Saturday, March 21, 2009

March 21.09 commentary.

 
Good morning Ladies andd Gentlemen:
 
Gold closed down by 2.30 to 956., yet silver resisted downward pressure from its stronger brother gold, by rising 25 cents to 13.77.  The open interest on gold comex rose by only 8000 contracts with a 68 dollars comex gold rise on Thursday. The new OI is 388,000, plenty of room for speculators to move gold higher.
 
Over in the silver pits, a total of 15.9 million oz of silver remain to be hit which is very unusual in that only 1 week is left for all deliveries to be made.  Only 68 million oz of registered silver sits in the comex vaults.
We suspect that most of its silver has been leased out.
 
As financial troubles blanket the world, many are seeking the safe havens of the precious metals of silver and gold.  I am going to highlight one of the best funds to hold silver and gold.
There is now a huge premium of the gold  GTU of 31%. The premium on the CEF is 15%.  Here is the article for you to read and it is self explanatory:
 

The Premiums for CEF and GTU

The daily MIDAS commentary has discussed the extraordinary premiums now being paid to buy the two Canadian Precious Metal Funds CEF (Central Fund of Canada) and GTU (Central Gold Trust). Both of these closed ended funds trade in Canada and the US under similar symbols. They are separate and independent entities with separate boards but there is some overlap in the individuals occupying positions on both funds-with the same President & CEO (Stefan Spicer) and Chairman (Philip Spicer although co chair with John Embry for GTU). The Central Fund of Canada is the much older of the two with a chart below of its Premium/discount history. The chart can be found at:

CEF-Central Fund of Canada Premium/Discount History

http://www.etfconnect.com/select/fundpages/displayChartData.asp?name=
Central+Fund+of+Canada&ticker=CEF&MFID=3653&hdrtxt=Premium
%2FDiscount+History&qsChart=type%3DETFCv2%26id%3D3653%26
w%3D500px%26h%3D200px%26dtatyp%3Dpremdiscall&dtatyp=premdiscall

As of 2/28/2009

They also include the monthly closing premium/discount history on the same page. Needless to say premiums above 10% are relatively rare.

GTU-Central Gold Trust Premium/Discount History

http://www.etfconnect.com/select/fundpages/displayChartData.asp?name=
Central+Gold-Trust&ticker=GTU&MFID=169250&hdrtxt=Premium%2
FDiscount+History&qsChart= type%3DETFCv2%26id%3D169250%26
w%3D500px%26h%3D200px%26dtatyp%3Dpremdiscall&dtatyp=premdiscall


As of 2/28/2009

Notice the very different Premium/Discount histories. The Central Fund has not traded at a discount (with a very few exceptions) since the current Precious Metal bull market began eight years ago. However, there was a long period of discounts for GTU from approx Nov/2004 until Jan/2008 during which time CEF traded at a premium. GTU was set up in 2003 but by the time all the legal and regulatory issues were cleared up the competing World Gold Council ETF had begun trading and demand for GTU shares fell away. During this period GLD sold for a premium compared to GTU.

There was to have been a Central Silver Trust but this was shelved because of the competition from SLV. The key reason for this is the storage cost for Silver. With the Gold Silver ratio currently around 70 it requires a lot more to ship/store silver than an equivalent Dollar amount of Gold and this would affect a small fund’s expense ratio.

Comparing CEF and GTU with GLD

The first thing to note is how small both the Canadian Funds are. The GLD ETF, as of Mar 19, 2009, allegedly holds 35,471,832 ounces of Gold. GTU has 192,673 ounces of gold bullion and 4,981 Gold Certificates for a total holding of 197,654 ounces. In other words GLD is almost 180 times larger than GTU. The market cap of GTU including today’s premium of 30.9% is only $252,590,250. The market cap of GLD is $34 Billion.

The Central Fund of Canada holds 1,049,328 ounces of Gold and 52,460,793 ounces of silver bullion. It’s market cap including today’s 18% premium is just over $2 Billion.

Just today GLD supposedly added 609,433 ounces to its holdings which is three times the entire size of GTU’s holdings. And in the last week, GLD added 1,985,610 ounces to its holdings which is more than the combined Gold holdings of GTU and CEF accumulated over 25 years.

What do the CEF and GTU Premiums tell us about GLD and about Silver

In today’s Midas Dave from Denver asks:

“why someone would be willing to pay 31% over the NAV of GTU to buy into it vs. not even paying NAV for GLD. (GLD trades below spot to account for the trust expenses). if the two investment vehicles were identical, i.e. they both hold physical gold, an investor should buying GLD instead of GTU. Liquidity does not explain the wide premium to NAV that GTU is experiencing. AND, the premium on GTU somewhat mirrors the actual premium on gold bullion coins as reflected in the market place. If someone could, they would want buy GLD and sell short GTU - but that is not happening (or, since you can't borrow GTU, sell GTU and buy 31% more GLD with it).”

