Saturday, January 10, 2009

Jan 10.09 commentary.

www.lemetropolecafe.com

 

Good afternoon Ladies and Gentlemen:

 

Gold closed up by 30 cents to 854.00.  Silver rose by 18 cents to 11.27.  The open interest on gold and silver remained constant on Thursday so the selling was short sale related as opposed to liquidation.

 

The big news of the day came from the BLS  (Bureau of Labour Statistics).  The USA lost 524000 jobs for December and also there were revisions in Oct and November with further losses. 

 

For the whole year 2008 a total of 2.6 million jobs were lost.  The unemployment rate skyrocketed to 7.2%.  First I will give you the official release and then discuss the implications:

 

 

08:30 Dec non farm payrolls reported (524K) vs. consensus (525K); unemployment rate 7.2% vs. consensus 7.0%
* * * * *

08:30 Nov non-farm payrolls revised to (584K) from (533K)
* * * * *

08:30 Dec average hourly earnings 0.3% vs. consensus 0.2%; average weekly hours 33.3 vs. consensus 33.5
Nov average hourly earnings unrevised from 0.4%; average weekly hours unrevised from 33.5.
* * * * *

US Dec payrolls fall 524,000, jobless rate 7.2 pct

WASHINGTON, Jan 9 (Reuters) - U.S. employers slashed payrolls by 524,000 in December, driving the unemployment rate to its highest level in almost 16 years, a government report showed on Friday, suggesting that the year-long recession was deepening.

The Labor Department said the national unemployment rate rose to 7.2 percent in December, the highest level since January 1993. The jobless rate was 6.8 percent in November.

Analysts polled by Reuters predicted a reduction of 550,000 jobs in December. November's job losses were revised to show a cut of 584,000, previously reported as a 533,000 loss, while October's losses were revised to 423,000 from a decline of 320,000. With those revisions, the total reduction in U.S. nonfarm payrolls in the four months through December was 1.9 million.

The largest number of job losses in December was in services-providing businesses, which shed 273,000 jobs.

End

 

 

However, their high chancery continues as the BLS added 72000 of phoney jobs for December.

Bill King reports:

 

 

Taking the revisions into account, the number was as bad as anyone feared. Now for the real number and story, the story which The Muppets never report … Bill King this morning…

Stocks are tanking even though the headline NFP is in-line because the BLS employed seasonal adjusting chicanery to mitigate job losses. Not seasonally adjusted (NSA) 954,000 jobs were lost. Additionally, the BLS's hokey Net Business Birth/Death Model unfathomably created 72k jobs in December. For December 2007, the model created 70k jobs….

For December 2007, 216,000 jobs were lost.

More importantly, the U6, or comprehensive unemployment rate, surged to 13.5%. If 'discouraged workers' are added the total unemployment rate would be about 17.5% as estimated by John Williams.
http://www.bls.gov/news.release/empsit.t12.htm

The breakdown of the phantom jobs number…

Howdy, Bill !!!
The good ol' Birth/Death model did it again, by ADDING 72,000 phantom jobs. If you can believe it, they actually added MORE jobs than this time in 2007, when they ADDED 70,000 phantom jobs.

Look at the ridiculous sectors in which the jobs were ADDED (first figure is Dec 2007 and second is Dec 2008)

>Manufacturing: 2,000/3,000

>Trade, Transportation & Utilities: 19,000/20,000

>Information: 2,000/3,000

>Financial Activities: 17,000/18,000

>Professional & Business Services: 9,000/10,000

>Leisure & Hospitality: 16,000/12,000

 

End.

 

If you first take off the seasonal adjustments and just use the plain numbers, then 954000 lost their jobs last month.  In the NSA numbers you include part time employment that seek full time employment.

 

In the Williams Shadow statistics the unemployment rate in the usa is really 17.%.

 

If you use NSA numbers which is called underemployment statistics the unemployment rate is 13.5%.

 

 

Here is another article written by Ambrose Evans-Pritchard on the state of the economy in Europe.

Please press down on the blue to read the whole article and it will give you a sense of the deterioration spread throughout the world:

 

 

Have a good day and this article by Mr Evans-Pritchard reinforces what I was hearing yesterday in France. Our operation in Spain has just had its two worst sales months ever and Italy is as bad. Even the German operations are struggling. Apparently all white collar staff at Arcelor-Mittal (global no. 1steel producer) in Europe have to take one day a week as unpaid leave until March, at the earliest. If anything, it is even worse here in the UK and the recent interest rate cut is widely seen as a mistake as many savers will now look for alternative investments - including gold. The premiums on UK Ebay for coins are over 20% and if anything are increasing.

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/4177664/Europes
-economy-contracts-at-rates
-not-seen-since-1930s.html

Best wishes,
Bob

 

Then we received this article from John Browne of Euro Pacific Capital.  This article is a dandy and a must read:

 

 

Panic could herald dollar rout
By John Browne

One of the few things more troubling for an economy than government intervention is government intervention driven by panic. Time and again, history has shown that when governments rush to engineer solutions to pressing problems, unintended difficulties arise.

In the current crisis, there is growing evidence that Washington is in a state of increasing panic. Despite its massive cash injections, market manipulations and "rescue" plans, the recession is clearly deepening and spreading. With little to show thus far, politicians don't know if they should redouble past efforts, break ground on new initiatives, or both. However, all agree, unfortunately, that the consequences of doing too little far outweigh the consequences of doing too much.

