Saturday, February 14, 2009

Feb 14.09 Happy Valentines Day...

 
As for Rob Kirby's paper re the swap on oil, I am still getting details.  I hope to report on our findings on Monday or Tuesday.
 
Gold closed down by 7.00 to 941.70.  However silver rose by 11 cents to 13.61.  The open interest on gold rose by 5000 contracts.  Silver's Oi continues to rise by 1000.  The new Oi is 97000.
 
As Bill Murphy explained in his commentary today, the CFTC officials are probably telling the shorts to cover as quickly as possible.
 
It gets better:
 
Gartman yesterday shorted two yen contracts against the Anglo currencies.  Generally this is a forerunner of a huge runnup in the price of gold and silver.  ie.  weak yen, strong gold and silver price.
 

In a potentially very gold-significant move, The Gartman Letter shorted a significant (two unit) yen position against the "English speaking" (I prefer the Canadian usage "Anglophone") currencies today. He has a strong view that the yen will be forced to slide. TGL is influential – and well-informed.

The effect of such a move on precious metals has always been paradoxical. Low yen precious metal prices bring in physical buying – and this is said to have been material in Platinum recently. On the other hand, apprehensions of yen weakness have traditionally been the primary driver of demand for TOCOM gold futures, currently standing at a dismally low open interest. A yen slide could well see TOCOM resume its occasional role as a force in world gold.

end.

However, the big news is the huge runnup in the GLD.  It has advanced another 15 tonnes yesterday.

The new gold holdings is 986 tonnes.  Silver  (SLV) holdings are just over 245 million oz.

It is logistically impossible for the GLD to acquire, ship, insure that quantity of gold in such a short period of time.  The Central Fund of Canada needs 4 months to acquire half that quantity.

We are writing to both the CFTC commissioner and the new SEC commissioner that the GLD ann SLV are fraudulent.

Here are the daily advance in "physical" gold acquired by GLD:

The big deal this week in gold was the incredible increase in GLD holdings. Supposedly 104 tonnes of gold has been accumulated in the past 4 days alone. Yesterday another 15 tonnes went in. Here are the numbers reflecting the massive increase in tonnage

Monday - 881.87
Tuesday - 894.72
Wednesday - 935.09
Thursday - 970.57
Friday - 985.86.

 

In graph form:(for all gold etf's)

 

In economic news, the following are important:

 

09:55 Feb Univ of Michigan Confidence 56.2 vs. consensus 60.2
Prior reading was 61.2.
* * * * *

U.S. consumers' mood falls sharply in Feb - survey

NEW YORK, Feb 13 (Reuters) - U.S. consumers' confidence fell to its lowest in three months in February as sentiment grew increasingly gloomy over an economic downturn that most expected to last five more years, a survey showed on Friday.

The Reuters/University of Michigan Surveys of Consumers said its index reading of confidence for February tumbled to 56.2 from 61.2 in January.

That was the lowest since November, when U.S. stocks hit 11-year lows during one of the worst periods of the current financial crisis. A separate reading in the report showed consumer expectations fell to their lowest since May 1980.

"Confidence fell in early February as consumers came to the consensus that the economy would remain in recession throughout 2009," the report said.

"Moreover, nearly two-thirds anticipated that the downturn would last five more years."

The index's headline number was well below economists' median expectation for a reading of 61.0 culled from 60 forecasts in a Reuters poll that ranged from 56.5 to 64.0.

The University of Michigan confidence index dates back to
1952. Its record low of 51.7 was hit in May 1980.

The February report showed mixed views on inflation.

One-year inflation expectations plummeted to 1.6 percent from January's 2.2 percent for the lowest since November 2001, highlighting worries that the United States might be headed for a deflationary period of falling prices, wages and economic activity.

However, five-year inflation expectations edged up to 3.0 percent from January's 2.9 percent.

-END-

 

and then this was released later in the day:

 

Economists see even deeper US contraction--Philly Fed

NEW YORK, Feb 13 (Reuters) - The U.S. economy will shrink a whopping 5.2 percent in the first quarter, its worst performance since 1982, according to a quarterly forecasting survey published by the Philadelphia Federal Reserve.

In the previous survey, economists had foreseen an annualized decline of just 1.1 percent in first quarter U.S. gross domestic product.

The pain is also expected to last longer than before. The economy was seen shrinking an additional 1.8 percent in the second quarter, bringing the jobless rate to 8.3 percent. Previously forecasters believed GDP might eke out some growth in that quarter, about 0.8 percent.

-END-

The following banks were closed by the FDIC today:

WASHINGTON, Feb 13 (Reuters) - U.S. bank regulators closed Corn Belt Bank and Trust Co of Pittsfield, Illinois on Friday, the 12th U.S. bank to fail this year.

WASHINGTON, Feb 13 (Reuters) - Bank regulators closed Pinnacle Bank of Beaverton, Oregon on Friday, the 13th U.S. bank to fail this year.

The news about China continuing to buy USA treasuries has been corrected.  Please refer to the following articles:

20:11 China News reports Chinese official backtracks slightly from Treasuries' comment - Bloomberg
Recall that the FT recently cited comments from Luo Ping, a director-general at the China Banking Regulatory Commission, who said that China will continue to buy Treasuries even though it knows the dollar will decline in value. Luo argued that Treasuries are China's "only option" in a perilous world (see 11-Feb, 20:38 comment). However, in an interview with China News, Luo says that US debt is one option in addition to gold and other government debt. He added that if the US government issues too much debt it in its efforts to reinvigorate the economy, all Treasury holders will suffer losses.
* * * * *

Official clarifies FT report on China buying US bonds

Following a report in the Financial Times, Luo Ping, a senior official at the China Banking Regulatory Commission, issued a clarification pointing out that buying US bonds is not the only option available to China for investing its foreign exchange reserves.

In an earlier Financial Times report on February 12, Luo Ping was quoted as saying: "China will continue to buy US Treasury bonds even though it knows the dollar will depreciate because such investments remain its 'only option' in a perilous world."

Luo clarified the report later the same day, pointing out that buying US treasuries is in fact one of the options available to China, which can also purchase gold and securities issued by other countries and regions to protect the value of its foreign investments.

"If the U.S. issues too many bonds to prop up its ailing economy, the holders will suffer substantial losses," he said.

In September 2008, China surpassed Japan as the largest overseas holder of Treasuries. But as China's foreign exchange reserves grow at a slower pace in the midst of falling exports, it is expected that there will be a declining Chinese appetite for US bonds and dollar-based assets.

In fact, China's own needs, and the country's target of securing the value of its foreign reserves, will be the determining factors in the decision to buy any future bond issues, and the numbers bought.