I think the current premiums tells us several things. Firstly, the market is telling us GLD and GTU are not the same. Those holding GTU do not want to trade their shares for GLD. A small segment of the market believes those who argue that GLD is too opaque to touch. But it can only be a small part of the market just by looking at the market caps of the two funds. The GLD sponsors have done a brilliant job in convincing investors that buying GLD is equivalent to buying gold bullion. The ever increasing GTU premium over the past year (see above GTU chart) indicates that a small but growing group of investors doubt this to be true.

Just as interesting is the difference in CEF and GTU premiums. Why is the GTU premium so much greater than that of CEF? Why don’t GTU share holders sell and buy CEF instead? Recall that earlier this decade the situation was reversed. Silver was then outperforming gold and that was reflected in the premiums.

This can only be answered in reference to the under performance of silver over the past year. On March 19th 2008 Gold closed at $942 slightly below today’s close of $958.30. Silver, however, has dropped from $18.49 last year to $13.52 today which is a 27% loss. As I mentioned earlier, the Central Silver Trust which had been planned was aborted because of the high cost of moving and storing silver. Despite arguments to the contrary the rising Gold/Silver ratio is telling us that Gold and only Gold is money. Silver cannot compete for the very simple reason that it costs so much more to ship and store an equal value. A million dollars of gold weights 65 pounds but a million dollars of silver weighs 2.3 tonnes!

The Central Fund of Canada holds silver in the ratio of 50 ounces to each gold ounce. The market has moved away from that ratio to 70 to one. If we look at today’s closing prices and premiums and valued the gold in CEF at the same premium that GTU enjoys (30.9%) then its 1,049,328 gold ounces would have a market cap of $1,313,820,488. But the total market cap of CEF today (including premium of 18%) was $2,052,198,350. The difference is $738,377,862 and this is the value assigned to silver in CEF which is a 7% premium to its spot price today of $688,810,213.

Since the beginning of 2009 Silver has outperformed Gold. If this continues and I’m right, then the GTU/CEF premium should narrow and move in CEF’s favor. Silver may not be money but it may be the better investment.

Cheers from Auckland, Ed Wener
ed.na@xtra.co.nz

Ok. Lets start with economic news of the day: Yesterday the Dow fell by 122 points as financials were hit hard.  JPMorgan came out and stated that they see now sign of any change in the financial climate. The market for the past two weeks saw a 15% gain on words that Citibank and Bank of America were going to show a profit in the first quarter. JPMorgan saw its share price fall by

This stunned the street.  They do not know who to believe.

The announcement by Berbanke that he is going to purchase 300 billion dollars of long term treasuries and then another 1.45 trillion of mortgage-backed securities sent a chill down the markets.

As the Fed buys up the long end, he is flattening the yield curve and killing all hopes of bank profits.  This is one commentary from a cafe member:

 

TOO BIG TO BAIL

It has been my extensive long held view that the mess created by The Gold Cartel and financial institutions in the US is too big to bail. Thus, I have repeated that slogan over and over for many months. The latest moves by the Fed suggest that notion is gaining steam in the investment world. Note what Bill King wrote last night to his followers…

Stocks sank, led by financials. How can this be? Because the Fed’s dubious monetization strategy flattens the yield curve, which reduces bank and financial firms’ profits.

So while Weimar Ben applies his theories on averting deflation by trying to re-inflate dead and decaying assets, the income statement side will deteriorate.

Secondly, investors fear that Ben’s quick trigger of the nuclear option implies there is something gravely wrong in the system.

end

 

With quantitive easing the norm throughout the world, it is quite easy to understand the movement into gold.  Yesterday in one day, the gold ETF GLD added  18.96 tonnes

 

The GLD ETF added a healthier 18.96 tonnes to a new record.

 

end

 

GLD has added 80 tonnes of gold in one week and over 350 tonnes of gold from the beginning of the year.  The ECB has been selling approximately 6 tonnes of gold per week.

I wonder who is providing all of the gold?