Although there are many parallels between the current crisis and the crash of 1929, one key difference is the global profile of the US dollar. In 1929, the dollar was on the rise, and would soon eclipse the British pound sterling as the world's reserve currency. Furthermore, the American economy was fundamentally so strong that in 1934 America was the only major nation able to maintain a currency tied to gold.

Ever since, the US dollar's privileged "reserve" status has been a principal factor in America's continued prosperity. The dollar's unassailable position has enabled successive American governments to disguise the vast depletion of America's wealth and to successfully increase US Treasury debt to where the published debt now accounts for some 100% of GDP. The total of US government debt, including IOUs and unfunded programs, now stands at a staggering $50 trillion, or five times GDP! If the dollar were just another currency, this never would have been possible.

In today's crisis however, the dollar is likely making its last star turn as the leading man in the global financial drama. Other stronger, less-burdened currencies are waiting in the wings for the old gent to take his final bows.

The dollar's demise is being catalyzed by the neglect of the Federal government. Instead of enacting policies that would restructure the US economy and restore productive, non-inflationary wealth creation, Congress is simply financing the old crumbling edifice.

Faced with the growing realization that America is not doing the work necessary to right its economic ship, it will not be long before America's primary creditors begin to seriously question the nation's ability to service, let alone repay, its debts.

There is now the prospect (inconceivable until recently), that America could lose its prestigious triple-A credit rating. In today's risk-adverse market, this could cost the Treasury 1% in interest on long bonds. Each additional percentage point of interest would cost America some $10 billion a year on each trillion dollars of new debt, or some $300 billion over the life of a 30-year bond.

Many of the foreign governments who hold huge amounts of US dollar Treasury debt, such as China and Japan, have announced plans to spend money on their own ailing economies. Should these foreign central banks divert to domestic initiatives some of the funds used to buy US Treasuries, serious upward pressure on US interest rates will result. Should they actually sell parts or all of their holdings they will likely put serious downward pressure on the US dollar. Last week, a Chinese official claimed the US dollar should be phased out as the world's reserve currency.

In the short term, as dollar carry-trades continue to be unwound and questions of political will and falling interest rates haunt the euro and some other currencies, the US dollar may be the recipient of some upward appreciation. But with the American government appearing increasingly to be in panic mode, a run on the US dollar could develop rapidly into cascading devaluation. Even if no such panic run materializes, the long-term outlook for the US dollar is one of high risk and low return. This beckons major upward pressure on precious metals.

John Browne is senior market strategist, Euro Pacific Capital. Euro Pacific Capital commentary and market news is available at http://www.europac.net/">. It has a free on-line investment newsletter. end

 

Today, we find that England has a deficit to GDP of 10% and rising.  Their economy is in disarray and for the first time, if England wanted to join the EU in a currency alignment would be rejected because of their huge deficits.

 

The usa is also running massive deficits.  With the huge shortfall in employment, coffers at the Fed will run dry.  So will state coffers as citizens stop spending.  However government costs continue to rise because of the massive unemployment.

 

Expect that in 2009, the usa will experience a deficit of close to 2 trillion without the stimulus pkg of Obama.  You could add a further 1 trillion on top of that (Obama’s fix) to give you a closer picture of reality.  The usa will have a 3 trillion dollar deficit for 2009.

 

Where on earth are they going to get the money?. The entire globe are in deficits, from Japan, Korea  Russia,  Taiwan, Germany, Italy etc etc.  The surplus usa dollars on foreign shelves will now be used to fix their economies.  China has stated that it will not purchase any more usa agency or treasuries. 

You can bet that an additional 1 trillion dollars will be cashed to help offset foreign deficits.

Who will now buy this debt  (4 trillion dollars)? Answer:  nobody.  It must now be printed.

 

The banks which have so far hoarded 3 trillion dollars and have a facility for 5.5 more trillion dollars will start and compete for assets as we go into hyperinflation.

 

There is no way around this.

 

The usa in 1929-1933 went into a deep depression (deflation) as they restricted money supply.

However please remember that they were a net creditor nation, The world owed more money to the usa than the usa owed foreigners in the depression of 1933.

 

Japan in 1990 went into a depression (deflation) as the property bubble burst .  The banks were basically insolvent but the Japanese citizens were net savers.  The country of Japan was also a net creditor nation as the world owed it more than Japan owed foreigners.  They could withstand deflation as their exports were still solid.

 

The usa is a net debtor nation and cannot withstand deflation.  They must print money in order to pay their deficits.

 

Two years ago Warren Buffet said it best:” the usa owns 7 trillion dollars of assets worldwide.  The outside world owns 10 trillion dollars of usa assets.  We are in debt to the world of 3 trillion dollars”.

 

My bet now is that the usa owns 7 trillion dollars of assets worldwide and the outside world owns 12 trillion dollars of inside usa assets.  The usa is indebted to the tune of 5 trillion dollars.

The usa GDP is shrinking badly.  In 2007, the GDP was around 10.5 trillion and in 2008 it is expected to be around 10 trillion dollars.

So in an economy of 10 trillion dollars, the usa owes one half to foreigners.

You can bet the farm that the usa dollar will fall and bond yields will rise.

 

On one final note, JPMorgan stock closed badly down to $25.96.  There have been quite a few rumours that they experienced  derivative problems.  I will keep you informed on this situation.

