Saturday, February 21, 2009

Commentary..Feb 21.09 important.

 
Good morning Ladies and gentlemen:
 
First, as promised, I sent down my complaint to the SEC on the GLD/SLV fiasco:  Here is my complaint in full:
 

Dear Chairwoman, SEC:  (Mary Schapiro)

 

Below I have highlighted publications written by Henry Fellerman and Rob Kirby, of which I would agree the views are a little extreme but point out that there are, as a result of publications such as these, many uncertainties regarding the GLD & SLV in particular.  Mr James Turk and myself have alerted the SEC 5 years ago regarding the inventories of the GLD and SLV and feel the SEC should conduct such investigations and issue such reports as they are necessary to provide confidence to the investing public.

  

We are led to believe that for GLD each share is equivalent to 1/10 of an oz of gold, yet the GLD only provides an audit of its financial statements, not an audit of its gold inventory.

 

In SLV each share represents 10 oz of silver.  However appearances reveal the company issues shares with no physical metals being transferred.  The SLV has about 25% shortfall in the metal vs the number of shares issued.  It seems that the operators are having trouble locating the massive amounts of physical metals needed to satisfy the recent demand in GLD and SLV shares, in addition to not storing the metal that is contrary to the prospectus.

 

 

Based on the facts for the past 7 days, the GLD has increased its total inventory by an astonishing 128 tonnes of gold.  As of Monday, the GLD registered a whopping 1008 tonnes, which surpasses both Japan and Switzerland in total gold holdings.  To help put 128 tonnes of gold in perspective, it would require 22 full plane loads in order to satisfy last weeks rise alone!   With regards to SLV, the ETF holds 245 million oz of silver.  In conclusion, these two entities are amassing great quantities of silver and gold, which are logistically impossible to acquire. 

 

 

As an aside, the Central Fund of Canada, which backs their stock with 100% physical metal,  took  4 months to acquire 4.5 Million Oz of silver, and approx 65,000 oz (2 tonnes).  It is difficult to believe that GLD picked up 128 Tonnes in one week.  Moreover, the CFC does provide an inventory audit and warrants that its inventory has no encumbrances, which I would recommend the same methodologies be in place at the GLD and SLV in order to avoid confusion.

 

You will find the details of the transaction through the link below.  If you wish to speak to Stefan Spicer, CEO of Central Fund of Canada, he would be more than happy to speak to you.. His phone is XXX- XXX- 7878

http://www.centralfund.com/pressrel_files/2009/CFOC%20PR%20%20Closing%20%20%20Feb%203%202009.pdf

 

 

Meanwhile, we are also witnessing problems at the mints as they are having difficulty supplying the physical gold and silver demand many investors desire in addition to seeing delays at the comex in supplying the needed silver and gold contracts for investors.

 

I am humbly asking for your assistance investigating these claims to affirm whether the underlying asset of these ETF’s are real. (GLD and SLV)  An independent audit of the GLD and SLV is all that I am asking for:  i.e. a physical count of the two metals and the full recording of all serial numbers.  In addition, an independent certificate that none of these metals are encumbered, or leased out. 

  

I am also a complaintant to the CFTC with regards to the large concentrations of silver short positions and silver manipulation and I have been conversing with their Enforcement on a weekly basis.

 

I thank you for your kind attention in looking into these matters in an expedient fashion.

 

Harvey B Organ BSc Phm MBA

 

Appendix: 

***************************

1.  Government Sanctioned Theft:

http://www.321gold.com/editorials/kirby/kirby123108.html

 

2. Controls on the Gold ETF

Henry Fellerman

Demand for the SPDR Gold Shares (GLD), the gold ETF, is so great that if GLD were a country it would have the seventh largest gold reserves. From the day this gold ETF went public some of us have questioned whether GLD would be a way to invest in physical gold. The cynical among us suspected it was a scam that was designed to divert money from physical gold to paper gold. At the end of this message is a letter I sent to the SEC five years ago. I had a telephone conversation with an SEC lawyer about this, but nothing came of that. Though the SEC never answered my questions by now the answers are obvious.

Every public company is required to establish a system of internal controls to ensure its assets are safeguarded. In this instance we are seeking to establish a scheme to safeguard gold. We can compare what the management of GLD came up with to the system used by the Central Fund of Canada (CEF).

The internal controls of Central Fund have the following traits:

Define Terms

The Central Fund holds at least 90% of its net assets in gold and silver bullion, and at least 85% must be in physical form. A recent report to shareholders contained the following: “On October 31, 2008, 96% of Central Fund’s net assets were invested in gold and silver bullion. Of this, 99.3% was in PHYSICAL form and 0.7% was in CERTIFICATE form.” (Emphasis added).

Thus CEF defines what it means by the word “gold.” It can be physical, the stuff that will break your foot if you drop a bar. Or it can be paper gold. It also tells us how much it holds of each.

Legal Status of Gold

“Central Fund’s physical gold and silver bullion holdings may not be loaned, subjected to options or otherwise encumbered in anyway.”

Management could not be clearer on this point. Gold and silver belongs to the shareholders and nothing will be done to cloud legal title. Further, management will not engage in games with the bullion it claims to have, such as secretly disposing of it to manipulate the gold and silver markets.

Location and Means of Storage

Central Fund stores bullion “…on an allocated and fully segregated basis in the underground vaults of the Canadian Imperial Bank of Commerce (the Bank), which ensures its safekeeping.”

This is a very important safeguard. The gold and silver is held in an allocated and segregated basis. It is not comingled with the Bank’s other assets. Thus, in the event the Bank gets in to trouble, that gold and silver bullion will not be subject to seizure by the Bank’s creditors. This is such an obvious control that it is impossible for honest people to overlook it.

Control over Dispersal

“The Bank may only release any portion of Central Fund’s physical bullion holdings upon receipt of an authorizing resolution of Central Fund’s Board of Directors.”

It takes unusual efforts to get bullion out of the Bank. Also, this procedure provides an audit trail should bullion go missing.

Insurance

“Additional insurance against destruction, disappearance or wrongful abstraction is carried by Central Fund on its physical gold and silver bullion holdings.”

The insurance company does not want to have to pay on a claim. Therefore, it will send agents around to the Bank to ensure the controls are adequate to protect the gold and silver. This procedure gives a lot of protection to the shareholders.

Count the Bullion

“Bullion holdings and bank vault security are inspected twice annually by directors and/or officers of Central Fund. On every occasion, inspections are required to be performed in the presence of both Central Fund’s EXTERNAL AUDITORS AND BANK PERSONNNEL.” (Emphasis added).

So every six months the Chartered Accountants and Bank officials will audit the bullion and review the internal controls. This is the fundamental control over bullion. Given this policy, it is hard to imagine how the gold and silver could go missing without someone quickly catching on to the problem.

If you hired every Certified Public Accountant in America and every Chartered Accountant in Canada to design an internal control system to protect gold and silver bullion they would all come up with something similar to that used by the Central Fund. It’s just common sense.

How do GLD’s controls compare those of the Central Fund? The gold ETF has none of the controls used by the Central Fund. Not one. Instead, the governing documents are a wordy, winding, tangled mass of verbiage that seems designed to allow GLD to take in money but not purchase physical bullion. Or if they do buy physical gold, the procedures allow management to dispose of the gold while pretending it is still there. Not one CPA in America or CA in Canada would come up with GLD’s controls. Only sleazy executives and corporate lawyers are capable of creating such a system.

That the SEC allows the management of GLD to get away with this is a disgrace. It is just what I would expect from the government employees who enabled Madoff to get away with his scam for so many years.