(China.org.cn by He Shan, February 13, 2009)

And this from London:  HBOS which is owned by the Bank of England reported a huge loss of  11  billion pounds.  Its sister operation the Royal bank of scotland has reported to you earlier lost 28 billion pounds:  here is the story:

We have had another banking shock here as HBOS has reported that its loss in 2008 was much worse than expected at £11 billion and that the deterioration has come from its corporate lending rather than from its mortgage lending. Although lower than the loss reported by RBS two weeks ago, in underlying terms it is worse as £20 billion of the RBS loss of £28 billion related to writing down the cost of its investment in ABN Amro. This totally put the skids under the share price of Lloyds which took over HBOS last autumn just after the Lehman collapse. This deal was done very much at the request of Gordon Brown so he is now under attack and Lloyds may now need more government cash - it is already 43% owned by the state. The market also seems to have been spooked by the news that the losses reflected worse conditions in lending to businesses and this is again opening up the prospect of even more losses for all of the banks as the economy slides. The prospect of the government owning all or much of the banking sector here is becoming more and more likely.

Here is a story on European steel production.  Looks like production will fall by 50% as Europe is going into a tailspin. The EC B will have to cut interest rates to zero very shortly.   Here is the article:

Industrial production across Europe is falling fast and when the statistics are reported for January and February, based on what is happening in the products where I have knowledge, it is going to look even worse. I was told yesterday that European steel production could even be down by 50% as the main producer Arcelor-Mittal is determined to get rid of the build up of stock in the supply chain. Interestingly, some analysts think that they will move to push up their prices hard once the de-stocking is over to compensate for the loss of volume.

If this sort of production fall happens, then I think you can safely talk about there being an economic depression or slump or collapse - recession hardly sounds adequate. April 2009 is likely to be a key month as by then many businesses will have had four months of bad trading, if not more, and their cash flow will be awful. If major shut-downs or closures are going to be avoided then the banks will need to support these businesses and if they cannot do it then governments will have to intervene, probably by further support for bank lending.

end.

The Federal debt is now rising.  It increased another 46 billion yesterday:

 

 Debt Outstanding
10,632,005,246,736.97
10,667,963,268,393.28
10,668,643,381,356.91
10,669,192,308,562.45
10,717,998,123,287.70
10,717,280,371,345.89
10,717,726,200,848.14
10,721,365,792,566.28
10,713,124,215,572.20
10,759,196,587,563.44
Related Links
The Dow tumbled yesterday down by 82 points as investors just did not believe the pundits as to Thursday's spectacular relief rally from down 250 points to par.  The finanacials tumbled more yesterday as many believe earnings will continue to fall.  They believe that banks will not lend and that borrowers are too ill to borrow.

I wish everyone to have a grand weekend.

Speak to you on Monday night.

Harvey.

Thursday, February 12, 2009

Feb 12.09 commentary..important

 
Good evening Ladies and Gentlemen:
 
Gold closed up by 4.80 to 948.50.  Silver fell by 4 cents to 13.50.  The open interest on the gold comex rose by 6000 contracts as JPMorgan and friends dug their heels to cap gold's rise.  The silver OI basically remained unchanged.
 
The startling news is the rise in gold inventory over at the GLD.  Last week we had reached a record 870 tonnes and I commented that we were within a whisker of inventory rising 300% of that of the Bank of England.
 
Today we got new inventory levels and it is simply mindboggling.  The new inventory increased by 36 tonnes today and rose 64 tonnes the previous 4 days.  The new level is 970 tonnes.  The GLD is now closing in on Switzerlands level of 1000 tonnes.
 
It is physically impossible to acquire, and store that quantity of tonnage. If the GLD has 25% of that total, I would be surprised. Ladies and gentlemen: GLD and SLV is a fraud.
 
Here are the totals for you to peruse:
 

Garic sent us astonishing numbers last night regarding GLD…

These numbers are huge. Who is the buyer? Sovereign Wealth Funds? Pension Funds? Hedge Funds? Cartel? All of the above. I hope the regulators are on top of this one. There is not enough Gold above the ground to meet this demand IF GLD IS LEGITIMATE.

06 Feb 2009

27,881,022.07

867.19

25,453,719,825.83

09 Feb 2009

28,353,034.67

881.87

25,373,481,387.18

10 Feb 2009

28,766,041.84

894.72

26,167,139,271.04

11 Feb 2009

30,064,054.34

935.09

28,197,020,005.48

***Garic just informed us GLD added another 35 tonnes to bring the new record total to 970.57 tonnes.
 
If you like it in graph form to show the exponential growth of physical gold at the GLD, here it is
 

Lets now start with the economic news of the day:
 
First of all Libor remained at 1.24% as the arteries are still clogged.  The blood of the credit system is the commercial paper.
 
Today, the government released news that commercial paper is contracting again instead of expanding.  The banks just refuse or cannot lend.  Here is their report on commercial paper. It contracted by a rather large 31 billion dollars for the 5th straight week:
 

U.S. commercial paper plunges for fifth week

NEW YORK, Feb 12 (Reuters) - U.S. commercial paper issuance retreated sharply for a fifth straight week, according to Federal Reserve data released on Thursday that offered discouraging news for the U.S. central bank's efforts to revive slumping credit markets.

The market for commercial paper, a key tool for short-term corporate financing, has lost over $200 billion in value since early January. It decreased $31.5 billion last week alone, bringing the total market to $1.554 trillion, down by nearly a third from peaks seen before the crisis started in mid-2007.

Analysts say part of this pullback is a healthy sign that companies were issuing longer-dated debt now that government guarantees had been broadened as part of the financial rescue efforts.

But some of the withdrawal in capital coincided with increased nervousness about banking sector losses, compounded by a lack of clarity in the new administration's policies for mending the banking sector.

The Fed data covered the week to Feb. 11.

end
 
Wall Street was greeted with this news on the employment front where jobless claims remain high and unemployment benefits remain at an alltime high:
 

08:30 Jobless claims for w/e 7-Feb 623K vs. consensus 610K
Prior week revised to 631K from 626K. Continuing claims for w/e 31-Jan 4.810M vs. consensus 4.800M. Prior week revised to 4.799M from 4.788M.
* * * * *

US jobless claims dip but by less than expected

WASHINGTON, Feb 12 (Reuters) - The number of U.S. workers filing new claims for unemployment benefits eased last week but by less than expected, according to government data on Thursday that showed the labor market in the grip of a deep recession.

In addition, the number of people staying on the benefits rolls after drawing an initial week of aid the week ending Jan. 31 was at the highest on record, the Labor Department said.

The department said initial claims for state unemployment insurance benefits slipped 8,000 to a seasonally adjusted 623,000 in the week ending Feb. 7. Analysts polled by Reuters were expecting 610,000 claims. The previous week's claims were revised up to 631,000, the highest since the week ending Oct. 30, 1982.

The number of people staying on the benefits rolls rose by 11,000 to 4.810 million in the week ended Jan. 31, the latest week for which data is available.

The four-week moving average for initial jobless claims, considered a more reliable gauge since it smooths out week-to-week irregularities, rose to 607,500, the highest level since the week ending Nov. 13, 1982.

 
This news on Hartford Insurance stunned the street.  Insurance companies are one of the pillars.  They are imploding along with the banks.  Here is the story released early in the session
 
 

Hartford Insurance Loses Access to Government Lending After Ratings Downgrades


This news helped to take the US equity indices down to new lows when it came out.