 

See you on Monday

Harvey.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Thursday, January 8, 2009

Jan 08.09 commentary.

www.lemetropolecafe.com

 

Good evening Ladies and Gentlemen:

 

Gold closed up by $13.00 to $853.70.  Silver remained unchanged and did not participate with gold.

The open interest on the gold comex rose by 8000 contracts to 328000.  Silver’s Oi hardly budged again.

 

The big news today came from China:

 

23:14 China buying less American debt - NYT
China's high demand has helped keep interest rates low for borrowers. Reducing the demand introduces dual dangers of higher interest rates in the US and rapid reductions in the value of American bonds. The reasons for the lower appetite are not startling: China needs to fund its domestic stimulus package, a task made more difficult by falling tax revenues. Banks are being pushd to lend within China rather than hand deposits to the country's central bank. Foreign direct investment in China is decreasing, and a housing and stock-market bust in the country over the past year are exacerbating foreigners' withdrawals of funds from the economy. And China's trade surplus is dwindling.
Reference Link (registration required

 

End.

 

China has been the purchaser of a huge amount of treasuries throughout the last 5 years.  They have on their shelves in excess of 2 trillion dollars of usa. treasuries,  agency paper and other fixed usa dollar assets.  China is closing many factories due to western faltering demand. China is now selling their huge surplus of usa dollars and investing in their infrastructure.  You can bet the farm that  China will not purchase any bonds to finance the usa deficit.

 

From my vantage point, the usa will have a deficit this year of 2 trillion dollars.  Yesterday, for the first time, Obama postulated that the deficit would be 1.2 trillion without the new expenditures.

 

The economy is contracting rapidly and with the massive layoffs and the massive deficits of the states, you can reasonably assume that the final figure for 2009 will be 2 trillion.  However you must add the 1 trillion of  additional boost Obama is asking Congress.   The figure announced today is around 80 billion  and then add 200 billion for Iraq and Afghanistan.  The true deficit will probably exceed 3.0 trillion.

 

Then  foreign nations with surplus usa dollars will start to cash in their usa treasuries.  Expect 1 trillion dollars here to be cashed.  The total  for 2009 will thus be 4 trillion of treasuries cashed with no buyer.  The usa will just monetize and thus hyperinflation to the highest degree.

 

 

Here is an article from China as the main players are taking pot shots at Bernanke and Paulson.

 

Dave from Denver also noted….

from The People's Daily in China - it looks like the Chinese Govt is increasingly taking shots at the U.S. - wonder how long it will be before they start pulling out of our Treasury bonds:

"While countries are battling the crisis, outgoing U.S. Treasury Secretary Henry Paulson has been playing a blame game...[Paulson's and Bernanke's] remarks made headlines but cannot change the facts. It is widely accepted that the U.S. low interest rate policy, which encouraged excessive spending and caused the sub-prime crisis, was at the root of the problem."

http://english.people.com.cn/90001/90778
/90858/90864/6569743.html

Libor rates for the 3 month usa is now at 1.35%.  Rates are starting to decrease and this is getting gold bugs excited.  Gold bugs also got excited by seeing commercial paper totals increase. 

 

Here is the link:

 REUTERS US COMMERCIAL PAPER OUTSTANDING ROSE $83.1 BLN WK ENDED JAN 7, VS $20.4 BLN FALL PRVS WEEK-FED

REUTERS US ABCP OUTSTANDING ROSE $46.3 BLN IN JAN 7 WK, VS $400 MLN RISE PRVS WK -FED

REUTERS US COMM PAPER OUTSTANDING $1.764 TRLN WK ENDED JAN 7, VS $1.681 TRLN PREVIOUS WEEK -FED

REUTERS US ABCP OUTSTANDING $779.6 BLN WK ENDED JAN 7, VS $733.3 BLN PREVIOUS WEEK -FED

REUTERS US UNSECURED FINANCIAL ISSUANCE ROSE $400 MLN JAN 7 WEEK, VS $5.0 BLN FALL PREVIOUS WEEK-FED

 

Credit card debt is falling due to savings rate increases.

The banks are not lending so consumers are saving and deleveraging.    Here is the article:

 

Credit-card debt falls at fastest pace in nearly five years

WASHINGTON (MarketWatch) - U.S. households paid down a record $7.9 billion in consumer debt in November, the third month in the past four in which they paid off more debt than they took on, the Federal Reserve reported Thursday.

Consumer debt fell $7.9 billion to a seasonally adjusted $2.57 trillion in November, a 3.7% annualized decline. It's the largest percentage decline in nearly 11 years and is the largest decline ever in dollar terms.

The figures from the Fed do not include debts backed by real estate, such as mortgages or home equity lines of credit.

U.S. residents paid down $2.8 billion, or 3.4% annualized, on their revolving credit accounts, the largest decline in credit-card balances in nearly five years.

For other types of loans, such as auto loans or student loans, balances fell by $5.2 billion, or 3.9% annualized.

Auto sales fell to the lowest levels in decades in November.

Debt had exploded in recent years, rising 27% since 2003.

Debt fueled an unsustainable pace of consumer spending, which the country is now repaying in the form of the most severe recession in generations.

With banks increasingly unwilling to lend to anyone, consumers are raising their savings rate and deleveraging in the face of large losses in their net worth due to plunging house and equity prices.

-END

I saw this last night and I commented that this is deadly to the usa economy.  The pension liability is over 400 billion dollars and this will  hurt earnings terribly in 2009. Here is the article:

 

US companies face $409 bln pension deficit--study

NEW YORK, Jan 7 (Reuters) - Volatile markets have saddled U.S. companies with a $409 billion deficit on pension plans, reversing a $60 billion surplus a year earlier, and will cut into earnings in 2009, consulting firm Mercer said.