Henry Fellerman

Denver, CO 80227

November 23, 2004

Chairman William H. Donaldson
Security & Exchange Commission
450 Fifth Street, NW
Washington, DC 20549

Dear Mr. Donaldson:

On November 18 streetTRACKS Gold Shares started trading on the New York Stock Exchange. I believe it is both the first commodity-based fund and the first that purportedly deals in gold bullion. The two sponsors, the World Gold Council and State Street, say little about their venture as it is in a permanent “quiet period” under SEC rules since it may issue additional shares in the future.

Though the sponsors may be quiet, streetTRACKS Gold Shares is getting a lot of free publicity in the press. A typical example is a story that appeared in The Seattle Times on November 19. According to the article, the fund “…is designed to give investors the opportunity to invest in gold without requiring custody of the metal, which can be expensive.” The reader is led to believe that by purchasing shares in streetTRACKS he is getting an investment backed by gold. All of the stories in the Main Stream Media leave a similar impression.

The attached article by gold analyst James Turk makes a persuasive case that streetTRACKS Gold Shares may not in fact have gold backing them up. I find this extraordinary as scores of newspaper articles are causing the public to believe that this security is just a convenient and inexpensive way to buy gold. Mr. Donaldson, this is no different that if you thought you have purchased a house when in fact the house didn’t exist. Wouldn’t that be fraud? How can you let so much misleading information about a security your agency approved be in the public record?

If the sponsors intended that Gold Shares have gold backing they would take the basic precautions of storing the gold in bonded facilities, purchasing insurance on the gold and requiring the gold to be subject to periodic auditing by independent auditors.

According to information at www.streettracksgoldshares.com, the security is “Designed to track the price of gold.” Not to hold gold, but just to track it. The public is obviously being misled.

Mr. Donaldson, a few questions:

  1. If streetTRACKS Gold Shares issues shares to the public for money but doesn’t use the funds to purchase gold, has a fraud been committed?
  2. If the money is used to buy gold but the gold is subsequently leased out, has a fraud been committed?
  3. To the SEC is there any difference between gold in the vault and a promise to pay back leased gold?
  4. Why is the SEC allowing such misleading information to be put out on a security under the agency’s jurisdiction? That the sponsors are in a permanent “quiet period” doesn’t seem to be an excuse. Surely the World Gold Council and State Street have an affirmative duty to correct the record.

I look forward to your reply,

Sincerely,
Henry Fellerman

 

OK, lets start with my regular commentary:

 

Gold marched northbond again on Friday as economic conditions deteriorated.  The gold price hit 1000.50 at 1:30 at closing time.  However it fell in the access market to 993.50 as the cartel members had to deal with option expiry.  Silver rose  to 14.49 up by 52 cents.

 

Ladies and gentlemen:  this is the first time in memory that the cartel could not whack gold down at the conclusion of options expiry.

Open interest fell by 7000 contracts on gold comex on Thursday as many anticipated a further Friday whacking. The new OI fell to 358000 a full 280,000 contracts lower than when gold crossed 1000 dollars in Feb/March 2008.  The silver Oi hardly budged.

 

I have to report two major events in the inventory of the GLD and SLV.  As you can see from my complaint, the GLD in the Monday report was 1008 tonnes.  Last night's update was 1029 tonnes.

 

The silver inventory on the SLV advanced a huge 8 million oz and its new inventory level is 253 million oz.  I need to discuss the next part with my legal team as the silver component is reaching maximum levels re custodial levels which can be administered by JPMorgan.  First here is the report:

Hi Bill-
The last two days of SLV inventories were just posted and there was a huge jump of 8.6M oz to 253,146,837oz.

http://us.ishares.com/product_info/fund/overview/SLV.htm

This puts JP Morgan very close to maxing out on their custodial duties of 264,550,255oz. Either they have to release a new Prospectus with updated Custodial numbers or they are approaching an end to their custodial responsibilities.

Either way EVERYTHING is pointing to the end of the game very soon.
Bix

I am not sure if they are allowed to alter their prospectus.  I will seek guidance on this and report back.

 

it is logistically impossible for physical gold and silver to rise each day and be stored in one facility. How on earth did the SLV acquire, store, insure, stack etc 8 million oz in one day. I am now thankful that many are writing that these two ETF's are nothing short of confetti paper.

 

And now for other important economic news:

At about 11 am yesterday, I received a call from No 2 son, who informed me that the way  Citibank and Bank of America were trading, he would not be surprised to see these two companies nationalized (euphemism for bankrupt..capoot). Citibank was already breaking the two dollar level and bank of America was breaking the 3 dollar level. I agreed with him that these two entities may even be nationalized on the weekend.

 

Then at around noon time, Senator Dodd, chairman of the banking finance committee stated that certain major banks need to be nationalized.  Here is that report:

 

U.S. Stocks Tumble, Sending Dow Below Lowest Close in 11 Years

Feb. 20 (Bloomberg) -- U.S. stocks tumbled, sending the Dow Jones Industrial Average below its lowest close since 1997, after Senate Banking Committee Chairman Christopher Dodd said some struggling banks may need to be taken over by the government.

Citigroup Inc. and Bank of America Corp., which combined have received more than $90 billion in federal aid, slid more than 30 percent after Dodd told Bloomberg Television that it may be necessary to nationalize some banks for a short time. Europe’s benchmark index sank to a six-year low, while Japan’s Topix plunged to the lowest since 1984. Treasuries rallied and gold climbed above $1,000 an ounce as investors sought a haven from riskier assets…

http://bloomberg.com/apps/news?
pid=20601087&sid=aZr3F8Z335Pk&refer=home

-END-

At around 3 pm, the white house press secretary said that they were not thinking about "nationalizing" the banks in question but put them in a private bank.  The market which had sunk to negative 250 points at one point, rebounded to go to even.  Then  strangely investors started to think for a change...a private bank?  what about all of Citibank and Bank of America's derivatives?  The stampede out of stocks started again and the Dow finished down 100 points.  This may have been the reason for gold to sell off in the access market.  And then this was released:

 

C and BAC may become wards of the taxpayer

as soon as this weekend:

http://www.chartingstocks.net/2009/02/gone-in-60-days-citi-and-bank-of-america-wont-live-to-see-may/

the corrupt Senator Chris Dodd issued this statement today:

"Senate Banking Committee Chairman Christopher Dodd said it may be necessary to nationalize some banks for a short time ..."

http://www.calculatedriskblog.com/2009/02/dodd-short-term-bank-nationalization.html

 

 

 

I have been commentating to many of you on the disappearance of gold coins of numistatic quality.  Here is a report for those who collect gold coins:

Speaking of gold coins...

Dear Bill:
Just a quick word on a significant new development in the U.S. gold coin market. Old U.S. Double Eagles - $20 Gold Pieces minted from 1850-1933 - have absolutely taken off in price over the past few weeks. These semi-numismatic gold coins that contain just under one troy ounce of gold apiece (.9675) have always been popular with collectors and investors.

During the 4th quarter last year, premiums for these coins over the spot price of gold increased about $100 on average, which was a lot when going back over several year's price histories.

The past few weeks, however, have seen the most rapid increase in premiums since January 1980.

While the circulated grades (VF, XF, AU) slightly lagged spot gold, the Mint State grades have mostly doubled gold's increase. Note especially the very popular Saint-Gaudens design type. The MS63 to MS65 examples now bid 32% to 38% higher than at the beginning of January.

Whereas 100-piece lots could be had with just one or two phone calls last year, larger dealers are now mostly sold out and staring at many unfilled orders

Ok, lets go with economic news:

Libor continues to remain at the 1.25% at the 3 month level even though 3 month treasuries are yielding  zero percent.  Lenders just do not want to lend and borrowers do not want to borrow.