Reuters
Hartford loses access to U.S. lending facility, shares plunge
Thursday February 12, 2:07 pm ET

NEW YORK (Reuters) - Hartford Financial Services Group Inc lost access to a U.S. commercial paper lending facility after recent debt rating downgrades, it said in a regulatory filing, and shares dropped 11 percent.

In the filing on Thursday with the U.S. Securities and Exchange Commission, Hartford (NYSE:HIG), a large life and property insurer, said it will have to repay the $375 million borrowed under a federal program.

That happened after its commercial paper ratings were downgraded by Moody's Investor Services on February 6, and by Standard & Poor's and Fitch on February 9.

As a result it will have to tap other sources of cash to repay the debt, a potential thorn as its capital had already eroded due to large losses over the past two quarters.

Also Thursday, Hartford said the Connecticut insurance department approved changes to the way it can account for some reserves. The decision effectively boosted its life insurance unit's capital by about $1 billion.

Analysts said the move was not enough to offset bigger capital concerns, and may not protect it from ratings downgrades, which could trigger the need to raise additional capital. Hartford raised $2.5 billion in capital from German insurer Allianz SE last October.

The regulatory relief is "better than nothing, but it doesn't necessarily follow that this will put it (Hartford) in a better position with the rating agencies," said Steven Schwartz, a life insurance analyst at Raymond James.

The Connecticut insurance department's decision to grant Hartford the regulatory relief came after a national group of insurance regulators voted on January 29 not to approve such changes for life insurers nationwide.

U.S. life insurers have lobbied for regulators to ease capital rules after heavy losses on investments, and on sales of variable annuities, a popular retirement product that accounts for much of the sector's business.

Hartford and others have also sought capital injections under the U.S. government's $700 billion financial services rescue plan.

Shares of the Connecticut-based company fell $1.51 to $12.11 in afternoon trade on the New York Stock Exchange. Shares are down more than 80 percent in the last 12 months.

end

Then we heard from December inventories and they were down pretty bad:

 

U.S. Dec inventories decline biggest since 2001

WASHINGTON, Feb 12 (Reuters) - U.S. business inventories in December recorded their biggest monthly drop since 2001 and sales fell again, according to a report on Thursday that provided more evidence the economy likely shrank at a faster pace in the fourth quarter than initially estimated.

The Commerce Department said inventories fell 1.3 percent, the largest drop since October 2001, after falling by a revised 1.1 percent in November.

Analysts polled by Reuters had forecast business inventories to fall 0.9 percent in December.

Government data on Tuesday showed wholesale inventories fell by a record 1.4 percent in December. Analysts said this made it likely that the government estimate of the economy in the fourth quarter contracting at a 3.8 percent annual rate would have to be revised to an even slower pace.\…

-END-

 
Prices on existing single family homes fell badly in December. It fell over 12%:
 

Distressed sales hurt 4th qtr US home prices-NAR

NEW YORK, Feb 12 (Reuters) - Prices of existing U.S. single-family homes in the fourth quarter of 2008 dropped 12.4 percent from a year earlier, the National Association of Realtors said on Thursday.

The NAR said distressed sales, or foreclosures and short sales, accounted for 45 percent of transactions in that quarter, dragging down the national median price of existing single-family homes to $180,100.

In the fourth quarter, 134 out of 153 metropolitan statistical areas showed declines in median single-family home prices from the same period in 2007, pulled down by active sales at the lower end that were driven by foreclosures, the NAR said.

-END-

US sales rose unexpectedly by 1%.  I do not trust the data:
 
Here is the report:
 
 

U.S. retail sales unexpectedly up 1 pct in January

WASHINGTON, Feb 12 (Reuters) - Sales at U.S. retailers unexpectedly rebounded in January, government data showed on Thursday, likely boosted by post-holiday discounts and providing a glimmer of hope for the recession-hit economy.

The Commerce Department said total retail sales rose 1 percent, advancing for the first time in seven months, after slumping by a revised 3 percent in December, previously reported as a 2.7 percent decline.

January's increase in retail sales was the biggest since November 2007.

Excluding motor vehicles and parts, sales were up 0.9 percent after a revised record 3.2 percent decline in December, previously reported as a 3.1 percent drop, the department said. The January rise was the highest reading since May 2008.

Analysts polled by Reuters had forecast January retail sales to fall by 0.8 percent. Excluding motor vehicles, sales had been predicted to drop by 0.5 percent.

-END-

This is going to be the next wave to mortgage defaults.
 
First the graph and then I will explain:
 
 

Hi Bill,
following on from Dave from Denver yesterday, the enclosed graph shows that the Sub-Prime problem pales in comparison to the next extended 2nd wave of loan resets and associated defaults that is about to hit. With the bulk of the Sub-Prime ARM resets out of the way, we have another wave of Alt-A, Option ARM and Prime ARM resets to undergo. This will be an additional blow on top of all the other financial fallout that is currently hitting the fan.

With an already cash-strapped US home owner and an already battered US economy, the ensuing fallout may be multiples of the Sub-Prime defaults. Also bear in mind this graph is somewhat out of date and the bars may be even higher than shown, but definately not lower.
rgds LT

end

 You will note that we are now going into the next phase of the securitized mortgage mess.  If you remember my previous commentaries, the total Alt A's out there is around 1.2 trillion.  The Prime stuff and the ARMs is around 1.8 trillion. 

However, you have other defaults looming as well such as  commercial loans and studend loans. Total commercial loans number around 3 trillion and there are 1 trillion dollars of student loans.  There is also over 1.2 trillion of home improvement loans. In Canada we call them second mortgages.

 

The total securitized mortgages held by financial entities total around 10.5 trillion.  It is estimated that at least 35-50% will go bust.

That puts the total default to the banks at somewhere around 4-5 trillion. 

 

In other words, Geithners little patchwork did not pass the smell test for Wall Street.  They knew that 1 trillion of bank injections plus another 1 trillion of loans to relieve the clogged arteries of loans just was not enough.

 

Bryant writes about the insurance on mortgage defaults.  He explains the nefarious activities of the 8 companies involved in this fiasco:

 

Mortgage default insurance

Bill,
A third grader in class probably would have asked the following question, but I have not seen it raised by any reporters or financial experts at any time during the mortgage crisis of the last year and a half. If banks require mortgage default insurance for anyone borrowing more than 80% of loan to value on a house, how come mortgage defaults are adversely affecting the banks? After reading up on this, I found out that the banks avoided mortgage insurance by use of creative financing. The following paragraph at this article http://mortgageblues.us/mortgage-insurance-companies-get-the-blues/. explains how it was done:

The creative loans left lenders exposed and did not put premiums into the pockets of mortgage insurance companies. Creative financing terms for these products are blended, piggyback mortgages, simultaneous loan closings, split loans, 80-10-10, and 80-5-15. A buyer could use two or more loans to purchase property. The first mortgage was at less than 80 percent of the purchase value and a second mortgage (10 to 15 percent) was used for the purchase of the property. The down payment from the buyer was as little as 5 percent. In some cases home equity lines of credit (HELOC) were also included at the closing table and the buyer could leave the table with 25 percent of the value of the purchase available for home improvements or personal use.