 

As for the deficits, the CBO posted its projected 2009 deficit.  They now state that the 2009 the deficit will exceed 1.8 trillion dollars and 2010 will exceed 1.4 trillion dollars:

 

Bank stocks

U.S. economic news:

U.S. CBO REVISES BUDGET DEFICIT UP TO $1.8 TRILLION FOR FY2009-SOURCE 

U.S. CBO REVISES BUDGET DEFICIT UP TO $1.4 TRILLION FOR FISCAL 2010-SOURCE

Washington Post.com

News Alert
1:55 p.m. ET Friday, March 20, 2009

U.S. Federal Deficit Soars Past Previous Estimates

Deteriorating economic conditions will cause the federal deficit to soar past $1.8 trillion this year and leave the nation wallowing in a sea of red ink far deeper than the White House had previously estimated.

 

It looks like GM and Chrysler are going to need more dollars to fix their problems:

 

GM, Chrysler May Need ‘Considerably’ More Aid, Rattner Says

March 20 (Bloomberg) -- General Motors Corp. and Chrysler LLC may need "considerably" more government aid than their request for as much as $21.6 billion, said Steven Rattner, the U.S. Treasury’s chief auto adviser.

"It could be considerably higher, I won’t deny that," Rattner said, when asked whether U.S. aid sought could rise to $30 billion or $40 billion. Rattner spoke in an interview on Bloomberg Television’s "Political Capital with Al Hunt," scheduled to air today…

http://www.bloomberg.com/apps/news?
pid=20601087&sid=ajvc.HUwoK44&refer=home

 

end

 

Leon Black of Apollo, commented yesterday that the next black hole is the commercial property market and he states that this will add an additional 2 trillion dollars of losses to the banks.

I have also written about this in previous commentaries:

 

17:58 Apollo's Leon Black warns of commercial property "black hole" - FT
In an interview with the FT.com, Leon Black, the founder of the private-equity firm Apollo, says that a "black hole" in the US commercial property market is set to exacerbate the problems for troubled banks. According to Black, the additional costs of cleaning up the US banking industry could total as much as $2T.
Reference Link (subscription required) 
* * * * *

There is strong evidence that China is buying huge supplies of raw materials and storing them on their shores.  This is why oil has shot up as well as copper and other metals:

 

Here is a commentary from a cafe member:

 

Here it is - evidence supporting a key factor in my recipe for hyperinflation. China is using its massive foreign reserve surplus of US dollars to scoop up huge stockpiles of raw materials. This is an enormous transfer of resources from the West to the East, financed by the mad men running our country. Eventually the global glut will turn into global scarcity and there will be trillions of dollars sloshing around the system looking for necessities, driving prices to unthinkable heights:

As the U.S. and Europe continue to slide commodities should fall, but Chinese buying is buoying commodities instead, creating global stagflation. Western consumers have less money, but prices rise anyway.
The massive size of China’s purchases has swayed energy markets. It also has sparked concern that China will hoard commodities, lifting their prices and making them unavailable to other countries, including the United States.

http://moneynews.newsmax.com/streettalk/
china_foreign_buying/2009/03/19/193729.html

Printing money in the history of the world has NEVER worked to solve economic problems. Ben Bernanke is borderline retarded. Now he's a retard with a finger on the printing press - a financial nuclear weapon.

Please start accumulating gold and silver bullion before the Chinese snatch up the remaining stock of precious metals. It will be your ONLY protection from the financial tyrants looting our system and destroying our country.

***

end

 

This is why we are heading for a hyperinflationary depression as goods disappear in a lousy economy.  The purchase of long end bonds will eliminate any hope of a banking recovery.

The world is devaluing together preventing a run on any country.  However it creates a run into silver and gold

 

speak to you on Monday

Harvey.

 

 

 

 

Thursday, March 19, 2009

March 19.09.

 
Good evening Ladies and gentlemen:
 
 
What a fantastic day for gold and silver.  Gold finished up a whopping 69.30 to 958.30 while silver is up 1.51 to 13.52.  The gold open interest rose 3,914 contracts to the tune of 379,831, so there is no doubt there was a lot of long speculators that joined the gold market today.  On the silver front, the OI actually contracted 312 contracts to 92,484 contracts, which shows me that there was a lot of short covering today in the silver pits.  There is no question that there is more problems facing the banking cabal in the silver pits than in the gold pits as evidenced by the OI figures today.
 
Ladies and gentlemen:  please look at what investors are willing to fork over in order to obtain physical gold and silver.  The premium on the gold GTU (Central Fund) is a startling 31%.  It is back to where it was 4 weeks ago when they bought huge amts of gold at a premium of 22%.  The real price of gold is in reality approx. 1240 usa per oz physial metal.

Gold premiums update this morning from Andy…

CEF 16%
GTU 31%!