 

The consumer price index rose  by .3% and the core by .2%.  This is starting to alarm Obama;s cabinet:  the report: (the big gain was energy rebounding by 1.7%..I do not recall this happening)

 

U.S. consumer prices rise 0.3 pct in January

WASHINGTON, Feb 20 (Reuters) - U.S. consumer prices rose in January, advancing for the first time since July as energy costs rebounded, government data showed on Friday, but a severe economic downturn was likely to keep inflation pressures muted in the months ahead.

The Labor Department said its closely watched Consumer Price Index rose 0.3 percent after falling 0.8 percent in December. Analysts polled by Reuters had forecast headline CPI rising 0.3 percent.

Core prices, which exclude food and energy items, rose 0.2 percent after being flat in December. That compared to analysts' prediction for a 0.1 percent increase.

On a year-over-year basis, consumer prices were flat, the weakest reading since August 1955. The index rose 0.1 percent year-on-year in December.

Energy prices rebounded 1.7 percent in January, reversing five months of declines. However, compared to the same period last year, energy prices tumbled 20.4 percent.

-END-

Rick Santelli, who on Wednesday on live televison, basically stated that the rescue pkg was ill thought out.  He went on a rant and basically declared we should have a Boston Tea party revolt.  I urge you to see this interview with Santelli: it is well worth viewing.

Yesterday Drudge featured Rick Santelli, from the CBOT, calling for a new Boston Tea Party against bailouts.

http://www.cnbc.com/id/15840232?video=1039849853…

-END-

Late in the day, we heard that GM is letting Saab go bust.  And then we heard that Citibank is pullling all lending in Denmark:  Here is the report below:

GM throws SAAB into bankruptcy protection in Sweden:

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a_bLPtlzvYZs

and Citi stops all lending Denmark:

http://www.creditwritedowns.com/2009/02/citib
ank-has-cut-all-lending-in-denmark.html

 

This one is huge:  now we are seeing PRIME JUMBO loans go into default.  Here is the report:

JUMBO LOAN DEFAULTS RISE AT FAST PACE AS RICH SUFFER

Feb. 20 (Bloomberg) -- Luxury homeowners are falling behind on mortgage payments at the fastest pace in more than 15 years, a sign the U.S. financial crisis that began with the poorest Americans has reached the wealthiest.

About 2.57 percent of prime borrowers who took out jumbo loans last year were at least 60 days delinquent, a percentage reached within 10 months and the fastest since at least 1992, according to LPS Applied Analytics, a mortgage data service in Jacksonville, Florida. That’s almost twice as quickly as 2007 borrowers fell behind and a level 2006 owners haven’t attained after almost three years…

http://www.bloomberg.com/apps/news?
pid=20601087&sid=aXQyhJ_n2Nqs&refer=home

And this from James McShirley on the housing crisis. He basically states correctly that the current delinquencies do not factor the millions who are now being laid off but will be delinquent in the next few months:  Here is the report:

Bill,
As someone with a front row seat to the housing bubble I can say it's drastically worse now than what most people know. Words like appalling, stunning, surreal, and insane don't do justice to the enormity of this crisis. The most recent feeble attempts to rectify what's wrong with housing are laughable, if not downright dangerous. There are FAR more people underwater or delinquent on mortgages than is being reported. The current delinquencies don't factor the millions of recently laid off workers that will become delinquent. Like toxic derivatives it's impossible to appraise home values when there are NO bidders. All attempts to pacify existing delinquent mortgage holders only emboldens the millions who ARE paying on time to stop. Thus in a perverse way the solution being offered is actually throwing gasoline on the fire. By the end of summer a majority of U.S. homes could be upside down on their mortgages. It is nearly incomprehensible what that could mean to society as we know it. The only solution (if that's what you call it) is hyperinflation, the likes of which never witnessed.

I find it strange that under these circumstances anybody could predict with such certainty a "top" for gold. Do they really know precisely how many FRN's are yet to circulate? Even if someone knew Fed-head Bernanke personally does HE even know how many trillions of OTC garbage is out there? If this derivatives-fueled crisis has literally no visible bottom then how do you define gold in dollars, euro's, yen, or ANY paper? Just for the sake of the top callers and the Nervous Nadler's let's plug in a few numbers and then extrapolate what constitutes a "bubble" in gold. Let's assume the following amounts will finally clear the deck and return us to unbridled capitalism:

Housing bailout: $2 trillion
Fannie/Freddie bailout $4 trillion

Auto bailout: $1 trillion
Banking bailout $15 trillion
Pension bailout $2 trillion
Entitlements $20 trillion
State and local government bailout $5 trillion
Sundry stimulus $3 trillion

5% failure rate on all derivatives $25 trillion

Total FRN's: $77 trillion

As you can see these figures are above and beyond normal budget deficits, and exclude bailouts in other sectors. Does anybody think under this hyperinflationary scenario that at $1,500 gold will be a bubble? If the answer is no I'll keep adding zeros, and somebody can stop me when I'm close. $15,000 an oz? $150,000 an oz? $1,500,000 per oz? But wait, it gets better, or worse, as you would have it. Like Bill H. said we have 40 years of catching up to do with the price of gold so we should already be starting hyperinflation from $3,000 - $5,000. Shall we start the zero-adding process all over again?

Top callers in gold are either banking shills or fools. I'd like to offer any of them my front row seat in the "housing from hell" show. It's a real heart-stopper.
James Mc   end.

(by the way  FRN means Federal Reserve Notes or paper money)

I will now add my two cents on the genral ecnomical abyss we are facing:

 

We are seeing huge problems in the Eastern Europe.  These emerging nations were basically commodity countries feeding their commodities to the West to manufacture goods.  Now these countries have a scarity of foreign reserves and their debt is owed in these same foreign currencies.

We have seen Western European banks, loan huge amount of Euros to these emerging markets in sums 10-15 times their own gross national product.  If the sovereign nation  takes over their insolvent banks, the country has low foreign reserves and huge foreign debt.  Sure, these nations have huge foreign assets but many of these assets like mortgage back securities have dubious values.  Europe is in deep trouble.

Spain has now seen its unemployment rate rise to 14% and that is not including workers  who gave up working.  Also Spain pays unemployed workers on unemployment benefits for 2 full years.  The two years will be up in or around June or July.  Then the unemployment rate will skyrocket to over 20%.  Ireland had its debt to GDP rise to over 112%.   Their banks are insolvent.

If Ireland defaults, then the Bank of England defaults and this will cause nightmares for the Fed reserve as the Bank of England and the fed Reserve are the worlds financial capitals.  England is also the seat of the world's largest physical gold and silver market.

 

If the Bank of England defaults, Barclays defaults automatically and then the GLD and SLV become suspect especially if there is no physical asset but only cash sitting in the account.

If Eastern European countries default, then credit default swaps written by usa banks come into play and must be paid.  The credit defaults on countries total in excess of 15-20 trillion dollars.

General Motors and Chrysler also bring a dilemma to the financial world. The proper scenario is to merge both of these two entities into one.

The problem:  what are they going to do with the 1 trillion dollars of derivatives written on them?

if massive dollars are printed, then interest rates rise.  This triggers interest rate losses to JPMorgan to the tune of 120 trillion dollars.

You would need  thousands of printing presses working 24/7 printing the dollars needed to pay off  on JPMorgan;s derivatives

In actuality the day JPMorgan blows up, the world's financial scene disintegrates.

 

Many Europeans are witnessing the deterioration in their economy.  They are also seeing no place to put their money.

They are trying to get physical gold and silver and are having great difficulty as supplies have dwindled to nothing.  They are purchasing the GLD and SLV thinking that at least they have physical backing.  When the musical chairs stop boy will they be surprised.

Over on this side of the pond, investors do not want to see banking shares fall below 2.00 or 3.00 for that matter.  They are bailing out of these banks.  Problem:  where are they going to put their money?  the usa is printing money like mad.  Investors here are also seeking gold and silver but are having difficulty these precious metals.