So essentially, the banks are not a victim of a market downturn, they are a victim of their own stupidity. The above linked article also lists the 8 main mortgage default insurers and they are as follows:

MGIC Investment Corp. (NYSE:MTG)
Radian Group Inc. (NYSE:RDN)
The PMI Group, Inc. (NYSE:PMI)
American International Group, Inc. (NYSE:AIG)
Old Republic International Corp. (NYSE:ORI)
Genworth Financial, Inc. (NYSE:GNW)
Triad Guaranty Insurance (NASDAQ:TGIC)
G.E. Capital Mortgage Insurance Corporation (General Electric Credit Corporation, General Electric)

Even though the insurers were not insuring all of the defaulting mortgages, I imagine they still were insuring a fair share and it is not a leap to say most or all of the above 8 companies will become bankrupt without government bailouts. Regards,
Bryant.

end

 

There are two new areas that I would like to mention. Rob Kirby presented a paper tonight on the oil market.  It has to do with the differential in the light sweet oil vs  the heavier sour oil the Brent Oil.  For the past several months Brent has been trading at a huge premium to the West Texas Intermediate  (light sweet oil) which is the reverse of normal protocol.

 

It seems that our government has engaged in swaps with Europeans whereby the Europeans occupy the SPR and the usa owns a like amount of Brent.   This caused a huge sell-off in the light sweet oil.  The action commenced the last week of June 08 exactly within a week of the massive short of silver and gold.

I forwarded this to Ted Butler asking for his opinion and I will get back to you on this.  Suffice it to say, we have a massive conspiracy here!!  I will report on this matter on Saturday.

 

The second area of which I have been alerted to a few weeks ago but kept silent was the realization that  Stamford Investments is in reality a Ponzi scheme similar to the Madoff situation. It was announced today in Bloomberg so I am now free to announce it to you:

 

First the Bloomberg paper:

 

s Firm Said to Face U.S. Probe (Update1)

Email | Print | A A A


 

By Alison Fitzgerald

Feb. 12 (Bloomberg) -- Stanford Group Co., a Houston-based investment firm led by billionaire R. Allen Stanford, is under investigation by U.S. securities regulators over sales of certificates of deposit in its affiliated offshore bank and the consistent, above-average returns those investments pay.

Investigators from the Financial Industry Regulatory Authority visited six Stanford Group offices last month, downloaded information from computer hard drives and looked through files, people familiar with the events said. Two former Stanford financial advisers were questioned last month by the Securities and Exchange Commission, according to the people, who declined to be identified because they didn’t want to put their current jobs at risk.

The agencies are investigating Stanford’s sales of certificates of deposit issued by its Antigua-based affiliate, Stanford International Bank Ltd., according to the former employees. The agency has asked former employees about the bank’s stated returns on investment, between 10.3 and 15.1 percent every year from 1995 until last year, according to documents and annual reports on the bank’s Web site. SIB has $8.5 billion in assets and 30,000 clients, according to the site.

“That type of return ignores the business cycle,” said L. Burke Files, principal of Financial Examinations & Evaluations Inc., a Tempe, Arizona-based financial investigation firm. “His returns fall outside the bell curve of probability.”

‘Routine Exam’

The visits by Finra and the SEC were part of a “routine exam,” said Brian Bertsch, a spokesman for Stanford. Finra spokesman Herb Perone said the agency doesn’t confirm or deny investigations.

Kevin Edmundson, an SEC investigator in Ft. Worth, Texas, said, “I can’t even confirm the existence of the investigation.” The agency issued subpoenas last July to at least two former Stanford employees.

The SEC has stepped up probes after being accused of failing to heed warnings that Bernard Madoff’s investment returns were too good to be true. Madoff was arrested Dec. 11 after allegedly telling his sons that his business was a $50 billion Ponzi scheme. The SEC has since announced unrelated lawsuits against at least seven money managers for allegedly inflating profits or siphoning off client money.

Finra in November 2007 fined Stanford Group Co. $20,000 for failing to adequately state the risks involved in the CD investments and to disclose that an affiliation between the broker-dealer and the bank could pose a conflict of interest. Stanford consented to the sanctions without admitting or denying wrongdoing, according to a file on the Finra web site.

The Stanford Financial companies, including Stanford Group, Stanford International Bank and Stanford Trust, were founded by R. Allen Stanford, who is their chairman. The Texas native was listed by Forbes Magazine as the 605th-richest man in the world with an estimated net worth of $2 billion.

No Madoff Exposure

Allen Stanford is a citizen of the U.S. and of Antigua & Barbuda after being naturalized in that country 10 years ago, according to a biography on the company’s Web site. He was knighted by the Antiguan government in 2006 and now uses the title “Sir.” Stanford Group Co. has 19 offices in the U.S. and more than $43 billion under management or advisement, according to its Web site.

Stanford International Bank said in a Dec. 17 letter to clients, posted on its Web site, that it didn’t have any exposure to Madoff’s investment funds.

Stanford’s one-year, $100,000 CD paid 4.5 percent annual yield as of Nov. 28, according a posting the Web site yesterday. A one-year, $10,000 CD purchased at JPMorgan Chase & Co. would earn 1.5 percent, according to its consumer banking Web site.

Stanford International Bank describes the CDs in its disclosure statement as traditional bank deposits. The bank says it doesn’t lend proceeds and instead invests in a mix of equities, metals, currencies and derivatives, according to its Web site and CD disclosures.

Returns ‘Incredible’

“Those returns are just incredible, in the sense that I don’t believe them,” said Alex Dalmady, an independent financial analyst based in Weston, Florida, who has examined Stanford’s investment strategy and published an article in VenEconomia Monthly, published by Caracas-based economic consulting firm VenEconomia.

The company “obviously disagrees with his conclusions,” Stanford’s Bertsch said.

“The most important opinion for us is that of our clients, some of whom have been with us for over 20 years and have maintained their confidence in Stanford International Bank through the years,” he said in an e-mail response to questions.

Dalmady and Files say the financial information published by Stanford International Bank makes them doubt its authenticity.

‘Subtle Clues’

“There are just a whole lot of subtle clues at Stanford that when you look at it tell you to run away,” Files said in an interview. He cited the consistent investment returns and the use of an Antigua-based auditor.

Stanford International Bank lists C.A.S. Hewlett & Co., based in St. John’s, Antigua, as its auditor. The firm reports offices in Antigua and London on its web site. No one answered the telephone yesterday at either number.

“If you have $8 billion in assets, and you’re taking deposits from all over the world, you would really like to have someone signing those balance sheets that someone has heard of,” Dalmady said.