Later…

CEF 17%
GTU 33% - equates to $1261 gold, which is exactly where we're heading. 
And if anyone starts to doubt what GLD and SLV own for even a second…

 

I would like to point out that the other ETF GLD trades at a discount to gold as does the silver SLV.  Here is what one cafe member states:

Obviously we know the answer to my question, but that doesn't explain why someone would be willing to pay 31% over the NAV of GTU to buy into it vs. not even paying NAV for GLD. (GLD trades below spot to account for the trust expenses). if the two investment vehicles were indentical, i.e. they both hold physical gold, an investor should buying GLD instead of GTU. illiquidity does not explain the wide premium to NAV that GTU is experiencing. AND, the premium on GTU somewhat mirrors the actual premium on gold bullion coins as reflected in the market place. If someone could, they would want buy GLD and sell short GTU - but that is not happening (or, since you can't borrow GTU, sell GTU and buy 31% more GLD with it).

 

Please note that the CEF and GTU are different funds compared to the GLD in that these two are backed by 100% physical Gold and silver, whereas the GLD is nothing but a paper promise.

My good moronic friend Dennis Gartman, who two days ago pondered as to whether he was going to go short gold, immediately changed his mind and bought two long units of gold.  He saw the light.
 
What one makes of yesterday's Fed action depends on one's grasp of monetary and economic history. A particularly astute observer put out a note this morning with the headline "Weimar on the Potomac" and The Gartman Letter promptly bought two units of gold. Eminently sensible responses, in my view.
 
This just crossed my desk and it is a doozy!!!!.  The headline says it all:
 

China said to support Russia on replacing dollar

 Section: 

By Gleb Bryanski
Reuters
Thursday, March 19, 2009

http://www.reuters.com/article/usDollarRpt/idUSLJ93633020090319

MOSCOW -- China and other emerging nations back Russia's call for a discussion on how to replace the dollar as the world's primary reserve currency, a senior Russian government source said on Thursday.

Russia has proposed the creation of a new reserve currency, to be issued by international financial institutions, among other measures in the text of its proposals to the April G20 summit published last Monday.

Calls for a rethink of the dollar's status as world's sole benchmark currency come amid concerns about its long-term value as the U.S. Federal Reserve moved to pump more than a trillion dollars of new cash into the ailing economy late Wednesday.

Russia met representatives of China, India, and Brazil ahead of the G20 finance ministers meeting last week, as the big emerging powers seek to up their influence on decision making globally. Their first-ever joint communique did not mention a new currency but the source said the issue was discussed.

"They (China) did not formally put forward their position for the G20 summit but unofficially they had distributed their paper regarding the same ideas" on the need for the new currency, the source told Reuters, speaking on condition of anonymity.

The source said the Chinese paper envisaged the International Monetary Fund's Special Drawing Rights (SDRs) being first assigned a role of a clearing currency on some transactions and then gradually becoming the main global reserve currency. "They said that the role of reserve currency should be given to SDR," the source said.

A U.N. panel of experts is also looking at using expanded SDRs, originally created by the International Monetary Fund in 1969, but now used mainly as an accounting unit within similar organisations as a new reserve currency instead of the dollar.

Currency specialist Avinash Persaud, a member of the U.N. panel, told a Reuters Funds Summit on Wednesday that the proposal was to create something like the old Ecu, or European currency unit, that was a hard-traded, weighted basket.

The SDR and the old Ecu are essentially combinations of currencies, weighted to a constituent's economic clout, which can be valued against other currencies and against those inside the basket.

The Russian source said Moscow was aware that the emergence of the new global currency would not happen overnight and said its goal was to initiate a discussion about it at the G20 summit in London on April 2.

The source said that India did not object to the discussion but was not prepared to take the lead. The source said South Korea and South Africa backed the idea, while developed nations were not "allergic" to it.

"We are not waiting for everyone to say: 'How beautifully it has all been formulated, let's subscribe to it,'" the source said. "The main idea is to start a discussion about it."

Russia holds about half of its reserves, the world's third largest, in dollars, with the rest in euros and pounds. Prime Minister Vladimir Putin has called on reserve currency issuers to show more financial discipline.

Finance Minister Alexei Kudrin told reporters on the sidelines of the G20 finance ministers meeting that it would take up to 30 years to create a new super-currency, suggesting there was no unity in Russia on the issue.

President Dmitry Medvedev's top economic aide and G20 sherpa Arkady Dvorkovich is behind the Kremlin's G20 proposals, made public one day after Kudrin returned from England.

END
 
 
 
Please note that yesterday, I stated that China wants guarantees on all the usa bonds its holds.  There is no question that they asked for gold which does not exist on usa soil.
 