 

Countries like China and Russia are cashing in their usa bonds and buying whatever gold and silver is available.  Russia is buying and shipping 10 tonnes of physical gold per month to its shores.  My bet is the secretive Chinese are doing likewise.

In very short order, the physical wicket in London will close.  At that point, investors will scramble to the Comex who will then default.

They will then go and try and cash out of GLD and SLV and that entity would eventually default as no physical supplies will be anywhere on the planet.

i give it 60 days before the entire mess bursts.

 

Have a great weekend

Harvey.

 

 

 

 

 

 

 

 

 

 
 

Thursday, February 19, 2009

Feb 19.09 commentary.

 
Good evening Ladies and Gentlemen:
 
Gold traded down by 2.50 to 975.00  Silver retreated to 13.97, down by 34 cents.Gold and silver had to go down because of option expiration on Friday.  The crooks do this every month.  The open interest on gold rose by 4400 contracts to 366000 despite yesterdays big rise.  The silver Oi rose by 397 contracts to 99700.
 
Today, it was the Euro's turn to rally up by a full 1.17 cents.  When this happens now, expect gold to fall, the bank stocks to plummet and the Dow to fall as well.  The pundits are throwing out the deflationary scare.  If the dollar rises, the theory is that the world is re-inflating so gold will rise, the dow will rise and the banking shares will live for another day.
 
Not today.  The bank shares were ambushed today  like the St Valentines Massacre.  JPMorgan saw its stock fall all the way down to 20.60..a low not seen for  at least 7 years.  Citibank saw its stock fall to 2.51. The Bank of America also plummeted to 3.90.  There are going to be many margin calls tomorrrow. The Dow fell by 89 points.
 
Today Greenspan talked about nationalization of some of the major banks.  I guess Bank of America and Citibank were in their crosshairs.
The problem of nationalization will be the credit default swaps.
 
When Eastern Europe countries default, there will be  massive credit default swaps written by the banks on those countries.
Even though  Western European banks have underwritten 80% of the loans to Eastern Europe, the usa will still feel the brunt of those defaults in addition to all of those mortgage defaults, since the massive credit default swaps total in excess of 15 trillion dollars.
 
****
OK.  lets start with economic news of the day:
 
First, came the producer price index and it was ugly with the PPI rising by .8% and the core PPI rising by .4%.  Gold initially popped up on the news then the cartel did their thing and gold fell and remained low for the entire day.  Here is the news on the PPI:
 
 

U.S. January producer prices rise 0.8 pct

WASHINGTON, Feb 19 (Reuters) - U.S. producer prices rose faster than expected in January after falling for five straight months as energy costs rebounded, government data showed on Thursday, but inflation pressures generally remained benign.

The Labor Department said the producer price index rose 0.8 percent in January, rising for the first-time since July, compared to a 1.9 percent drop in December.

Analysts polled by Reuters had forecast a 0.2 percent rise in the overall index. However, compared to the same period last year, the producer price index fell 1 percent, the largest decline since October 2006.

Core producer prices, excluding food and energy costs, rose 0.4 percent in January, also above market expectations for an increase of 0.1 percent. Core PPI rose 0.2 percent in December.

Compared to the same period a year ago, core producer prices were up 4.2 percent….

-END-

We then heard form the jobless report and unemployment benefit payments.  Basically they were in line with expectations as the jobless rate continues to climb.

08:30 Jobless claims for w/e 14-Feb 627K vs. consensus 620K
Prior week revised to 627K from 623K. Continuing claims for w/e 7-Feb 4.987M vs. consensus 4.830M. Prior week revised to 4.817M from 4.810M.
* * * * *

New jobless claims unchanged last week

WASHINGTON (Reuters) - The number of U.S. workers continuing to claim jobless benefits jumped to a record high in the first week of February, the Labor Department data showed on Thursday, while new claims for unemployment insurance last week was unchanged at a very high level.

Initial claims for state unemployment insurance benefits were a seasonally adjusted 627,000 in the week ended February 14 unchanged from an upwardly revised 627,000 the previous week. According to department data, new claims hovered close to a 26-year high.

Analysts polled by Reuters had forecast 620,000 new claims versus a previously reported figure of 623,000 the week before.

The number of people remaining on the benefits rolls after drawing an initial week of aid surged 170,000 to 4.987 million in the week ended Feb 7, the most recent week for which the data is available. That was the highest reading on records dating back to 1967.

Analysts had estimated so-called continued claims would be 4.86 million from a previously reported 4.81 million the prior week.

The four-week moving average of new jobless claims, a better gauge of underlying labor trends because it irons out week-to-week volatility, rose to 619,000, the highest since 1982, from 608,500 the prior week.

-END-

 

After hearing the NY empire report yesterday, the street was bracing for a bad number and a bad number they got:

10:00 Feb Philadelphia Fed (41.3) vs. consensus (25)
Jan reading was (24.3).
* * * * *

Philly Fed factory index slumps again in February

NEW YORK, Feb 19 (Reuters) - Factory activity in the U.S. Mid-Atlantic region fell sharply in February, a survey showed on Thursday.

The Philadelphia Federal Reserve Bank reported its business activity index at minus 41.3 after a reading of negative 24.3 in January. Any reading below zero indicates contraction in the region's manufacturing sector.

Economists had expected a result of minus 25.0, according to the median of 47 forecasts in a Reuters poll, which ranged from minus 34.0 to negative 20.0.

The survey of factories in eastern Pennsylvania, southern New Jersey and Delaware is seen as one of the first monthly indicators of the health of the U.S. manufacturing sector.

-END-

The negative 41.3 is an all time low.  Any reading below zero indicates contraction in the Philadelphia manufacturing region.  Minus 41 is devastating.  Manufacturing has grounded to a halt!!

 

This is from the San Francisco Fed's chief economist:  This is the worst job loss in 50 years.  Here is his comments:

SF Fed economist sees worst job losses in 50 years

CHICAGO, Feb 19 (Reuters) - Job losses in the current U.S. recession are likely to be the worst in 50 years, but fiscal stimulus will provide some relief, according to an economist at the San Francisco Federal Reserve Bank.

As of January 2009, employment had fallen by 2.6 percent from the December 2007 business-cycle peak, still less than the roughly 3-percent decline seen during the 1981-82 recession, research adviser Sylvain Leduc wrote in the bank's latest "FedViews" newsletter.

By the end of the recession, "employment should have decreased by roughly 4 percent from December 2007. We have to go back to the 1957-58 recession to see a larger percentage drop in employment," Leduc said.

The bleak assessment came as the U.S. Labor Department showed initial jobless claims at 627,000 for the week ended Feb 14. Continued claims for the week ended Feb. 7 were a record 4.9 million.

Leduc forecast that U.S. real GDP would turn positive in the second half of 2009 on the back of Obama administration's $787 billion economic stimulus.

"The fiscal stimulus package has a sizable impact on our growth forecast, particularly in 2009. Moreover, we forecast that the unemployment rate would climb to nearly 10 percent, absent the fiscal initiative," he said.

Real GDP for 2009 will likely be minus 1 percent, according to the bank's forecasting staff. Without the stimulus program 2009, GDP was forecast to fall 2.2 percent.

The fourth-quarter 2009 jobless rate was pegged at 8.9 percent, falling to 8.5 percent by the fourth quarter of 2010. Without fiscal stimulus, the rate in both instances was forecast at 9.6 percent.

Leduc said the inflation rate should stabilize "at a very low level" after plunging in the fourth quarter of 2008.

The San Francisco Fed's forecasters expect the core personal consumption expenditures index, a measure of inflation, to rise slightly from the 0.5 percent annual rate hit in the fourth quarter, and remain at about 0.75 percent throughout 2009.