Four former investment advisers interviewed by Bloomberg said the Stanford Group offers incentives for those who steer their clients’ money into the bank CDs. The company paid a 1 percent fee to the advisers, held contests and offered trips and bonuses of up to $125,000, based on how much money went into Stanford International Bank, according to the former employees and e-mails provided to Bloomberg News. Those incentives weren’t paid for investments in other securities, they said.

‘Carte Blanche’

The bank said in a December report that it lost $110 million last year. The S&P 500 index fell 39 percent last year.

That month it also withdrew a commitment to provide $85 million in financing for Tampa, Florida-based Health System Solutions Inc. to purchase Emageon Inc., a medical information technology systems company, according to an Emageon press release. The transaction was scheduled to close yesterday, an Emageon filing with the SEC said. Emageon’s shares fell 44 percent yesterday and are down 18 percent to $1.15 as of 2:35 p.m. in New York on the Nasdaq Stock Market.

Emageon “does not expect Stanford International Bank Ltd. will provide the funding necessary to consummate the parties’ merger transaction today,” according to the Birmingham, Alabama- based company.

Stanford International Bank is the principal shareholder of Health Systems Solutions, according to an Oct. 13 press release that announced the merger agreement. Health Systems Solutions shares are not trading today. They fell 62 percent on Feb. 9 and rose 40 percent yesterday to $1.05 in over-the-counter trading.

Stanford’s Bertsch didn’t immediately respond to a request for comment.

The bank discloses broad investment categories in marketing materials and on its web site. In 2006, it reported that 57.4 percent of its portfolio was in equities, 21.9 percent in Treasuries and corporate bonds, 13 percent in metals and 7 percent in alternatives, according to a disclosure statement related to the CD offering. The rest was in cash, mostly dollars.

“They have carte blanche to invest in anything they want,” said Scott MacKillop, president and chief compliance officer at Frontier Asset Management in Denver, who reviewed the CD offering documents. “You don’t really know what your risk is, and you’re getting a limited return.”

To contact the reporter on this story: Alison Fitzgerald in Washington at Afitzgerald2@bloomberg.net

end

 

Sir Stanford is no longer a resident of the usa but a resident of Antigua.  He is listed by Forbes as the 65th richest person on earth.  He uses a small firm to audit  45 billion usa of assets.  The auditor resides in Antigua. Stamford Investments has consistently averaged 10-15% returns each and every year for the past 20 years.  They even made 15% in each of these two past years.  Telephone calls to the auditors remain unaswered.

Phone calls to investment advisors of Stamford remained unaswered!!

 

Ladies and Gentlemen: this looks like a mammoth fraud to me!

Speak to you on Saturday

Harvey/

 

 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

 

 

 

 

 

 

 

 

 

 

Wednesday, February 11, 2009

February 11.09 commentary..important.

www.lemetropolecafe.com   and  uktelegraph...Evans-Pritchard
 
Good evening Ladies and gentlemen: 
 
Today, gold and silver took off in obvious response to the massive printing of money globally.
 
The world finally woke up to the dire situation facing the banking apparatus throughout the world.  When Geithner reported on his banking
"rescue" yesterday, the street just did not buy it.  They knew the costs to bail out the banks were much higher.
 
Gold rose by $31.30 to 943.80. Silver joined the fun rising by 39 cents to 13.54.
 
The real exciting part of todays action was the reporting of open interest.  With gold rising by 20 dollars yesterday, the OI rose by only 100 hundreds  Silver rose by a 1000 contracts.
 
There is no question that the minor cartel members bailed out of their short positions.  With the printing press on 24/7 they exited their shorts as fast as they could.  The major shorts, JPMorgan and HSBC  have been designated to hold up the Alamo.  Santa Ana's army is surrounding their little fortress waiting for the final seige.
 
In gold news, the ECB reported a sale of .3 tonnes.  Last week 1 bank  (Bundesbank) purchased gold for coins.  Europe is not interested in supplying any metal and this has been going on for quite a few weeks.  The only supplier of gold is the usa and this will turn out to be criminal as the Sec Treasurer has no authority from congress to sell  the royal treasury.  With the whole world flocking to the gold metal because of the banking crisis, you can imagine the anger of citizens when they find that all countries have depleted their gold reserves.
 
And now for economic news:
 
Libor continues to remain at 1.24%. The lending arteries are still clogged.  Mortgage rates continue to rise despite the low treasury bills.
Lenders just do not want to lend and the quality of borrowers are just not good.
Many businesses are failing and this is causing commercial mortgages to falter.  We are witnessing much deterioration throughout the world but  it is Europe that is getting the full brunt right now.
 
Evans-Pritchard  has just published a paper outlining the serious deterioration throughout Europe.  In a secret report the banks are overextended relative to their GDP.  The 8 countries named that are in serious trouble are England, Spain,  Ireland,Luxembourg, Austria, Sweden, Belgium and the Netherlands .  The report suggests that the total losses written off globally is around 1.2 trillion even though 2.2 trillion have been lost.
The usa has recognized 738 billion dollars but Europe only $294 billlion.
What is really scary is the rapid deterioration in Eastern bloc countries  and southern Med countries.  They have seen massive unemployment and massive contraction in their economies.  Russia has defaulted on some bonds and this has shaken Europe.  The risk is now a complete default by the ECB. 
 
Please remember, that Bernanke stated yesterday at 1:30 that the swap the usa made  was with the ECB itself and the total was in excess of 1 trillion dollars.  What is the meaning of this?  Simply the ECB ran out of dollars, so they swapped with the usa.  Originally the world was told the swap was with captive European banks. They lied.  This is serious in that the world is running out of dollars as the world bails out of assets.
 
Here is the article for you to read.  I urge you to study it thoroughly and it has huge implications.
 

European banks' toxic debts risk overwhelming EU governments

The toxic debts of European banks risk overwhelming a number of EU governments and may pose a "systemic" danger to the broader EU banking system, according a confidential memo prepared by the European Commission.

 

"Estimates of total expected asset write-downs suggest that the budgetary costs of asset relief could be very large both in absolute terms and relative to GDP in member states," said the document, prepared for a closed-door meeting of EU finance ministers.

"For some member states, it may be the case that asset relief for banks is no longer an option, due to their existing budgetary constraints and/or the size of their banks' balance sheet relative to GDP. The extent of any risks to the EU banking system as a whole from an inadequate response in these member states needs to be considered, particularly in the case of cross-border banks".

While no country was mentioned, the obvious candidates are Ireland, Luxembourg, Belgium, the Netherlands, Austria, Sweden, and Britain -- and non-EU member Switizerland -- which all have oversized banking sectors. EU banks hold balance sheet assets of €41.2 trillion (£36.9 trillion).

Brussels refused to comment on the paper, but it is clear that officials are concerned about default risk in the weaker states where interest spreads on government bonds are flashing warning signs. The International Monetary Fund has questioned the lack of a proper lender of last resort in the eurozone. The European Central Bank is not allowed to bail out individual states, yet national goverments do not control the monetary levers.