Ok  lets start with economic news of the day:
 
First off, this is Thursday so we get the unemployed levels and benefits paid out.  Again we had a record week:
 

U.S. economic news:

08:30 Jobless claims for w/e 14-Mar reported 646K vs. consensus 655K
Prior week revised to 658K from 654K. Continuing claims for week ended 7-Mar reported 5.473M vs. consensus 5.323M. Prior week revised to 5.288M from 5.317M. 
* * * * *

U.S. workers on jobless benefits hit record high 

WASHINGTON, March 19 (Reuters) - The number of U.S. workers drawing state unemployment benefits scaled another record high early this month, government data showed on Thursday, highlighting the difficulties of getting new jobs as the economy battles a severe recession. 

However, the number of people filing new claims for jobless benefits fell to a seasonally adjusted 646,000 in the week ended March 14, the Labor Department said, still at levels consistent with a distressed labor market. The prior week's number was revised up to 658,000 from 654,000. 

Analysts polled by Reuters had forecast 652,000 new claims. 

The number of people staying on the benefits roll after drawing an initial week of aid surged 185,000 to 5.47 million in the week ended March 7, the latest week for which the data is available, from 5.29 million the previous week. This was the highest on record and pushed the insured unemployment rate to 4.1 percent from 3.9 percent the week before, the highest since June 1983. 

The four-week moving average for new claims, considered to be a better gauge of underlying trends as it irons out week-to-week volatility, rose to 654,750, the highest since October 1982, from 651,000 in the week ended March 7. 

The Labor Department will next week publish revisions for the series from 2004 to 2008 for both initial and continued claims.

-END-

 
The leading indicators plummeted again last month.  We see no end in sight to the banking mess which we are witnessing:
 

10:00 Feb LEI reported (0.4%) vs. consensus (0.6%)
Jan LEI was revised to 0.1% from 0.4%. 
* * * * *

The Conference Board Leading Economic Index(TM) for the U.S. Declines 

NEW YORK, March 19 /PRNewswire/ -- The Conference Board Leading Economic Index(TM) (LEI) for the U.S. declined 0.4 percent in February, following a 0.1 percent increase in January, and a 0.1 percent decline in December. 

Says Ken Goldstein, Economist at The Conference Board: "The U.S. Leading Economic Index declined in February, but strengths and weaknesses were roughly balanced among its components. Financial market volatility remains strong, and the credit market freeze is relenting very slowly. The LEI suggests the recession will continue in the near term. A return to strong growth will not likely occur until 2010." 

The Conference Board Coincident Economic Index(TM) (CEI) for the U.S. declined 0.4 percent, following a 0.6 percent decline in January, and a 0.7 percent decline in December. The Conference Board Lagging Economic Index(TM) (LAG) declined 0.4 percent in February, following a 0.3 percent decline in January, and a 0.1 percent decline in December.

end.
 
Today we got the Philly Mfg number and it was pretty low but a little better than last month.  It registered negative 35 whereas last month it was negative 41.  Anything below zero and manufacturing contracts.
Here is the report:
 
 

10:00 Mar Philadelphia Fed (35) vs. consensus (39.0)
Feb reading was (41.3). 
* * * * *

Philly Fed factory activity slump moderates 

NEW YORK, March 19 (Reuters) - Factory activity in the U.S. Mid-Atlantic region shrank less severely in March, a survey showed on Thursday. 

The Philadelphia Federal Reserve Bank reported its business activity index at minus 35.0 in March versus minus 41.3 in February. Any reading below zero indicates contraction in the region's manufacturing sector. 

Economists had expected a result of minus 38.0, according to the median of 53 forecasts in a Reuters poll, which ranged from minus 45.1 to negative 30.0. 

The survey covers factories in a region encompassing eastern Pennsylvania, southern New Jersey and Delaware and is looked at closely as one of the first indicators of the health of the U.S. manufacturing sector.

-END-

Look at the backlash at certain credit card holders:
 
 

JPMorgan, GE Face Credit Card Losses as Retailer Rewards Vanish

......March 19 (Bloomberg) -- JPMorgan Chase & Co. and General Electric Co., two of the biggest sponsors of store-branded credit cards, face a rebellion by customers who may tear up their bills from defunct retail chains.

Consumers who used store cards to buy flat-screen TVs from Circuit City Stores Inc. and espresso makers from Linens 'n Things Inc. had their accounts shut after the slump in consumer spending forced the retailers to liquidate. Lenders now want to collect from customers who were stripped of rewards points and have no further use of the plastic. Private-label credit-card debt in the U.S. totaled $111 billion as of January, according to the Nilson Report.