Several Fed officials recently have noted that even if outright deflation does not occur, very low inflation will push up "real" interest rates at the worst possible time for the struggling economy.

-END-

 

This is concerning  Sir Allen  Stanford.  It has been reported that former employees reported to the SEC three years ago that this was a Ponzi scheme.  The SEC ignored this one just like the Madoff reporting by Markopolos.  Here is the story:

Stanford Employees Yelled "Ponzi Scheme!" 3 Years Ago

http://www.businessinsider.com/stanford-employees-alleged-
ponzi-scheme-three-years-ago-2009-2

***

Paulson decided to backstop  Fannie and Freddie Mac to the tune of 200 billion dollars in Sept 2008.  If you remember he thought that they would never need the money but just in case the economy turns sour, he would backstop this entity by 200 billlion dollars.

Well, today, we found that 200 billion is not enough.  They need 400 billion dollars...and gold goes down on this news:??

 

Here is the report:

 

Obama doubles FNM/FRE backing to $400 billion

This is after Paulson said in September that FNM and FRE probably wouldn't need the $200 billion that Bush put in place:

The massive expansion of the government backstop is a response to mounting strains on the two companies, officials said. It was announced as part of the Obama administration's broad plan to reduce foreclosures, which will further squeeze the companies' revenue by requiring the pair to refinance or modify millions of loans to lower monthly payments.

Just another step in the Government's move to monetize/nationalize the entire credit system of our country. Another way to look at this is it's part of Obama's "Change" promise, only the "Change" we are getting is the continued transfer of wealth from middle income taxpaying citizens - as opposed to the wealthy and Obama Cabinet appointees who don't seem to pay taxes - to the banking system.

When will this end? When the middle class is squeezed into serfdom and can no longer be financially squeezed by those in power.

***

We are getting a step closer to complete NATIONALIZATION/MONETIZATION ON THE ENTIRE USA FINANCIAL STRUCTURE!!!

This next news report floored me:  Switzerland may be heading for bankruptcy!!.  First the article:

Switzerland at Risk of Default?

In an interview with Swiss daily Tagesanzeiger, a well-known economist has warned that Switzerland risks bankruptcy, if the recent market turmoil centering on Eastern Europe is not contained quickly. At issue are loans made in Swiss francs to Eastern European debtors. With many countries in the region falling into depression, currencies and asset prices are plunging. Therefore, debtors domiciled in Eastern Europe are increasingly expected to have difficulty with mounting foreign debt loads ­ and that spells trouble for Switzerland.

http://www.creditwritedowns.com/2009/02/switzerland-threatened-with-bankruptcy.html

***

As we reported to you on earlier occasions, UBS has lost billions of dollars on mortgage backed securities.  The Swiss National bank decided not to rescue the bank and left them on their own to try and solve their financial mess. 

Now the usa is seeking secret Swiss account customer names.  You can imagine what that will do to the economy of Switzerland.  If an American is taxed, there is no reason to keep money over there.

Here is the bloomberg story:

U.S. Sues UBS Seeking Swiss Account Customer Names (Update4)
Email | Print | A A A

By David Voreacos and Carlyn Kolker

Feb. 19 (Bloomberg) -- The U.S. government sued UBS AG, Switzerland’s largest bank, to try to force disclosure of the identities of as many as 52,000 American customers who allegedly hid their secret Swiss accounts from U.S. tax authorities.

U.S. customers had 32,940 secret accounts containing cash and 20,877 accounts holding securities, according to the Justice Department lawsuit filed today in federal court in Miami. U.S. customers failed to report and pay U.S. taxes on income earned in those accounts, which held about $14.8 billion in assets during the middle of this decade, according to the court filing.

“At a time when millions of Americans are losing their jobs, their homes and their health care, it is appalling that more than 50,000 of the wealthiest among us have actively sought to evade their civic and legal duty to pay taxes,” John A. DiCicco, acting assistant attorney general in the Justice Department’s tax division, said in a statement.

UBS’s U.S. listed shares fell 14 cents, or 1.3 percent, to $10.43 on the news. The lawsuit came a day after UBS agreed to pay $780 million and disclose the names of about 250 account holders to avoid U.S. prosecution on a charge that it helped thousands of wealthy Americans evade taxes.

The U.S. and Zurich-based UBS disagreed over how many account holders the bank must disclose to the Internal Revenue Service, agreeing to resolve it in court.

Summons Enforcement

With today’s lawsuit, the U.S. asked a federal judge to enforce its so-called John Doe summonses. On July 1, a federal judge in Miami approved an IRS summons seeking information on thousands of UBS accounts owned or controlled by U.S. citizens. Negotiations between the U.S., Switzerland and UBS have been at a standstill since then, according to a Justice Department filing.

UBS said in a statement that it expected today’s filing.

“UBS believes it has substantial defenses” to the U.S. attempt to enforce the summonses and will “vigorously contest” the case, the bank said in the statement. The bank’s objections are based on U.S. laws, Swiss financial privacy laws, and a 2001 agreement between UBS and the IRS, according to the statement.

Roy Smith, a finance professor at New York University’s Stern School of Business and a former Goldman Sachs Group Inc. partner, said a UBS loss in the case would be “very bad news” for Swiss banks.

Swiss Secrecy

“If you get to the point where you’re able to get information on 52,000 accounts just because they exist, not because of evidence of a crime, you’ve gotten rid of Swiss banking secrecy forever,” Smith said. “If the European Union follows suit, it’ll virtually be the end of secret accounts in Switzerland.”

Swiss banks would still get business from Asia, Russia, eastern Europe and Africa, he noted.

The Justice Department accused UBS of conspiring to defraud the U.S. by helping 17,000 Americans hide accounts from the Internal Revenue Service. The U.S. will drop the charge in 18 months if the bank reforms its practices, helps prosecutors and makes payments.

In entering a deferred-prosecution agreement, UBS agreed to a statement of facts that said from 2000 to 2007, it actively helped “U.S. individual taxpayers in establishing accounts at UBS in a manner designed to conceal the U.S. taxpayers’ ownership or beneficial interest in said accounts.”

Evading Requirements

UBS bankers “facilitated the creation of such accounts in the names of offshore companies, allowing such U.S. taxpayers to evade reporting requirements,” according to the statement of facts. Prosecutors filed a complaint, unsealed yesterday, accusing UBS of conspiring to defraud the U.S. by helping Americans hide accounts from the IRS.

“UBS and its U.S. clients knew that it violated U.S. law for U.S. taxpayers to maintain undeclared accounts with UBS in Switzerland -- whether the accounts held cash or securities,” IRS agent Daniel Reeves said in a declaration filed with today’s lawsuit.

“UBS had its declared account holders complete a boilerplate declaration swearing that they were unaware that their relationship with UBS could have legal ramifications,” Reeves wrote.

UBS gave the IRS “a list of 323 U.S. accounts used to send or receive wire transfers to or from UBS Swiss accounts held in the same name, as well as related account statements for 57 of the 323 U.S. accounts,” according to Reeves.

Bank Disclosure

The bank provided the names and account numbers after the U.S. asked the bank to search for wire transfers between accounts within the U.S. and accounts in Switzerland, Reeves wrote. UBS “produced only U.S.-based records, and did not produce any Swiss-based records for these accounts,” Reeves said.

Private bankers went to great lengths to hide their clients’ identities and assure them of Swiss customs of secrecy, prosecutors said in the criminal complaint filed against UBS. In January 2003, after UBS signed an agreement to share tax information with the IRS, bank managers sent U.S. clients letters saying they had kept client identities secret since 1939.

Some bankers went so far as to develop written codes to hide their communications about U.S. clients’ assets, according to court documents filed in today’s lawsuit.