The IMF says European and British banks have 75pc as much exposure to US toxic debt as American banks themselves, yet they have been much slower to take their punishment. Write-downs have been $738bn in the US: just $294bn in Europe.

Global banks have so far written down half the $2,200bn losses estimted by the IMF. On top of this, EU banks have $1,600bn of exposure to Eastern Europe -- increasingly viewed as Europe's subprime debacle, and EU corporate debts are 95pc of GDP compared to 50pc in the US, a mounting concern as default rates surge.

The EU document also highlighted the "real danger of a subsidy race between member states" if countries start to undercut each other in the way they value toxic debts in their `bad bank' rescue programmes. This could be used as a means of covert state aid, undermining the unity of the EU single market.

It could also lead to an explosion of budget deficits, already threatening to hit 12pc of GDP in Ireland next year and almost 10pc in Spain and Britain.

"It is essential that government support through asset relief should not be on a scale that raises concern about over-indebtedness or financing problems. Such considerations are particularly important in the current context of widening budget deficits, rising public debt levels and challenges in sovereign bond issuance.

END

The cartel needed to rescue the Dow today as yesterday's big fall was a real slap in the face to President Obama.  The boys pulled all the stops to keep the Dow in positive territory and the bond prices rising.  The huge volatility in the bonds have created a nightmare for JPMorgan.

They now have many balls in the air juggling to keep the paper business afloat.  They are running out of physical gold and silver and this is also limiting them.

The market got a little lift,with news that both houses have agreed on a 789 billion stimulus pkg.  The problem now is what are they going to use to prop up markets?  All the news is out!

 

Here is the link on that story:

 

Lawmakers Agree on $789 Billion Stimulus Proposal, Baucus Says

Feb. 11 (Bloomberg) -- U.S. lawmakers are cutting a proposed economic stimulus package to $789 billion and may be able to send it to President Barack Obama's desk by the end of this week, said Senate Finance Committee Chairman Max Baucus.

"The votes are there for passage, that is clear," Baucus said, while cautioning that lawmakers are working out details of the agreement. "Everyone is giving in here..."

-END-

.The housing market continues to deteriorate.  New applications for mortgages remain at its nadir:

U.S. mortgage applications slump to 8-year low

NEW YORK (Reuters) - Demand for U.S. mortgage applications tumbled nearly 25 percent last week, with requests for loans to buy homes sinking to an eight-year low, the Mortgage Bankers Association said on Wednesday, as potential buyers hold out for better terms and government help.

The Mortgage Bankers Association's seasonally adjusted home purchase applications index slid 9.8 percent in the week ended February 6 to 235.9, its lowest level since the end of 2000.

Average 30-year mortgage rates slipped to 5.19 percent from 5.28 percent a week earlier, the trade group said.

The rate has fallen more than a full percentage point in three months, but is up about 3/8 point from early this year and seen heading lower.

"In addition to waiting for the rate, you have home prices continuing to come down, so why would I pay $200,000 today when I can pay maybe $180,000 in a couple months or even $150,000," Daniel Penrod, industry analyst for the California Credit Union League in Rancho Cucamonga, California, said on Tuesday. The government is "really pushing against some very strong forces."…

-END-

 

The trade deficit came in much higher at 40 billion dollars instead of 36 billion.  The pundits thought that with the low price of oil, the trade deficit would improve into the low 30's.  They were wrong.  Imports plummeted as did exports as the entire world is suffering the banking crisis as spending throughout the world contracts!
 
Wall Street was not happy with this budgetary report for January. It showed a budgetary deficit of 83.8 billion dollars.  If you multiply by 12 you get 1.68 trillion dollars.  However, this is not taking the stimulus number AND the war with Iraq and Afghanistan into consideration.  The true deficit will be somewhere btw. 2 and 3 trillion dollars.  Then they need another 2 trillion to bail out the banks. Here is the link:
 
14:00 Jan monthly deficit reported ($83.8B) vs. consensus ($78.0B)
Prior surplus figure unrevised from $17.8B.
* * * * *
 
I want you all to read this exchange btw. Senator DeMint and Geithner regarding the bank funding:
 

C-SPAN Video Player - Sec. Geithner Outlines the Economic Recovery Plan

This is priceless. follow the link below, hit the House Hearing video link re Timothy Geithner's testimony, and move the video timeline to about 02:03.

Watch R-Sen Jim DeMint quiz TG about the new stimulus programs, especially how the Treasury is going to fund all this;

-JD asks are we going to "print or borrow" the money (asks several times)

-TG says "borrow", JD asks "from whom??????"

-JD goes on to say that the US debt/GDP ratio is twice as bad as Europe, in fact the US wouldn't even qualify to join the euro!!!!!!!!!!!!!

-JD asks how is the US going to service all the interest and debt???????

-TG's response is what you would expect from someone who knows WHY gold must be suppressed at all costs
cheers
jeff

 
The entire world has stopped buying bonds.  So the usa is buying its own bonds and using the printing presses to buy them. (monetizing the debt).  DeMint is all over Geithner demanding to know if the usa is going to print all of this money.  .
 
Early this morning, we woke up to this warning from Mervyn King, the Governor of the Bank of England:
Basically,  King is warning parliament that he will release massive paper pounds as the UK economy is in deep recession.  The pound tumbled from 1.47 to 1.43 to the dollar on the news.  Here is the article:
 
 

Bill,
http://finance.yahoo.com/news/Bank-of-England-says-Britain-apf-14320238.html

It looks like the Zimbabwe approach is being adopted

QUOTE

LONDON (AP) -- The head of the Bank of England said Wednesday that Britain was in a "deep recession" that would require further easing of monetary policy, including expanding the money supply.

"The UK economy is in a deep recession," bank Governor Mervyn King said at a news conference, who also gave his clearest sign yet that the Bank of England was ready to in effect print money to get the economy going again.

"The projections...imply that further easing in monetary policy may well be required. That is likely to include actions aimed at increasing the supply of money to stimulate nominal spending," King said……………

END

Wall Street just loved this report released late in the day:
 

Deluge of Financial Calamities Looming by Mid-March


As horrible as the financial news for currencies and paper assets has been since mid-2007, it looks like the worst is yet to come - perhaps as early as next month.

Over the weekend the Managing Director of the International Monetary Fund (IMF), Dominique Strauss-Kahn, told a gathering of Southeast Asian central bankers that the world's advanced economies are already in a depression and that the financial crisis may deepen unless the banking system is fixed.

On Febr. 4, Paul Wolfowitz, the former president of the World Bank, said the IMF and similar institutions are incapable of coping with the global financial crisis because they do not have enough resources.

The market appears to have turned on U.S. Treasury debt. Analyst Adrian Douglas issued a report on Sunday titled "Bond Market Collapse Unfolding." He used his proprietary Market Force Analysis on the price of the 10-year U.S. Treasury Note. Last September and October, as the value of Treasury debt was falling, it looked almost certain that the U.S. Treasury entered the market to purchase its own debt! This had the effect of boosting the price of Treasury bonds.