"If your card is closed without your permission and you're not getting your rewards anymore and it's a company that's gone out of business, you're not going to necessarily be the loyal and positive customer for the bank," said Emily Peters, analyst at Credit.com Inc., a personal-finance company in San Francisco. "In this economy, there's a lot of people having to make these tough choices about which bills to pay."........

http://www.bloomberg.com/apps/news?
pid=20601009&sid=aDJ7eksc9baM&refer=bond
 
 
end.
 
 
I guess Citibank does not have a rosy picture.  They are going to have a 1: 10 reverse split:
 
07:11 C Citi plans reverse stock split (3.08)
Citi did not specify under which terms it is proposing such a split. Citi also announced it has filed a registration statement with the SEC in connection with its previously proposed offer to issue common stock in exchange for publicly-held convertible and non-convertible preferred and trust preferred securities. Citi has received NYSE approval for the exchange offer and expects to launch the exchange offer in early April. Citi also entered into definitive agreements with private holders of convertible preferreds issued in Jan-08 under the terms committed to and announced on 27-Feb. Separately, Citi says it 
plans to spend about $10M for a new executive suite for CEO Vikram Panditand his team, according to affidavits filed with NY's Dept. of Buildings, according to Bloomberg. Citi says the move will help it save money over time. C continues to trade above yesterday's close;quoted last at $3.42. 
* * * * *
 
From Bill Holter;  (this is important).  The world is devaluing faster than a speeding bullet.  Generally most know my favourite saying and it is worth repeating it here:  This was said to me 8 years by my friend Reg Howe to myself and Don Jack:
 
"All currencies will go to their instrinsic value and that value is zero!!"  Again Bill Holter comments on the shot heard around the world:
 
 

The shot heard 'round the world.

To all; first off I would like to say congratulations, you won, and next, my condolences because we have all lost. Yesterday's announcement by the Fed ensures that if you own Gold you will retain purchasing power and likely end up with all the monetary marbles. On the other hand, the same announcement has guaranteed the "banana republic" status I have written about that will destroy the savings of 95+% of Americans. This "monetization train" coming down the tracks will wipe out anything and everything paper. The realization that hyperinflation is here and now has even occurred to the numerous goat heads on CNBC.

Several weeks ago the Bank of England made an announcement that they would monetize Great Britain's sovereign debt. Last week the Swiss sold Francs vs. Euros in an effort to devalue. Then we had yesterday. The Fed says they will create Dollars to buy US bonds to lower interest rates. If they are blowing money supply at a 20 or 30% rate, do they really think the rest of the world will accept a 3% yield in a currency that is devaluing at almost 3% per month?

This is the rub. The rest of the world is clamoring for a "stable" currency system while the Anglo banking system is hyperinflating. Mr. Sarkozy of France has called for a change of reserve currency. The Russians have called for a change away from Dollars while the Chinese premier has issued a statement that he is concerned about "the safety" of their Dollar investments. Yesterday, even the UN has jumped into the fray with this headline "U.N. panel says world should ditch dollar"

http://www.reuters.com/article/newsOne/idUSTRE52H2CY20090318.

Can you see the rift that is occurring? The Anglo banking system is broke, their solution is to dig the hole deeper and deeper by borrowing more. If they cannot borrow it, damn the torpedoes they will print it. The world is balking at this bigtime, as well they should.

Back in Dec. when the "emergency G-20" meeting was called, Britain and the US told the world they would get their financial houses in order prior to the April 4 meeting. Not only has this not happened, they have both pressed the turbo inflation button and now embarked on outright monetization that even an idiot can see. The upcoming G-20 meeting will be the stuff history is made of, I only wish I could be there to see how badly the US and Britain get dressed down for "defaulting" on their currencies. They are not saying "we won't pay you", they are saying "we can't pay you in current Dollars without printing more". DEFAULT, this is exactly what has happened.

Bill Seidman, past FDIC chairman said this morning "we no longer have a market economy, we have a Fed economy", he is exactly correct and I believe he is only the first of what will be many public and well known figures to say this. I said yesterday that the ramifications of the Fed's actions were huge, they are, and now there is only a question of time. Does the "Dollar" system even make it to the G-20? Who knows? The point is, the Fed told the entire world by their actions that THE DOLLAR SYSTEM WON'T SURVIVE! All of the past manipulations, lies, frauds, etc. are coming home to roost, the bankruptcy is being exposed for exactly what it was.

I wrote several months back that it would be a good idea to Google "hyperinflation". Now more than ever you must do this if you wish to financially survive. Read about Weimar Germany, Argentina, or the Soviet Union if you wish to have a road map as to where this goes. No longer is there ANY chance that the Dollar will survive in its current form. Do not listen to anyone telling you to invest in anything financial related to the Dollar, it is a death wish. If you have been waiting for any reason to put any remaining capital into the metals, wait no longer. There have been several historic events dubbed "the shot heard 'round the world", trust me, the announcement yesterday by the Fed, by far trumps anything in history. Regards, Bill H.