As of Dec. 31, pension plans among members of the Standard & Poor's 1500 had $1.21 trillion of assets and $1.62 trillion of liabilities, Mercer said in a report released on Wednesday. At the end of 2007, pension plan assets totaled $1.66 trillion
and liabilities totaled about $1.6 trillion, Mercer said.

The S&P 1500 is a broad portfolio representing large-cap, mid-cap and small-cap segments of the U.S. equity markets.

The shortfall suggests that more companies will have to pump cash into their pension plans to ensure they can meet their commitments to retirees….

-END-

This hurt Wall Street:  Hedge funds lost a record 18.3%

 

Hedge Funds Lost Record 18.3% as Managers Misjudged 2008 Market

Jan. 8 (Bloomberg) -- Hedge funds lost 18.3 percent in 2008, their worst year on record, as managers misjudged the severity of biggest financial crisis since the Great Depression.

A gain of 0.42 percent in December lessened the average loss for the full year, according to Hedge Fund Research Inc.’s HFRI Fund Weighted Composite Index. The decline was the most severe since the Chicago-based firm began tracking data in 1990.

“Hedge funds failed to appreciate the magnitude, breadth and duration of the declines we saw across most markets,” said Michael Rosen, principal at Angeles Investment Advisors LLC in Santa Monica, California, which advises clients on investments.... -END

As most are aware, the Bank of England lowered its rate to 1.5%.  This is the lowest rate in its 300 plus year history.  The race to zero is on!!

 

In the silver and gold comex delivery pits, there were no change from yesterday.

 

I am getting a little nervous at seeing such a rise in open interest on gold.  For 5 consecutive days, the cartel whacked  gold and just like a Duracell  battery, gold  withstood the attack  and continued marching northbound.

Something has to give.

 

Will things change on Jan 20.09?  Do not know!.  Will the cartel continue with their criminal activity?

We will find out in short order.

 

Harvey.

Wednesday, January 7, 2009

Jan. 7/09 commentary.

www.lemetropolecafe.com

 

Good evening Ladies and Gentlemen:

 

For the 5th straight day, gold was pounded.  It rebounded on the previous 4 days but not today.

Outside day reversals are rare and we have had two in the last 5 trading sessions on gold.

What is strange is that on 100% of the time, the cartel whack gold the day following an outside day reversal. This is your proof of manipulation.

 

Gold closed down by 24.70 to 840.70.  Silver fared better losing only  33 cents to 11.09 .

 

The open interest on gold climbed at 8000 contracts to 320,000.  Silver’s OI hardly budged.

 

The ECB announced its gold sales and it was pretty low at .99 tonnes. The ECB are in no mood to sell any gold reserves.

 

Over in the comex gold pits, zero gold entered and zero gold left.  The entire 1.4 million oz are still waiting for delivery.  There has been no change in eligible or registered gold.

 

In silver, approximately 300,000 oz entered the comex but 450,000 oz left.  There are approximately 31.0 million of silver remaining to be delivered upon.  There is no real change btw. registered and eligible silver.

 

There are two commentaries tonight on this matter and both echo what I have been telling you.

Here is the first:

 

On the recent Comex delivery period…

Bill--
Last year (is it 2009 already?) there was a lot of commentary at Le Metropole on what would happen to COMEX as of Dec. 31 because of many requests for delivery. I think the expectation was that COMEX would be revealed as not having the Gold that they claim.

I didn't read Midas' reports at the end of Dec, but in Jan there have been no mentions of any "event" having occurred.

What happened? (and why?)

Thanks.
Informed Spectator

There never was any expectation on my part of a major problem unless some major players went after the December contracts. Because it is the cheapest way to buy gold and silver, a number of us urged well-heeled investors to do so. Dave from Denver answers the question well…

Good question on his part. The possibility of a default is very real, but the idea of it happening in December was overplayed throughout the investment/market commentary arena. I spoke to real novices in the precious metals world in the past couple months who even knew about the idea of the Comex defaulting.

What happened in December is that close to 50% of the "registered" gold inventory is taking delivery. The registered inventory is that which is available to be delivered - rough numbers, about 1.4 million of 2.9 million registered ounces is taking delivery. The total inventory - with the balance being the "eligible" category, which is the gold being safekept on behalf of the owners - is roughly 8.5 million ounces.

My view has been that ultimately for a default to occur, the longs will have to stand for delivery of substantially more that the registered inventory, because a large portion of the eligible inventory may well have intent to eventually delivery anyway. I think this has a decent chance of occurring during 2009.

What I would like to know is why the Comex gold inventory as reported by the NYMEX has not reflected the delivery of the 1.4 million ounces in December, as the reported Comex inventory has been almost completely static during the whole month of December and up thru today, with last legal delivery day being December 31.

** end

And here is a report from Jesse on the matter:

 

Jesse likes this one…

I thought the comments to this guy's blog entry were the best part

How is the Comex warehouse audited anyway?

"What kind of hooey is this? Month after month COMEX registered gold for delivery stays constant? In one of the hottest gold markets in history? The only logical conclusion - they have no gold. Anyone stupid enough to believe that the biggest commodity exchange in the world for gold will maintain constant inventory levels probably believes the world is flat and the moon is made out of cheese. The reality that is becoming increasingly apparent is that gold, like silver, is being rationed in order to manage the price. Maybe folks need to buy direct from the miners?"