However, the futures market for 10-year Treasury debt shows that there have been far more sellers than buyers for more than the past six months, a strong sign that bond prices are destined to decline in the near term. For the past eight weeks, Treasury bond prices have indeed been generally declining (i.e. interest rates have been rising). The U.S. government is almost certain to intervene again, as the Treasury debt is the most important in the world, and whose collapse could wreak havoc across the global financial system.

The problem is that the U.S. government is going to have to float massive additional amounts of new Treasury debt in order to immediately finance the second $350 billion of the bank bailouts and the nearly trillion dollars for the new so-called "economic stimulus" program. If almost everyone else is selling and the U.S. Treasury is the primary buyer of its own outstanding bonds, who is going to buy the newly issued debt?

Non-precious metals prices may have also passed their bottom. The price of copper recently jumped as much as 10 percent in a single day, for example.

Treasury Secretary Timothy Geithner is so busy with the crisis over President Obama's "economic stimulus" program that he announced Monday he would have to delay dealing with the U.S. banking crisis.

In an interview on
www.commodityonline.com released Monday, Marc Gugeri, the Fund Manager and Advisor to both Gold 2000 Ltd and the Julius Baer Gold Equity Fund, was asked about the price of gold. He stated, "The majority of investors purchase Paper-(Gold)-Futures at the COMEX. The sellers or counterparties of those Gold-Futures are just a few dominant players. Some of them have an in-official close link to the U.S. government. So far most of the investors didn't exercise the gold futures and have accepted cash instead of physical settlement. This is about to change. I believe that the COMEX will default and the entire paper gold market will 'crash' and gold could rise very quickly to 2,000 [or] 3,000 U.S. dollars. When this happens it will be too late to exercise or to try purchasing physical gold."

It normally is rare to find such doom-and-gloom commentary appearing in general financial circles. It is even more uncommon for commentators to reveal that some of the dominant players in the gold market have a close link to the U.S. government or that the price of gold could soon double or triple. Lately, mainstream financial analysts have been much more willing to talk about gold, to recommend owning gold for having better appreciation prospects than other assets, and to specifically recommend purchasing physical gold rather than shares in gold exchange traded funds or gold "certificates."

The tide has been turning toward gold for the past eight years, partly because it has been one of the top performing of all asset classes. Still, the proportion of Americans who own gold is minuscule - estimates I have seen range from only 3-9 percent of all U.S. investors. There is much more room for future appreciation despite how far prices have already climbed this decade.

The money supply of all of the world's major currencies is now increasing by 10-30 percent annually. With the gold supply increasing by less than 2 percent annually, it is a virtual certainty that all currencies will fall in value against gold.

In the past several weeks, several investment advisors have become more positive about gold because of the relative strength in the price of silver! In the past, silver has led the way for higher precious metals prices, which is just what has been happening so far this year. Late last year, the gold/silver ratio was over 80. Now it is under 70 and falling. I like the prospects for both silver and gold (though I continue to expect silver's price to outperform gold).

Perhaps most telling of all, the February 2009 COMEX gold contract fell into backwardation against the March 2009 contract on Feb. 6 and again on Feb. 9. Last Friday, the February contract price closed at $913.90, while the March contract ended at $913.80. On Monday, the February contract finished at $892.40, while March closed at $892.30. The last time that the COMEX gold contract went into backwardation, where the spot month traded at a higher price than future months, was in 1980. Being only 10 cents higher and only being higher then just the following month may not seem significant, but the fact that this has not occurred since 1980, as the price of gold exploded, could be the clearest sign that gold is due for a major rise soon. (For full disclosure, I note that the less active New York Stock Exchange LIFFE contract for 100 oz of gold closed Feb. 9 at $892.20 for the February contract and $892.30 for the March contract.)

In sum, a variety of factors are coming together very soon that I think will clobber paper asset values even more than they have suffered in the past 20 months. As these troubles mount, as the Managing Director of the IMF and the former president of the World Bank forecast, the prospects for gold look ever better.

Note: at the huge Long Beach Coin show in California last week, a lot of rare coin buyers were taking a wait and see attitude - except for circulated and lower quality mint state US Double Eagles. Between the start and the end of the show for instance, the wholesale price of the Mint State-62 $20 Liberty jumped almost 6%, even as the gold spot price fell slightly! Supplies of these and other lower-premium U.S. gold coins were the lowest I have seen in more than 20 years attending this show!

END

We are now witnessing russian citizens rush to buy gold.  Remember that Russia has defaulted on some bonds earlier in the week.  Here is the link:

Russia's biggest bank notes surging demand for gold

By Dmitry Sergeyev
Reuters
Wednesday, February 11, 2009

MOSCOW -- Russia's biggest lender, Sberbank, saw retail precious metal accounts double in 2008 as people rushed to protect their savings in a time of financial and economic crisis, a bank official said on Wednesday.

Russians opened 170,000 new accounts which track the price of precious metals last year, taking the total number of such deposits at the state-controlled bank to around 300,000, said Vladimir Tarankov, the director of Sberbank's currency and non-trade operations department.

"We have clients who bought 200-300 kilograms of gold and a 10-kilogram gold coin only spent two days in our safe," he said….

http://uk.reuters.com/article
/rbssFinancialServicesAndRealEsta
teNews/idUKLB69916720090211
.

END

 

Early in the session, there was a report that the IMF is lending large amounts of money so they would not have to sell any gold.

The cartel was quick to change the story.  In reality, the IMF has no gold to sell for lease as this gold was never sequestered among the various nations that supplied gold to the IMF.  This is nothing but a phoney.

 

Finally, Ted Butler released his paper yesterday and again we are witnessing massive increase in gold and silver shorts and also huge concentration of the shorts.  Many are writing to the senators and congressman of this obvious and deliberate fraud.

And now the paper:

TED BUTLER COMMENTARY

February 8, 2009

Vindication

(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.)

New data from the CFTC, provides the clearest proof to date of a manipulation in gold, thus vindicating the long-held position of GATA (the Gold Anti-Trust Action Committee). It is my hope and expectation that GATA, run by Bill Murphy and Chris Powell (Ed Steer, a director, is a close friend), will take the evidence and do everything in their power to ram it down the manipulators' throats and end the gold and silver manipulation.

I would like to offer further evidence of manipulation with the intent of convincing the staff of the Enforcement Division of the CFTC of the continuing crime in progress. In somewhat of a twist, I would call on all gold proponents and investors to study this evidence, as it pertains mainly to gold futures trading on the COMEX. The evidence is found in source data published by the CFTC, in the form of their weekly Commitment of Traders (COT) and monthly Bank Participation (BP) Reports.

The Bank Participation Report for positions as of February 3, indicates that three or fewer U.S. banks hold a record short position in COMEX gold futures of 111,190 contracts (over 11 million oz). an increase of 28,690 contracts from the January report. The previous record short position by U.S. banks was 86,398 contracts in the August Bank Participation Report.

http://www.cftc.gov/marketreports/bankparticipation/index.htm

In other words, the current short position held by two or three U.S. banks is almost 30% greater than the previous record. After the previous record August short position was reported, gold prices fell almost $200 over the next two months. Will that happen again? I don't know. What I do know is that if gold prices do suffer a sharp decline, it will only be because this manipulation by two or three U.S. banks was successful.