In June, U.S. prosecutors secured the guilty plea of a former UBS private banker, Bradley Birkenfeld, who is cooperating with investigators. Another Switzerland-based UBS banker, Raoul Weil, was indicted on a charge that he helped rich Americans evade taxes.

Tax Havens

UBS reaped $200 million a year in revenue by helping high- income clients through such practices as setting up sham entities in tax havens including Switzerland, Panama, British Virgin Islands, Hong Kong and Liechtenstein, Birkenfeld said in pleading guilty in federal court in Fort Lauderdale.

UBS rose 59 centimes, or 4.8 percent, to 12.8 francs today in trading in Zurich. After falling on news of today’s lawsuit, the U.S. listed shares rose 25 cents, or 2.4 percent, to $10.58 in New York Stock Exchange composite trading at 4:15 p.m.

The case is U.S. v. UBS AG, 09-20423, U.S. District Court, Southern District of Florida (Miami).

To contact the reporters on this story: David Voreacos in Newark, New Jersey, at dvoreacos@bloomberg.net; Carlyn Kolker in New York at ckolker@bloomberg.net.

Last Updated: February 19, 2009 17:44 EST

END

And now Jim Sinclair talks about the impact on the Swiss Franc with this annoucement:

Posted: Feb 19 2009     By: Jim Sinclair      Post Edited: February 19, 2009 at 8:03 pm

Filed under: General Editorial

My Dear Friends,

Please be advised on the following concerning the Swiss Franc:

1. There is an ongoing battle between the US/GB and Switzerland over the full disclosure of the total 19,000 names on the books of UBS wherein tax evasion is said to have been solicited and abetted. In truth, very few of these accounts have been fully revealed and the US/GB wants all 19,000.

2. Since hedge funds pry on each other we are getting few very factual international hedge funds. They play the currency market in a big way as it is one of the few markets now able to absorb their interest.

As a result of both number one and two much of the media and expert commentary on the Swiss Franc is the use of media for dirty tricks as this is the major tool of these large funds and governments in conflict.

I would suggest in this case decision on the future of the Swiss Franc is better made on the 35 year technical price analysis. A short seeking to cover, which generally seems quite correct now amongst the weak versus dollar units, should and is taking place.

Negative media and short covering has gone hand in hand in this bear market. Was it not the same in all recent major market failures?

Why should currency be any different?

Respectfully,
Jim

 

For those that do not believe me that GLD is a fraud..here is another group that says that the underlying asset of the GLD is nothing but paper.  He give 10 reasons why it is a fraud:

Ten Reasons to Avoid the Gold ETF

http://seekingalpha.com/article/121121-ten-reasons-to-avoid-the-gold-etf?source=email

Nicely organized by the author who calls himself "Financial Foghorn"--

1. I'll start with the opening sentence of the gold ETF itself and work outwards to you. The opening sentence of the November 2004 gold ETF prospectus said, "This ETF is intended to track the performance of the price of gold."

2. GLD Share Price

3. Gold Acquisition

4. The Legal Structure of GLD

5. Sub Custodian Shenanigans

6. "Regulation" of the ETF

7. If Things Do Go Wrong

8. There are other GLD critics

9. But can you actually get real gold from GLD?

10. So why do these gold and silver ETFs even exist?
Take care,

Jt.

Bix left this out yesterday on his commentary on GLD and SLV:

Hi Bill -
Just to bolster the case that the ETF inventories are used in the gold/silver manipulation game, I just re-read Rob Kirby's analysis of the OCC's bank derivative book.

http://www.321gold.com/editorials/kirby/kirby123108.html

I find it more than coincidental that JP Morgan and HSBC not only hold over 95% of the bank derivative positions in gold/silver BUT ....

THEY ARE ALSO THE "CUSTODIANS" FOR THE PHYSICAL ETF METAL (GLD custodian is HSBC and SLV custodian is JP Morgan)

How obvious can they going to make it?!
Bix

 

We just checked on the Federal Debt.  It climbed 30 billion dollars in a one day .  The new debt is 10.789 trillion dollars, from 10.759 trillion. However as per the report this week, this debt doesn't include unfunded liabilities like Social Security and Medicare - the total debt of the USA is equal to 65 Trillion dollars!

Got to go now, see you on Saturday.

Harvey.

Wednesday, February 18, 2009

Commentary Feb 18.09

Good evening Ladies and Gentlemen:
 
 
Gold closed up by 10.40 to 977.40 in regular hours and a further 5.00 in the access market.  Silver continues to roll on, rising by 29 cents to
14.31 and a further 10 cents to 14.41 in the access market.
 
The open interest rose by only 6100 contracts with such a huge move yesterday.  The total OI for gold comex is 361000.  Silver rose approx. 1000 contracts to 99000.  There is only one seller.
 
Gold rose today as the world believes that the entire world is inflating aka Zimbabwe.
 
Today, President Obama pledged a further 275 billion to help mortgagees:
 
 

Obama Pledges $275 Billion to Stem Foreclosures, Help Borrowers

Feb. 18 (Bloomberg) -- U.S. President Barack Obama pledged $275 billion to a program that includes cutting mortgage payments for as many as 9 million struggling homeowners and expanding the role of Fannie Mae and Freddie Mac in curbing foreclosures.

The plan will help as many as 5 million homeowners refinance loans owned or guaranteed by Fannie and Freddie, the president said. Treasury will buy as much as $200 billion of preferred stock in the two mortgage companies, twice as much as previously promised, he said…

http://www.bloomberg.com/apps/news?
pid=20601087&sid=a7W_kzfPZbzw&refer=home
/

 

The banking shares did not perform well at all today but Goldman Sachs was particularly hit early and it stayed down.  Here is the reason why:

 

DJ Several Goldman Sachs Partners Borrowing Money To Cover Margin Calls –CNBC

Goldman drops after CNBC margin call report

NEW YORK, Feb 18 (Reuters) - Shares of Goldman Sachs fell more than 2 percent to $83.95 on Wednesday after CNBC reported that several partners in the firm were forced to borrow "tens of millions" of dollars to cover massive margin
calls.

-END-

 

US industrial production drops 1.8 pct in January

WASHINGTON, Feb 18 (Reuters) - U.S. industrial production dropped by a bigger-than-expected 1.8 percent in January, Federal Reserve data showed on Wednesday, hurt by a steep drop in auto production as vehicle sales slumped.

Economists polled by Reuters had expected a 1.5 percent decline in January after a revised 2.4 percent drop the month before, initially reported as a 2 percent decline.

"A plunge in motor vehicle and parts production that resulted from extended plant shutdowns subtracted more than 1 percentage point from the change in manufacturing production," the central bank said.

-END-

Housing Permits were down badly today.  Please read carefully the article which basically says that the housing market is completely dead!!
 

 

-END-

Industrial production was down a full 1.8% last month as manufacturing is sinking faster than a roller coaster ride

US industrial production drops 1.8 pct in January

WASHINGTON, Feb 18 (Reuters) - U.S. industrial production dropped by a bigger-than-expected 1.8 percent in January, Federal Reserve data showed on Wednesday, hurt by a steep drop in auto production as vehicle sales slumped.

Economists polled by Reuters had expected a 1.5 percent decline in January after a revised 2.4 percent drop the month before, initially reported as a 2 percent decline.

"A plunge in motor vehicle and parts production that resulted from extended plant shutdowns subtracted more than 1 percentage point from the change in manufacturing production," the central bank said.

-END-

 

This is strange;

 

there are increasing bets on the usa treasuries defaulting.  The credit default swaps are rising.

Nobody thought to ask the question:  if they win their bet, how on earth are they going to collect.  Think about this one!!  anyway here is the article:

 

US Treasury default swaps jump to new record-Markit

NEW YORK, Feb 18 (Reuters) - The cost to insure U.S. Treasury debt with credit default swaps jumped to a record high on Wednesday as President Barack Obama unveiled another round of spending designed to stem home foreclosures.