"Until the COMEX warehouse is independently audited to prove physical existence with single owners and /or leases, then it must be included in the Madoff School of Accounting. Maybe its the CON-EX not COMEX. We need a comprehensive independent auditing, transparent, verifiable, and frequent"

http://meltdown2011.wordpress.com/2009/
01/06/chart-comex-gold-inventory/

-END

Many are stating to me that demand for gold is low from India and Turkey and that is having a devastating effect on the price of gold.

 

Well, we just got the GLD figures on “inventory gold”  and the new GLD gold level is 787.88 tonnes of gold.  Here is the link and I will explain.

 

SPDR Gold Trust holdings hit record high 788 tonnes

TOKYO, Jan 7 (Reuters) - The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust , said it held a record 787.88 tonnes of gold in bank as of Jan. 7, up 7.65 tonnes from the previous day.
For details on gold holdings at the ETF, which is listed in New York and co-listed on other exchanges, click on:
http://www.exchangetradedgold.com/iframves/usa.php
Holdings in the trust, which issues securities backed by physical stocks of gold, resumed rising early in December as low visibility on the prospects for the global economy spurred demand for bullion as a safe-haven asset .
Following are changes in SPDR holdings:
Date: Total tonnes
Jan 7 787.88
Dec 29 780.23
Dec 17 775.33
Dec 16 769.21
Dec 15 765.23
Dec 11 762.17
Dec 5 757.89

SPDR  and GLD are identical terms.  Each share of GLD represents 1/10 oz of an oz of gold.  The GLD people are not allowed to issue shares until the gold is deposited in the vaults.

The amt of shares short on the GLD represents around 20% of the total outstanding.

 

To show you the huge amt of gold, lets compare the Bank of England.   They have 321 tonnes of gold.  Canada has basically zero.   The ECB has around 600 tonnes of gold even though various entities have gold on their own.  France has about 2600 tonnes.  Italy is suppose to have 2400 tonnes but we doubt that they have any gold.  They have leased all their stuff during these last 7 years.

 

The only country which has higher gold than the GLD is USA with an inventory of 8100 tonnes.

We bet that most of this gold has already been leased or sold  behind the scenes.

Germany has 3400 tonnes of gold, even though the usa swapped 1700 tonnes with Germany in 2000.  We believe that Germany has leased the other 1700 tonnes.

Today, Germany had an auction of 10 year bonds and the auction failed for the first time.

This is deadly to the ECB.

 

And now for other  Economic news:

 

Libor continues to remain at 1.40 as the lending facilities at the banks remain clogged.

 

The Dow fell by 245 points and the Nasdaq by 53 points on earnings concerns.  Intel reported a drop in chips and Alcoa stunned the street laying off 13000 workers.

 

 

The big news came from President Elect Obama.  He is going to present a major speech tomorrow at 11 am.  However this stunned the street:

 

Obama warns about years of trillion-dollar deficits

The New York Times
Tuesday, January 6, 2009

WASHINGTON -- President-elect Barack Obama on Tuesday braced Americans for the unparalleled prospect of "trillion-dollar deficits for years to come," a stark assessment of the economic condition facing the country that he said would force his administration to impose tighter fiscal discipline on the government.

Mr. Obama sought to draw a distinction between the need to run what would likely be record deficits by any measure for the next several years and the necessity to begin bringing them down substantially in following years. Even as he prepares a stimulus package that is likely to total in the range of $800 billion in new spending and tax cuts over the next two years, he said he would seek to make sure that money is used wisely and that he would work with Congress to implement spending controls and efficiency measures throughout the federal budget…

http://www.nytimes.com/2009/01/07/us/poli
tics/07obama.html?_r=1&hp

 

If that did not shake up Wall Street, this did.  The private ADP report showed that the usa lost 700,000 jobs in December.  Here is the link:

 

08:15 ADP Employment reports Dec payrolls (693K) vs. consensus (495K)
Nov figure revised to (472K) from (250K).
* * * * *

 

These guys are better in accuracy that the government bureau figures  (BLS).

 

And then we heard for Challenger Christmas on job layoffs :

 

US 2008 planned layoffs most in 5 yrs -Challenger

NEW YORK, Jan 7 (Reuters) - Planned layoffs at U.S. firms eased in December from the previous month's seven-year high but they were up an astounding 275 percent annually as the year-old recession cut a huge swathe of destruction through job market.

The economic slump, which is likely to be the longest since the Great Depression of the 1930s, also produced the worst year of layoffs since 2003, outplacement company Challenger, Gray & Christmas said on Wednesday in its monthly report on U.S. job cuts.

The report said heavy job-cutting could continue through at least the first half of 2009, and the outlook afterward hinges on President-elect Barack Obama's plans to stimulate the economy through increased government spending.

"The economy could begin to mount a comeback in the second half of the year, if the new administration can achieve quick passage of its proposed economic and job-growth stimulus package," said John Challenger, chief executive officer of
Challenger, Gray & Christmas.

"The plan to rebuild the nation's crumbling infrastructure will benefit not only laborers on the front lines, but it will push up through the economy, creating jobs for manufacturing workers, engineers, architects, technology specialists, etc."