Allow me to put the concentrated short positions in gold and silver into perspective. As the February BP report indicates, one or two U.S. banks held a 29% share of the COMEX silver market and two or three U.S banks held a 32.1% share of COMEX gold futures. Of the 73 markets covered in the report, no other market has a U.S. bank percentage even close to silver and gold, save the smallest market listed, 90-day EuroYen Tibor (Although I have over 35 years of futures experience, I don't know, nor do I wish to know, what that is).

Please keep in mind that the Hunt Brothers and all their reported associates had a futures market position (COMEX and CBOT combined) that was under a 10% share of the total silver futures contracts outstanding at that time and were charged with manipulation. What aren't short positions three times as large also manipulative?

As large as the current gold and silver percentages of the market held by one, two or three U.S. banks may be, those percentages are grossly understated because spread positions are included in open interest totals. Remove all spread positions (non-commercial and commercial) and the share of the market held by one or two U.S. banks in silver rises to 41.5%, and not 29%. In gold, the share of the market held by two or three US banks is really 45%, not 32.1%. How could one or two traders holding 41.5% of any market, or two or three traders holding 45% of any market not be manipulative?

When the market share of the one, or two, or three U.S. banks in silver and gold are compared to the total share of all commercial traders, the result is truly shocking. In silver, the one or two U.S. banks account for more than 81.6% of the total net short position of all commercial traders. In gold the three or fewer U.S. banks account for more than 62.3% of all commercial shorts. With such a lion's share, these big banks completely dominate and control the gold and silver markets.

Lastly, by comparing corresponding COT and BP report data from January 6 to February 3, I can make the following statement. The entire net increase in the commercial short position in silver and gold (2,500 contracts in silver and 28,000 contracts in gold) basically came as a result of new shorting by the big U.S. banks. In other words, neither the 5 through 8 largest traders, nor the 9+ commercial traders (the raptors) changed their positions much during that period. Almost all the selling was by the big U.S. banks in both silver and gold. Ask yourself this - what would the price of gold or silver have been if these big U.S. banks hadn't sold short in such quantities? How can that not be manipulation?

It appears obvious that the CFTC began its current silver investigation as a result of revelations in my article "The Smoking Gun" http://www.investmentrarities.com/08-22-08.html and because many hundreds of you wrote in to the Commission. Without that public participation, there would have been no investigation. But one thing always puzzled me, namely, why did that investigation appear to center on silver? What about gold? After all, in my article, I highlighted the extreme concentration on the short side of COMEX silver and gold futures and asked how it was possible that such concentrations could not be considered manipulative in both markets. Make no mistake, the silver market is the most manipulated market in the world. But gold is close behind.

For the record, I am neither a gold proponent or antagonist. I am a gold agnostic. I like to think that makes me more objective than most. I understand why people buy and hold gold, and I respect their reasoning. I study the facts concerning gold closely. If there were no such substance and story as silver, I would imagine I would be a gold proponent. Certainly, higher gold prices do not harm silver. I know there are times when gold is positioned to rise and fall and I try to analyze appropriately. While I profess to a neutrality on gold, I don't profess to a neutrality on manipulation. The latest data from the CFTC confirm a manipulation in gold. Gold people should not tolerate it. Since there must be at least a hundred times more people interested in gold than are interested in silver, their collective voice could be forceful.

The evidence in the February Bank Participation report is clear - two or three U.S. banks held a record net short position equal to 15% of total world annual production of gold, a staggering and unprecedented number, exceeded only by the absurd percentage in silver (currently 20%). In every reasonable measurement of market share, two or three U.S. banks are completely dominating and controlling the gold market. All according to government data.

Who gave these U.S. banks the right to manipulate gold prices? The U.S. Treasury Department? Why are banks who are receiving taxpayer bailout funds even shorting gold and silver in the first place, especially at a time when so few other big entities chose not to? Shouldn't they be looking to make loans to real people and businesses and leave market speculation to others? Are there no honest market regulators left? I sure hope gold people get to the bottom of this and give these crooks what they deserve.

 

Law & Order

 

I want to thank all who wrote to me about the recent testimony of Harry Markopolos before a congressional committee regarding his prior warnings to the SEC about Bernard Madoff. All compared this episode to my two-decades long campaign to get the CFTC to end the silver manipulation. If you haven't heard or read Mr. Markopolos's testimony, you should do so. It's long, but it's very instructive http://financialservices.house.gov/markopolos020409.pdf

In his statement, Mr. Markopolos highlights the SEC's ineptness and arrogance, and comes up with a no-nonsense solution - fire and replace the entire senior staff who should have caught Madoff years earlier and revamp the structure for uncovering fraud. As far as the comparison to the CFTC, let me just note that it is widely acknowledged that the SEC is considered much more competent and alert than the CFTC. So, if the SEC could bungle and miss a major fraud for more than a decade, despite repeated warnings, is it not possible that a much smaller staffed agency could do the very same thing?

There was a sharp contrast between the television coverage of Mr. Markopolos's testimony and what I usually watch on TV for entertainment. Most of my leisure television viewing time involves watching reruns of the show "Law & Order." It's been that way for many years. I watch the show for much the same reason I imagine children watch Disney cartoons, namely, for fantasy escape purposes. Where Disney portrays heroic and kindly animal cartoon characters, "Law & Order" portrays dedicated public servants, police and prosecutors alike, who risk their lives and devote all their time to protecting society and upholding the law.

The show allows me to balance the reality I face each day with a nightly escape of what should be. There is no SEC ignoring credible warnings, nor a CFTC dismissing hundreds of bona fide complaints on any of the nightly reruns. Instead, the public servants on TV leave no stone unturned to get to the truth and let justice and the law prevail. Oftentimes, the TV public servants cross the line and are too aggressive in their pursuit of the bad guys and are reprimanded, with the resultant message that the rule of law must be observed at all times. The irony is that the fictional characters on TV have sworn to the same oath of office as have their real-life counterparts at the CFTC and other government agencies.

I accept that my TV viewing is fantasy and escape, as much as I accept that the CFTC is incompetent, uncaring or worse. The only issue is what to do about it? Live in a world where the law is upheld only on television, or bring pressure in the real world where it is not? For me, it's an easy choice. I know I must do what I can to terminate the silver manipulation. That's the primary purpose why I write publicly. Specifically, my role has evolved into presenting credible evidence of the manipulation and then trying to persuade you to pressure public officials to terminate the manipulation.

On a personal note, I'll be speaking at the Phoenix Silver Summit on February 21 http://www.cambridgehouse.ca/phoenix.html

 

 

OK.  I think you had enough to digest for one evening.

I will speak to you tomorrow night.

 

Harvey.

 


 

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