Saturday, April 11, 2009

april 11.09. commentary

Good morning Ladies and gentlemen:
On Friday, the Government released its deficit for the month of March.  The deficit came in at 192 billion dollars.
I will first send the announcement and then comment:

Federal budget deficit sets March record $192.3B

Federal deficit hits March record $192.3 billion; near $1 trillion halfway through budget year

  • Friday April 10, 2009, 7:02 pm EDT

WASHINGTON (AP) -- The Treasury Department said Friday that the budget deficit increased by $192.3 billion in March, and is near $1 trillion just halfway through the budget year, as costs of the financial bailout and recession mount.

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Last month's deficit, a record for March, was significantly higher than the $150 billion that economists expected.

The deficit already totals $956.8 billion for the first six months of the budget year, also a record for that period. The Obama administration projects the deficit for the entire year will hit $1.75 trillion.

A deficit at that level would nearly quadruple the previous annual record of $454.8 billion set last year. The March deficit was nearly four times the size of the imbalance in the same month last year.

Nearly $300 billion provided to the nation's banks and other companies to cope with the most severe financial crisis in seven decades has pushed government spending higher.

The Treasury report said that through the end of March, $293.4 billion had been provided to support companies through the $700 billion bailout fund Congress passed last October. That support has been provided primarily to banks, although insurance giant American International Group Inc. and auto companies General Motors Corp. and Chrysler LLC also have received assistance.

Besides the bailout fund, Fannie Mae and Freddie Mac received $46 billion last month, bringing the total assistance provided to the mortgage finance companies to $59.8 billion since October. The government took control of both last September after they had suffered billions of dollars in losses on mortgage loans.

Through the first six months of the budget year that began Oct. 1, tax revenues have totaled $989.8 billion, down 13.6 percent from the year-ago period. The government's receipts have been reduced sharply by the recession, which is shaping up to be the longest of the post World War II period. The downturn began in December 2007.

Government outlays totaled $1.95 trillion through March, 33.4 percent higher than the year-ago period. Besides higher payments for the financial rescue, the government is paying more in such areas as unemployment benefits and food stamps.

The Treasury report showed benefit payments from the unemployment trust fund totaled $44.6 billion so far this budget year, up from $19.4 billion last year.

The Congressional Budget Office estimated last month that President Barack Obama's budget proposals would produce $9.3 trillion in deficits over the next decade, a figure $2.3 trillion higher than estimates made in February in the administration's first budget proposal.

The CBO review projected Obama's budget would generate deficits averaging almost $1 trillion annually over the decade ending in 2019.

The administration said it remained confident its forecasts for declining deficits over that same period could be achieved. But private economists have faulted those estimates for relying on economic assumptions they believe are too optimistic.

The administration projects that after hitting $1.75 trillion this year, the gap between spending and tax revenues will dip to $1.17 trillion in 2010, and plunge to $533 billion in 2013. If accurate, that would fulfill Obama's pledge to cut the deficit he inherited in half by the end of his current term in office.

Some economists have expressed concerns that the massive deficits being forecast could push interest rates up sharply, especially if foreign investors worry about the size of the U.S. deficit projections.

Lawrence Summers, director of Obama's National Economic Council, said Thursday there have been no indications that investors are growing worried about the size of the deficits. On the contrary, he said yields on Treasury securities have been pushed lower by increased demand from investors seeking to hold Treasury bonds as a safe haven in uncertain economic times.




We are now 6 months into the new fiscal year.  The CBO had projected tax revenues at 2.2 trillion dollars.

The 6 month figure is $990 billion dollars. If we multiply by two we get 1.96 trillion dollas of new tax revenues.

The economy is certainly hurting on the tax revenue side.

Obama's budget had projected spending at 3.6 trillion dollars.  Already the government has spent 1.95 trillion.

They said that their is increase layouts for food stamps and unemployment benefits.  It looks like total expenditures may come in at 3.9 trillion dollars.  The deficit for 2009 will truly come in at a figure greater than 2 trillion dollars.

They also announced that the government drew down 44.6 billion dollars from the pension or social security fund.  The fund had a surplus of around 80 billlion in 2008.  If you remove 44.6 billion from 80 billion you get a surplus of only 36 billlion dollars with 6 months to go.  Obama projected the year will end with a surplus of 30 billion dollars.  He is dreaming.  The surplus will end by fiscal 2009  (Oct 1.2009) and will go into deficit financing by then.

As far as tarp is concerned, only 293 billion of the 700 billion have been used.

The federal debt today is 11.151 trillion dollars.  When tarp was announced the Federal debt was 10.6 trillion.

When the rest of tarp money is utilized, the debt ceiling will rise another 400 billion or to 11.55 trilion dollars.


speak to you on Monday




Friday, April 10, 2009

April 10.09 commentary.