Job cuts announced in December totaled 166,348, down 8.4 percent from November's 181,671, Challenger, Gray & Christmas said. Despite the monthly decline, layoffs were up from just 44,416 in the year-ago period.,,,

 

 

Consumers are still having trouble with their loans.  Late payments are at a 28 year high:

 

U.S. consumer loan late payments at 28-year high

WASHINGTON/NEW YORK, Jan 7 (Reuters) - Soaring unemployment has caused more Americans to fall behind on loan payments than at any time since 1980, and delinquencies are likely to head higher, the American Bankers Association said on Wednesday.

"It is not going to be a pretty picture in 2009," James Chessen, the trade group's chief economist for 18 years, said in an interview. "The dramatic loss of jobs will have a huge impact on the ability of people to meet their debt obligations. This is one of the toughest environments we have ever seen."

The quarterly ABA study of delinquent payments found the percentage of loans at least 30 days late rose to a seasonally adjusted 2.90 percent in the July-to-September period from 2.68 percent in the second quarter.

Delinquencies on home equity lines of credit (HELOCs) and on indirect auto loans, which are made through dealerships, rose to the highest level on record, the ABA said.

The ABA represents many of the largest U.S. banks and credit card companies. Its composite index includes direct auto, indirect auto, closed-end home equity, home improvement, marine, mobile home, personal and recreational vehicle loans.
Bank credit card and education loans are not in the index….

-END-

Paul Krugman, winner this year of the Nobel Prize for economics  presented a paper on economic numbers which suggest to him depression throughout the globe!!

 

Depression Threat

January 6, 2009

"The fact is that recent economic numbers have been terrifying, not just in the United States but around the world. Manufacturing, in particular, is plunging everywhere. Banks aren’t lending; businesses and consumers aren’t spending. Let’s not mince words: This looks an awful lot like the beginning of a second Great Depression."

Paul Krugman

I have written piece after piece over the last month about the many signs of a shocking collapse in manufacturing in Asia. I have been amazed at the refusal of sell side and buy side economists and analysts to acknowledge that something horrendous is happening to the point of "freaking out."

Sunday night I was watching Bloomberg News. Bloomberg was interviewing the Chief Asian Economist of Citi Global Markets. This guy was optimistic about Asia. He insisted Chinese GDP will grow 8% in 2009. Overall Asian GDP will grow 5% in 2009. They have the savings and the surpluses and the reserves to do it. He was complacent, confident, unflappable, smug! I find this everywhere. It freaks me out. It is as though the Chief Asian economist of Citi Global Markets hasn’t looked at an Asian data point in four weeks.

Rob Parenteau provided me with the following statement from Paul Krugman from a New York Times editorial entitled "Fighting Off Depression."

"The fact is that recent economic numbers have been terrifying, not just in the United States but around the world. Manufacturing, in particular, is plunging everywhere. Banks aren’t lending; businesses and consumers aren’t spending. Let’s not mince words: This looks an awful lot like the beginning of a second Great Depression."

Well, here is at least one smart guy who sees what I see.

 

We have another scandal brewing and this one is big and it is overseas:

 

 

BUSINESS / WORLD BUSINESS | January 08, 2009
Satyam Chief Admits Huge Accounting Fraud
By HEATHER TIMMONS AND BETTINA WASSENER
A leading Indian outsourcing company massively inflated its earnings for years, the chairman said.

 

Finally, JPMorgan stock fell to 28.09 today.  It fell further in the access market to 27.89.

As I pointed out to you yesterday, there are major rumblings of a derivative bust over there.

If true we will have a financial collapse immediately as the total derivatives will implode on contract.

 

 

Speak to you on Thursday

Harvey.

 

 

 

Tuesday, January 6, 2009

Jan 6.09 commentary.

www.lemetropolecafe.com

 

 

Good evening Ladies and Gentlemen:

 

First, let me report on the comex gold and silver deliveries.

 

In gold, for the umpteenth straight day, no change.  In other words, we still have 1.4 million oz standing and waiting for the gold-shiny metal.  There is no change in the eligible and registered category.

This is strange in that if players wanted to keep gold it would change its designation from registered to eligible and no gold would leave the comex.  But this is not the case. It looks to me that the comex has been found out and all 1.4 million oz owners will pull their metal out of the comex.

 

In silver,  we had a little action in the deliveries.  The total amount of new silver entering the comex was 360,000 oz but 420,000 oz of silver left the comex for a net loss of 60,000 oz.  The registered silver declined by 420,000oz.  We still have 31.6 million oz still standing.  We have 5.0 million oz of silver standing for delivery in January. 

 

As I reported to you yesterday, the comex will only deliver 3 minibars(each mini bar is 33.33 oz) as supplies are running out there.

Thus we are witnessing that all mints have shut down.  All gold coins have been totally sold out.  Bars of less than 100 oz are also out of stock.

 

As for yesterdays action, the gold comex was open interest rise by 6000 contracts despite gold’s drubbing.  The cartel used all their muscle yesterday to keep gold and silver in check.

 

In silver the OI remained constant again.

 

Today, the cartel whacked gold for the 4th straight day and for the 4th straight day, gold and silver came right back.  Today we had another outside day reversal which occurs rarely in a year.  We have experienced two in 4 days.

 

I have been hearing from a few sources, that JPMorgan has some derivative problems.

If they default, the game is over and we will have our banking holiday.  Gold will trade at 10,000 bid no offer and then the fun begins.

 

And now for economic news:

 

Libor remained constant at 1.41%.  The banks refuse to lend and as such the lending arteries are all clogged.  The banks are content to receive 3% on mortgage money as their cost is zero.  It is certainly not healing their balance sheet in a big way.