Credit default swaps on U.S. government debt widened 8.5 basis points to 90 basis points, or $90,000 per year for five years to insure $10 million in debt, according to Markit. The swaps had traded at less than 10 basis points a year ago.

President Barack Obama on Wednesday pledged up to $275 billion to help stem a wave of home foreclosures that sparked the U.S. financial meltdown. For details, see [ID:nN17400254]

Swaps protecting the sovereign debt of Germany also rose 12 basis points to 85 basis points on Wednesday, while swaps on Britain fell 4.5 basis points to 164.5 basis points, Markit data shows.

-END-

This is good for gold..the St Louis Fed Gov states that the Fed must inflate  the money supply more aggressively:

 

St. Louis Fed Chief Says Fed Must Inflate Money Supply More Aggressively

Considering the AMB and the narrow money figures went parabolic, with the greatest increase in Fed history, these are somewhat unusual words from a Fed official.

Best to take him at his word.

Let me guess. The Fed should give more money to the big money center banks through Fed programs? The Fed should buy bad assets at par from unconventional parties like every large corporation with bad debts?

This ought to be fun to watch.

end

Not to be outdone, England needs to hyperinflate as well:

Bank of England seeks power to inject more money into economy to fight recession

The Bank of England's Monetary Policy Committee has voted unanimously to seek Government permission to increase the amount of money in the economy as interest rate cuts lose their power to fight recession.

http://www.telegraph.co.uk/finance/economics/interestrates/4688047/Bank
-of-England-seeks-power-to-inject-more-money-
into-economy-to-fight-recession.html

-END-

 

 

Gld released its daily gold inventory.  It rose to an astonishing 1008 tonnes of gold.  GLD has now surpassed the Swiss which has 1000 tonnes of gold.  In one day, GLD advanced from 986 tonnes to 1008 tonnes or a gain of  22 tonnes.  This is logistically impossible and verifies that GLD is nothing but a paper fraud.   As far as Bix is concerned this is how he sees GLD and SLV.

(He is definitely coming to our way of thinking.  Four years ago  very few individuals thought that they could possibly do a fraud on this vehicle.  To me it was just a paper fraud taking away needed demand.  I was joined by James Turk and now we are joined by many:).  AND NOW HIS TAKE ON THE SITUATION:

Here's the way I see it: ( Bix TALKING)

1) There are multiple claims of ownership of the GLD and SLV physical inventories including ETF shareholders, sovereign nation reserves, working manufacturing/refining inventories, pooled accounts, metal certificates, swaps, leases, etc. Although much of it may be stored in the ETF sanctioned warehouses in London, it is also in various other places (Fort Knox for example!). It would not surprise me to find out that the "metal leverage" translates into 3 or more claims on each individual bar listed in the ETF inventories. Neither prospectus requires physical audits, sole ownership audits or any strict storage location requirements.

2) The supposed naked short positions in gold and silver on the COMEX have been justified to the CFTC by the banking cabal (mainly JP Morgan) by claiming that at any time they can back those positions with the physical gold and silver located (and identified by serial number) in the metal ETF's. As the COMEX short position grows the inventories of GLD and SLV must grow as well to justify the naked short. The CFTC has never, to my knowledge, verified that the metal is real OR that there are no other claims of ownership on those inventories. Of course the obvious claim on that metal is the shareholders of the ETF through their "Authorized Participants"....don't even get me started on who those Authorized Partcipants are!

3) In the end, a gold/silver default is inevitable thus rendering the multiple ownership aspect of the manipulation plan a success. The default will happen in concert with the multiple other financial/currency defaults thus deflecting and masking the true nature of the scam. Of course, the losers will be those who thought they owned the physical metal but will never reap the rewards of it. The winners will be the countries in which the metal is stored because a collapse on a grand scale will surely promote the nationalization of all gold and silver the government can get their hands on for the good of their population. Thus the BIG winners in this game will be the USA with the COMEX inventories and England with the ETF inventories....no surprise there.

On a side note, it is very encouraging to hear so many new voices exposing the banking cabal after years and years of the GATA faithful fighting this battle alone!

Time to buckle up...AGAIN!

I will speak to you tomorrow night.  I am writing an official complaint to the Chairmwoman of the SEC on the GLD and SLV matter.  After it is published, i will forward to you what I wrote.

 

Harvey.

 

 

 

 

 

 

Tuesday, February 17, 2009

commentary...Feb 17.09.

 
Good Evening Ladies and Gentlemen,
 
Gold closed up by 25.30 to 967.00.  Silver continues to skyrocket, closing up by  41 cents to 14.02.  Its interesting to see the OI on both gold and silver is dropping dramatically, which illustrates  panic in that  these shorts are covering because the heat in the kitchen is getting a little too hot for them to handle!!
 
The big news of the day was the fall in the Dow by a full 298 points.  The market did not like hearing about major problems in Eastern Europe.
Word came that Ireland is on the verge of bankruptcy that scared the living daylights out of investors as they bailed out of securities. Finally, the street went to safe haven vehicles, Gold, Silver and strangely the long bond as yields tumbled again.
 
However, the most puzzling aspect on todays trading was the strength in the usa dollar.  Even though the Euro collapsed to 1.26 to the dollar due to Eastern European banking problems, the dollars strength is still very puzzling as it is the epicentre of all the turmoil in financial circles.

We now hear that the following may be the reason for the dollar strength:
 

"The dollar buying is a result of CDS margin calls. No-one in the MSM etc will talk about this, as it exposes the mad system they have created and more importantly just how vast the CDS position is, relative to the real world. Every time the SM starts tanking and the end of the financial world approaches, we get huge dollar buying, because CDS’s blow out and the margin calls go out. Most CDS’s are Dollar based."

***

Today, JPMorgan stocks plummeted to below 21.65.  A loss of 12.35%.  This company is the centre of all of those CDS  (collaterized debt securities) and they have massive interest rate swaps that  I reported to you last week.  These derivatives are causing massive migraine headaches to JPMorgan.   They own close to 200 trillion dollars in derivatives with other 120 trilllion in interest rate swaps.  In essence, they short the short end of the treasuries (today at zero percent yield) and go long in the futures  on the long bond.  They needed the long bond to rally today and it did.  However the Dow had to suffer as they don't have the muster to strengthen the dow, whack gold, and control bond prices all at once. They must keep all the balls up in the air and each day it is getting more difficult for them!!

Libor still remains high at 1.25%.  The arteries on loans are still clogged as lenders refuse to lend and borrowers refuse to borrow.

The ECB sold 7.6 tonnes of gold last week.  The sale was by one captive bank.  One bank, the bundesbank continues to buy gold on the open market to coin gold. I guess their 3400 tonnes of gold has somehow disappeared.
 
Late Sunday night, we got word that Japan's economy had contracted an astonishing 12.7%.  The markets around the world have suffered for the past two days because of this:
 
*Japan’s biggest GDP decline (12.7% annualized) since 1974 sent international bourses reeling on Monday. That is astounding the Muppets constantly make mention that the US avoid Japan’s "lost decade" of the 90’s.
 
This is interesting:  the usa's federal obligations exceed the worlds GDP:  Here is the article. Note that this article takes into account the USA's unfunded liabilities such as Medicare and Social Security which brings the USA to a total of 65 Trillion dollars in debt. 
 

Federal obligations exceed world GDP
Does $65.5 trillion terrify anyone yet?


Posted: February 13, 2009
11:35 pm Eastern

By Jerome R. Corsi
© 2009 WorldNetDaily

As the Obama administration pushes through Congress its $800 billion deficit-spending economic stimulus plan, the American public is largely unaware that the true deficit of the federal government already is measured in trillions of dollars, and in fact its $65.5 trillion in total obligations exceeds the gross domestic product of the world.