England just announced their deficit and it was abysmal:
 

The UK government announced a soaring deficit this morning. Here is how it was reported in the Times:

"Britain's budget deficit hit a record high last month, taking the total borrowing for the fiscal year to date to its highest level since comparable records began in 1993.

Public sector net borrowing was £8.991 billion in February, figures published today by the Office for National Statistics show. Total borrowing for the 11 months of this fiscal year reached a record £75.2 billion - three times higher than at the same point in the previous fiscal year.

Net debt surged to £717.3 billion,a record 49 per cent of GDP, up from £610.4 billion at the end of February."

end.
 
England's net debt is now 717.3 billion dollars or approx  1 trillion usa dollars.  Its GDP is around 2 trillion dollars so their debt is 50% of GDP.
For comparison, the net debt of the usa is 11 trillion on 13 trillion GDP or about 85%.  However England is sinking faster as they have basket case Ireland on its doorstep!.
 
 
I will give a comprehensive review on Saturday:
 
Harvey
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Wednesday, March 18, 2009

March 18.09 commentary.

 
Good evening Ladies and gentlemen:
 
I will be short today as I got caught up with a lot of work.
 
The FOMC had their meeting and at 2:15 pm the following announcement was made:
 

Countdown time for the Fed announcement...

And here you have it, why The Gold Cartel smashed gold today and of late…

14:17 FOMC repeats it will employ all available tools to promote resumption of sustainable economic growth 
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14:17 Fed to purchase $300B of longer-term Treasuries, $750B of MBS, $100B of GSEs 
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14:17 FOMC leaves fed funds target unchanged at range of 0% to 0.25%
The move is as expected. 
* * * * *

14:19 Follow-up: Fed to purchase $300B of longer-term Treasuries, $750B of MBS, $100B of GSEs
The Fed's statement said the following regarding these decisions:

"The Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability."

"To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750B of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100B to a total of up to $200B."

"Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300B of longer-term Treasury securities over the next six months."

"The Federal Reserve has launched the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses and anticipates that the range of eligible collateral for this facility is likely to be expanded to include other financial assets." 
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Fed says to buy long-term US government debt 

end

In other words, the Fed is going to monetize its debt by printing 1.2 trillion dollars of paper money.  This is called quantitative easing.  The British announced the same format i.e. monetizing their debt.

This is exactly what the gold bulls needed to hear.

This report was released after the market closed:

WASHINGTON, March 18 (Reuters) - The U.S. Federal Reserve on Wednesday, in a surprise move, said it will buy up to $300 billion worth of longer-term U.S. government debt over the next six months and expand purchases of mortgage-related debt to help ease credit market conditions. 

In a statement at the end of a two-day meeting, the central bank's policy panel also said it had decided to hold its target for overnight interest rates in a zero to 0.25 percent range -- the level reached in December -- and repeated that borrowing costs would likely stay unusually low for some time. 

"In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability," the Fed said. 

With benchmark rates virtually at zero, the Fed has turned its focus to pumping money into stressed credit markets in the hope of restarting lending and restoring growth -- a policy Fed chief Ben Bernanke has dubbed "credit easing."

end

Immediately, the dollar tanked by 2 and 1/2 points.  The yield on the bonds tanked as everybody thought they could make a quick buck as the Fed was buying almost every treasury bond out there.

 

Here are the more important economic news of the day after the stunning announcement by the Fed:

 

First consumer prices were up a big .4 percent in Feb.  It rose greater than expected:

 

U.S. consumer prices up 0.4 pct in February 

WASHINGTON, March 18 (Reuters) - U.S. consumer prices rose in February on higher gasoline and apparel prices, government data showed on Wednesday, calming fears of deflation for now. 

The Labor Department said its closely watched Consumer Price Index rose 0.4 percent, the biggest monthly gain since last July, after increasing 0.3 percent in January. Analysts polled by Reuters had forecast headline CPI rising 0.3 percent. 

Core prices, which exclude food and energy items, increased 0.2 percent in February after rising by the same margin the prior month. That compared to analysts' prediction for a 0.1 percent increase. 

On a year-over-year basis, consumer prices were up 0.2 percent after being flat in January. Energy prices surged 3.3 percent in February, also the largest monthly increase since July last year, while gasoline was up 8.3 percent. 

However, compared to the same period last year, energy prices were down 18.5 percent, the department said. 

Apparel prices jumped 1.3 percent, the biggest rise since a 1.5 percent gain in March 1990.