 

The ISM non manufacturing supply index was released and it was not bad as thought:

 

 

US services shrink less than expected in Dec - ISM

NEW YORK, Jan 6 (Reuters) - The U.S. service sector contracted less severely than expected in December, according to a report released on Tuesday.

The Institute for Supply Management said its non-manufacturing index came in at 40.6 in December versus November's 37.3.

The level of 50 separates expansion from contraction. The index dates back to July 1997.

Economists had expected a reading of 37.0, according to the median of 56 forecasts in a Reuters poll, which ranged from 34.5 to 42.0. 

 

End.

 

In other words services shrank less than they thought. A reading of 50 is neutral.  They reported 40.6.

 

However this next report is abysmal:

 

US Nov pending home sales drop 4 pct to 7-yr low

WASHINGTON, Jan 6 (Reuters) - Pending sales of existing U.S. homes plunged to a seven-year low in November, data showed on Tuesday, as mounting job losses and a deepening economic recession kept potential house buyers on the sidelines.

The National Association of Realtors Pending Home Sales Index, based on contracts signed in November, dropped 4 percent to 82.3, the lowest level since the series started in 2001. The reading was 5.3 percent lower than November 2007's print of 86.9.

Economists polled by Reuters ahead of the report had forecast pending home sales dropping by 1 percent. October's pending home sales were revised down to 85.7.

 

End.

 

This is far more important as these homes are serving as collateral for our banks and sales continue to drop.  They fell to a 7 year low.

 

US factory sales were released early in the session and they were also horrible.  Here is the link:

 

US Nov factory orders drop more than expected

WASHINGTON, Jan 6 (Reuters) - New orders received by U.S. factories plunged a much-greater-than-expected 4.6 percent in November, the fourth straight monthly decline and a sign the sharp drop in manufacturing is deepening the recession, a
government report showed on Tuesday.

It was the first time factory orders had fallen for four consecutive months since the government began assembling the data in its current form in 1992, the Commerce Department said. Analysts polled by Reuters were expecting factory orders to drop 2.5 percent.

An indicator of business confidence rose, however, as non-defense capital goods orders excluding aircraft rose 3.9 percent.

The total value of shipments fell 5.3 percent, the sharpest drop since the

Government began assembling the data in its current form in 1992.  end

 

The FOMC released minutes of their meeting Dec 16.08.  This is the meeting that interest rates fell to zero.  The Fed does not think we will grow out of our mess in the short term.  Here is their minutes of the meeting:

 

14:11 Follow-up: Fed minutes from 15-16 Dec meeting show the FOMC saw "substantial" downside risk to the economy
The FOMC expected economic activity to contract sharply in early 2009, while most saw a slow recovery in 2H09, helped by easy monetary policy and expected fiscal stimulus. The uncertainty regarding the outlook were "considerable" and that downside risks to this outlook were a "serious concern." The large volume of excess reserves had caused the federal funds rates to be significantly below the target rate and the FOMC decided "it would be preferable for the Committee to communicate explicitly that it wanted federal funds to trade at very low rates." The Dow, after initially selling off in first reaction, is now up about 20 points since the release; quoted last at 9005.
The following are comments from the chairman of Lemetropolecafe on the Fed minutes:

Fed minutes-Useful to be clear rates to stay low

WASHINGTON, Jan 6 (Reuters) - U.S. Federal Reserve policy-makers wanted to send a clear message that they intended to keep interest rates very low for a long time to help the economy recover from a recession, minutes of their December meeting showed on Tuesday.

"Participants judged that communicating the committee's expectation that short-term interest rates were likely to stay exceptionally low for some time could be useful," the Fed minutes said.

-END-

Bart Chilton has responded to quite a few emailers.  I will enclose what he sent to me:

HarveyOrgan:

I understand clearly your message.  It is important the message we leave for future generations to understand what has happened.

We applaud your courage and we will stand behind you as you solve the dilemma you are facing. All the best Harvey Organ BScPhm MBA

 

-----Original Message-----

From: Chilton, Bart [mailto:BChilton@CFTC.gov]

Sent: January-05-09 6:16 PM

To: Harvey Organ

Subject: RE: (GATA) Bart Chilton: Time to restore mission of regulators

 

Thx for the note. I wish I could tell you more now, but I can't at this time. I am sure we are on the right path, however.

Be well.

B

 

-----Original Message-----

From: Harvey Organ [mailto:harveyorgan@rogers.com]

Sent: Sunday, January 04, 2009 4:49 PM

To: Chilton, Bart

Cc: Bill Murphy

Subject: FW: (GATA) Bart Chilton: Time to restore mission of regulators

 

Your paper took great courage and we are proud of you. We know what you are up against.

 

As for your musings that JPMorgan may have long positions in other jurisdictions outside of your control, this fact  does not nullify the concentration issue of Morgan being a massive shorter in silver on the comex.  As a matter of fact, it is even more manipulative if they did as they can play both sides and sucker in the trade.  The job of the CFTC is to guard against that.

 

However judging from the data, at the BIS, it doesn't look like these guys have an offsetting long position in silver.  Besides, you have the power to ask them and prove otherwise.