The total U.S. obligations, including Social Error! Hyperlink reference not valid. and Medicare benefits to be paid in the future, effectively have placed the U.S. government in bankruptcy, even before new continuing social welfare obligation embedded in the massive spending plan are taken into account.

The real 2008 federal budget deficit was $5.1 trillion, not the $455 billion previously reported by the Congressional Budget Office, according to the "2008 Financial Report of the United States Government" as released by the U.S. Department of Treasury…

http://www.worldnetdaily.com/index.php?fa=PAGE.view&pageId=88851

-END-

 
I forwarded this important article to you on Sunday.  I hope that you read it.  The rest of Lemetropolecafe.com received it tonight.  Here is the headlines:
 
 
Failure to save East Europe will lead to worldwide meltdown.
 
 
For the complete article you can see it at www.harveyorgan.blogspot.com
 
And now for Economic news of the day.  We first heard from the Empire manufacturing report and it was pretty dismal.  Here is the article:
 

NY manufacturing tumbles in February - Fed survey

NEW YORK, Feb 17 (Reuters) - Manufacturing production in New York State fell to a record low in February, intensifying a factory slump gripping the recession-bound economy, according to a survey released on Tuesday from the regional central bank.

The New York Federal Reserve's Empire State factory index fell to minus 34.65 -- the lowest in the history of the index, which dates back to July 2001. It was down from January's already contractionary reading of minus 22.20.

Economists had expected a reading of minus 24, according to the median of their 46 forecasts, which ranged from minus 36.5 to negative 17.50.

Reflecting a bleak outlook, the survey's gauge of new orders fell to an all-time low of minus 30.51 from January's negative 22.81.

The survey showed prices continued to fall, while employment in the state's factory sector was depressed.

The employment gauge fell to 39.08 in February -- the lowest since November 2001 -- from January's 26.14.

The survey of manufacturing plants in the state is one of the earliest monthly guideposts to U.S. factory conditions.

-END-

The index which measures manufacturing in the NY area fell to minus 34.65, the lowest reading in its history.
The entire manufacturing sector in NY is extremely week!!.
 
USA home building sentiment continues to flounder. Look at todays readings:
 

US home builder sentiment crawls above record low

NEW YORK, Feb 17 (Reuters) - U.S. homebuilder sentiment climbed in February but held tightly near all-time lows, suggesting sales of new single-family homes would be meager as long as foreclosures flood the market, the National Association of Home Builders said on Tuesday.

The NAHB/Wells Fargo Housing Market Index eked out a one-point gain to 9 from the record low set in January, the group said in a statement. Economists polled by Reuters had predicted the index would stay at 8, the lowest reading since this measure started in January 1985.

Readings below 50 mean more builders view market conditions as poor than favorable. It was the fourth straight month the builder sentiment gauge clung to single digits, and was less than half of the reading of 20 posted a year ago.

"Home builders are especially concerned about the continually rising number of foreclosures and short sales, which are flooding the market with excess inventory and undermining overall home values," NAHB chief economist David Crowe said in a statement.

Concerns about this oversupply worsened the outlook for sales in the next six months, even though home buyer shopping picked up and affordability improved…

-END-

In other news, the FBI raided the offices of Houston based, Stanford International Bank and charged Sir Allen Samford with fraud.  This will turn into another 50 billion Ponzi scheme. This is the same case I told you last week and I assured you then that this was a fraud.. I was right.
 
By the way, sir Allen has auditors in Antigua, with offices the same size as Bernie Madoff.  (approx 500 sq feet).  What is very scary is that he is the 65th richest person in the usa.
 
Here is the article on the raid and charges of fraud:
 

11:18 US marshals seen entering Houston office of Stanford Financial--Reuters, citing witness
* * * * *

STANFORD FINANCIAL GROUP SIGN IN HOUSTON SAYS NOW "UNDER THE MANAGEMENT OF A RECEIVER" - REUTERS EYEWITNESS

US charges Stanford Financial with "massive" fraud

HOUSTON, Feb 17 (Reuters) - U.S. authorities charged Texas billionaire Allen Stanford and three of his companies with "massive ongoing fraud" on Tuesday as federal agents swooped in on Stanford's U.S. headquarters.

In a complaint filed in a Dallas federal court, the U.S. Securities and Exchange Commission accused the cricket-loving Stanford and two other top executives at Stanford Financial Group of fraudulently selling $8 billion in high-yield certificates of deposit.

About 15 federal agents, some wearing jackets identifying them as U.S. marshals, entered the lobby of Stanford's office in the Houston Galleria area, a Reuters eyewitness said. U.S. media descended on the scene and television helicopters hovered overhead.

Stanford Financial said it remained open for business but was "under the management of a receiver," according to a sign taped to the door of the firm's Houston office.

According to the 25-page SEC complaint, filed in federal district court in Dallas, Stanford sold $8 billion in CDS "by promising high return rates that exceed those available through true certificates of deposits offered by traditional banks."

The SEC said it was seeking to freeze the assets of the company and appoint a receiver "to take possession and control of defendants' assets for the protection of defendants' victims."

The move comes as investors, politicians and regulators focus on the returns that investment firms promise and provide following an alleged $50 billion fraud by Wall Street financier Bernard Madoff.

-END-

If this was bad enough, we then heard that Donald trump has walked away and defaulted on all his casinos.  
 

Trump Quits Trump Entertainment as Debt Payment Deadline Looms

Feb. 14 (Bloomberg) -- Donald Trump resigned from the board of debt-laden Trump Entertainment Resorts Inc. as bondholders weighed forcing the casino company he founded into involuntary bankruptcy next week.

"I have nothing to do with it. I’m not in it, I’m not on the board," Trump, who was chairman, said in a telephone interview yesterday. He said he had "no idea" whether there will be a bankruptcy filing….

-END-

 
Of all the strangest stories that I have ever read, the following takes the cake.  The state of Kansas is in such a turmoil, that it cannot pay tax refunds to its citizens.  The Federal government can print money but the state cannot.  They have no way of funding all of those tax refunds to state income tax.  Here is the article:
 

Feb. 16, 2009

Kansas suspends income tax refunds, may miss payroll

By JOHN HANNA
Associated Press Writer

Kansas has suspended income tax refunds and may not be able to pay employees on time, the state's budget director said Monday.

The state doesn't have enough money in its main bank account to pay its bills, prompting Democratic Gov. Kathleen Sebelius to suggest transferring $225 million from other accounts throughout state government. But the move required approval from legislative leaders, and the GOP refused Monday…

-END-
 
Today was deadline day for the auto sector whereby they had to submit to treasury their plan of how they were going to stay solvent.
I guess, GM said:  give more 5 billion more dollars and then we can restructure in bankruptcy.
You can imagine all of those credit default swaps cringe with fear.  Here is the article:
 
15:34 GM General Motors to offer government two choices: more money or bankruptcy reports the WSJ (2.50)
The company will offer the federal government two alternatives when it reaches the deadline for its restructuring plan, give it billions more in bailout funds or provide backing for bankruptcy financing. Treasury officials believe GM will need $5B more in loans merely to keeping operations going beyond Q1. Negotiations with unions and bondholders have not reached any deals, participants say part of the blame is because the administration has not yet appointed a car czar. Sources say CEO Wagoner has softened his stance opposing a bankruptcy filing. One plan would have GM separating into good and bad asset companies. UAW president Gettelfinger has been asking for additional time to negotiate with the auto makers. Sources say GM's viability plan will include broad restructurings and more than 10 plant closures in North America.
Reference Link (subscription required)
 
 
Speak to you late tomorrow night.
Harvey.
 

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