-END-

manufacturing in the Midwest plummeted to its lowest output in 15 years.

Chicago Fed Jan Midwest factory output at 15-yr low

NEW YORK, March 18 (Reuters) - The Chicago Federal Reserve Bank said on Wednesday its Midwest manufacturing index plunged in January to its lowest level in 15 years as the slumping auto sector weighed heavily. 

The index fell 5.9 percent to a seasonally adjusted 85.6 -- its lowest reading since July 1994 -- from 91.0 in December, which had been revised down from 92.2. 

Compared with a year earlier, regional output in January was down 21.8 percent from a year earlier, worse than the 13.0 percent decrease in national output, the Chicago Fed said. 

The Chicago Fed Midwest Manufacturing Index is a monthly estimate of manufacturing output in the region by major industries. 

Regional auto sector production dropped an astounding 20.0 percent in January after declining 1.8 percent in December. Compared to a year earlier, the Midwest's automotive output was down 42.2 percent in January. 

The region's steel sector output decreased 4.9 percent in January after declining 6.7 percent in December. Midwest steel output dropped 26.5 percent from its January 2008 level. 

The Midwest's machinery sector output decreased 3.5 percent in January after declining 4.2 percent in December. Regional machinery output in January was 16.2 percent below year-earlier levels. 

The Chicago Fed's survey covers the five states that make up the seventh Federal Reserve district -- Illinois, Indiana, Iowa, Michigan and Wisconsin.

-END-

This is huge:  corporate bonds are at a default risk and are expected to rise to a record.  Here is the report:

Corporate bonds at default risk rise to record 

NEW YORK, March 18 (Reuters) - Global corporate bonds at risk of default climbed to a record high of 298, affecting $526 billion in debt, Standard & Poor's said on Wednesday. 

So-called "weakest links" increased for the 13th straight month, S&P data through March 11 showed. Industries in media and entertainment, forest products and building materials, and retail and restaurants were the most vulnerable, S&P said. 

The rating company also said the global high-yield default rate rose to 4.3 percent in February, from 4.7 percent in January. 

The U.S. speculative-grade default rate climbed to 4.9 percent in February, from 4.7 percent in January, S&P said.

Goldman's share of AIG money is drawing fire from everywhere:

Goldman's share of AIG bailout money draws fire 

NEW YORK, March 17 (Reuters) - American International Group funneled over $90 billion of taxpayer bailout funds to various U.S. and European banks, but the biggest beneficiary was politically connected Goldman Sachs Group Inc . 

Suspicions of potential conflicts of interest and favoritism have been fueled by $12.9 billion AIG paid to Goldman Sachs -- where then-Treasury Secretary Henry Paulson had previously worked as chief executive -- in the months after the insurer was rescued by the government last September…
http://www.reuters.com/article/ousiv/idUSTR
E52H0B520090318?virtualBrandChannel=10112

 

PriceWaterhouseCoopers in a announcement today proclaimed that the usa commercial real estate market is going from bad to worse. Here is the report:

U.S. property bad and seen getting worse - survey 

NEW YORK, March 17 (Reuters) - The U.S. commercial real estate market is bad and investors expect it to get a whole lot worse, according to a closely followed survey by PricewaterhouseCoopers. 

"As investors painfully watch the value of their assets decline, many feel troubled knowing that the ills of the U.S. economic recession have yet to fully impact the commercial real estate industry," starts the first-quarter Korpacz Real Estate Investor Survey of more than 100 investors from real estate investment trusts, pension funds, private equity firms and insurance and mortgage companies.

Many investors are struggling with ways to preserve the value of their investments and maintain ownership in the wake of restricted debt sources, declining tenant demand, and falling values, the survey said. 

Real estate investors do not expect the commercial real estate sector to rebound until well into 2010 at the earliest, according to the survey…. 

Some property owners are lowering rental rates and increasing concessions, which results in lower revenue. 

Compared to a year ago, the average amount of free rent landlords are offering has increased to six month in several major office markets, such as Boston, where it rose from 2.15 months; Manhattan, where it grew from four-and-half months and San Francisco, where increased from three-and-half months, the survey said. 

One investor in the survey suggested "making the best deal you can today because tomorrow's deal will be worse."…

-END-

The Fed debt rose another 11 billion dollars today:

Current Debt Held by the Public Intragovernmental Holdings Total Public Debt Outstanding
03/17/2009 6,742,004,029,257.94 4,300,549,942,192.53 11,042,553,971,450.47

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It is late,so I had better go.  Speak to you tomorrow.

Harvey.

 

 

 

 

 

 

 

 

 

 

 

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