 

Harvey Organ

 

-----Original Message-----

From: LePatron@LeMetropoleCafe.com [mailto:LePatron@LeMetropoleCafe.com]

Sent: January-04-09 1:28 PM

To: harveyorgan@rogers.com

Subject: (GATA) Bart Chilton: Time to restore mission of regulators

 

 

Le Metropole Members,

 

Bart Chilton: Time to restore mission of regulators 

 

Submitted by cpowell on 09:46AM ET Sunday, January 4, 2009. Section: Daily

Dispatches

By Bart Chilton

Providence (Rhode Island) Journal

Thursday, January 1, 2008

 

http://www.projo.com/opinion/contributors/content/CT_chilton1_01-01-09_5PCOI

90_v11.3e3351f.html

 

In the building that currently houses the president-elect's transition team,

there used to be an imposing bronze plaque with the visage of the Securities

and Exchange Commission's redoubtable third chairman, William O. Douglas. It

was emblazoned with the inspiring legend, "We are the Investor's Advocate."

 

For many decades, the SEC enjoyed the reputation of living up to the noble

standard of public service. The plaque no longer graces the entryway of the

SEC's new quarters, and with the recent revelations of failure to detect and

prosecute incidents of egregious securities fraud and abuse, both internally

and externally, the agencyâ??s reputation has been severely tarnished.

 

These types of disclosures make us as public servants ask some fundamental

questions: Why are we here? The Founding Fathers had the answer: We are

employed to protect the common wealth and serve the public good. We are not

here to serve amorphous philosophical, economic or ideological concepts such

as "financial markets" or "economies."

 

Our task is to serve the public -- those people in the hinterlands, many of

whom have recently lost 30 percent or more of their retirement funds and/or

home values and who now face losing their jobs. Our "client," our

"constituent," is the American consumer and worker, the businessman or woman

who generates and uses the products and services that comprise our "markets"

and our "economy." If we fail to protect, first and foremost, these

individual Americans, we cannot succeed in assuring the strength of our

economy, nor in protecting the integrity of our financial market system.

 

Do we need to have statutes and regulations in place to ensure reliability

of the marketplace? Of course we do, but over the past decade "the

marketplace" has been exalted to a position perceived as virtually

omnipotent and omniscient, while consumer protections have been generally

neglected. The consequence lies scattered around us.

 

By veering too sharply to the right and letting go of the regulatory reins,

we provided neither the market nor the consumer a great service. Rather we

harmed both, and have a long hike to escape the resulting global economic

meltdown. We must be careful not to over-correct -- not to go so far in the

other direction that we stifle innovation and market growth. But it is

clearly time for federal financial regulators to re-evaluate our current

statutes and regulations, and to put "common sense rules of the road," as

the president-elect has suggested, in place to protect consumers and bring

our economy back into balance.

 

The SEC isn't the only federal financial regulator to have failed in serving

the public. The Treasury Department appears to have lost its way as well,

when a $700 billion bailout package, purportedly written to ensure against

unconscionable executive compensation was, within weeks after passage, found

to have a loophole allowing such compensation.

 

Federal banking regulators seem to be off course, permitting casino-like

buying and selling of trillions of dollars worth of virtually worthless

transactions. When gasoline topped $4 a gallon, the Commodity Futures

Trading Commission dropped the ball, unable to oversee speculationâ??s

uneconomic role in the U.S. commodities markets.

 

In decades past, the CFTC has been charged with being too tied to the

industry, too closely aligned with the regulated, and overly concerned with

protecting "markets" rather than consumers. We've made good progress, and

there are very fine people in all of these agencies and departments, but we

too can and must do much better.

 

I have advocated a comprehensive legislative reform of the laws governing

over-the-counter trading, and requested that authority over these critically

important markets be vested in the Commodity Futures Trading Commission. The

CFTC, a small agency in comparison to the SEC, has exclusive jurisdiction

over risk-management markets in the United States, and has in recent years

carved several significant notches in its enforcement belt.

 

At any one time, this small agency, with one-tenth the enforcement staff of

the SEC, is investigating or prosecuting anywhere between 750 and 1,000

individuals or entities for violations of the Commodity Exchange Act. The

agency has, just in the past year, tagged bad actors with more than $630

million in fines and settlements, in actions involving fraud, manipulation

and other misconduct. Not a bad record for a small agency operating on a

shoestring budget -- and weâ??d be able to do even more if given the

authority.

 

With the collapse of the economy, the transition of government already under

way with the new Obama administration, and the appointment of an excellent

new federal financial regulatory team, it will soon be time to implement

this new legislation, and similar consumer protection initiatives.

 

Also, we need to restore the clarity of our own mission in government: that

we are here to assure financial opportunity and market fairness to the

public. We need to regain the public trust.

 

With a shared vision of our mission and much needed reforms, our duties and

responsibilities will flow clearly. Chief among these duties is a strong and

aggressive enforcement arm. Markets must be free from fraud and manipulation

for them to operate as they should -- for all Americans. This baseline

approach to enforcement protects consumers and allows for open and free

markets that are able to grow and innovate.

 

Investor's Advocate: A good legend, apparently forgotten. All federal

financial regulators should use a new door sign: Consumers First. Everything

else will follow.

 

-----

 

Bart Chilton is a commissioner on the Commodity Futures Trading Commission,

a Democrat, and a member of the Obama transition team.

 

* * *

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Vancouver, British Columbia, Canada

Sunday-Monday, January 25-26, 2008

http://www.cambridgeconferences.com/ch_jan2009.html

* * *

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Contact GATA

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See you Wednesday night late.

 

Harvey

 

 

 

 

 

 

 

 

 

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