Good morning Ladies and Gentlemen:
Gold closed down by 3.00 to $881.60 yesterday.  Silver went down by 1 cent to 12.32.
The open interest at the gold comex plummeted by a huge 10442 contracts to 334,500.  Silver's OI hardly budged
dropping by 492 contracts to 92611.
In general, all commodities rose on Thursday with Platinum rising by $12.00 and oil finishing the day up $2.86 to
$52.24.  Copper finished the day above $2.00 to 2.01.  It looks like China is massively buying commodities again and storing them on their shores.
Rumours on the street had Johnson Mathey a big silver and gold refiner in trouble.  Here is the story we got:

Where there is smoke, there is fire … as they say. My friend Jim Willie sent the following yesterday:

"I have heard a rumor that a gold refiner in the UK (believed to be Johnson Matthey) may not be able to meet its deliveries for June-July. You may wish to check your sources."

So I did, with a bullion dealer with more than 30 years of experience. Here’s what he came back with:

"I have also heard they have some problems. I suspect the banks have pulled the consignment facilities!"

Dave from Denver remarked…

Bill, there's a story here. Remember, about a year ago J/M closed down its Australian silver refining operation. I actually got into a nasty email exchange about this with Nadler because he was poo-poo'ing the information and then I proved him wrong (he's really a complete dirtball - either that or complete moron).




These guys have been in trouble before.  In 1984 they were nationalized and then resold.

They are trading at around 10 pounds per share.  We will do a little more research on this matter and report back.

The other big rumour is the story that the Germans want their gold back that is sitting at West Point.

On many occasions I have reported to you that Germany did a swap with the US  through the facilities of the ESF whereby the Germans own the gold, 1700 tonnes at West Point, and the Americans, 1700 tonnes at the Bundesbank.  The  USA subsequently leased/sold all of the German gold into the market.

This occurred between 1995-2000.  I will highlight the passage that was written in 2001. 

Behind Closed Doors

by James Turk

© by The Freemarket Gold & Money Report.

Therefore, this change in the descriptive label for nearly 1,700 tonnes of gold at West Point from "Gold Bullion Reserve" to "Custodial Gold" was purposeful. It happened for a reason. This conclusion is all the more plausible because the Treasury did not change the classification from "Gold Bullion Reserve" to "Custodial Gold" to describe the gold stored in Fort Knox or at the US Mint in Denver. Maybe new US Mint director Johnson saw something he didn't like. What could that have been?

I’ve already put one-and-one together to establish that the ESF has "gold swaps" with the Bundesbank. It therefore does not require much conjecture to add one supposition to the equation by concluding that the gold in West Point has been swapped with gold owned by the Bundesbank, thereby necessitating its reclassification from "Gold Bullion Reserve" to "Custodial Gold". Here’s what I think has happened.

The Treasury Department wanted to make gold available to some bullion banks. This statement is based on my basic premise that several of the big banks have gold books that are hopelessly imbalanced. By having borrowed short and loaned long, these banks have in their quest for profits imprudently fallen into the alluring but usually fatal banker’s deathtrap – a mismatched loan book. But what’s worse for these banks, it is even more difficult and treacherous to try extricating themselves from this particular deathtrap because they haven’t mismatched their loan book of dollars, which we all know can be created by the Federal Reserve ‘out of thin air’ if dollars are needed to bailout banks from a deathtrap predicament. Instead, these banks have mismatched their gold book. And no one – not even the Federal Reserve – can create gold out of thin air.

So given this reality about the nature of gold, the Treasury had to turn elsewhere to find the gold necessary (1) to keep these banks from defaulting on their bullion obligations arising from their mismatched gold books in an environment where metal had become increasingly difficult to come by and/or (2) to keep the gold price low so that the likelihood of default by the banks would be lessened, even though metal would remain tight because fabrication year after year was exceeding newly mined supply. Rather than accept the bitter pill that certain banks were about to default on their bullion obligations, the Treasury looked for alternatives and found one – they put their hand into the till, until recently known as the Gold Bullion Reserve at West Point. They swapped this gold with the Bundesbank. I’ll explain how they did it, but let’s first consider the practical aspects of this transaction.

In all likelihood, these particular bullion banks needed gold in Europe where their obligations were originally established. There is very little gold lending in New York. It is a practical problem to ship the gold out of West Point without raising the alarm of government auditors. It is costly too. Also, it is likely that some of the gold in West Point is coin-melt from the 1933 gold confiscation. Even if it could be smuggled out of the West Point vault into the market without raising suspicions, the alarm bells would go off at the refiner and soon thereafter in the market because everyone knows that only the US government has coin-melt bars. The appearance of coin-melt bars in the market would immediately raise suspicions that the US Gold Reserve was being dishoarded, an outcome that the Treasury would obviously take steps to avoid in concocting its scheme because the US Gold Reserve cannot be depleted without Congressional approval. Therefore, one is faced with the practical considerations of overcoming these hurdles, but the answer is relatively simple.

The Treasury has gold in West Point. The Bundesbank has gold in Europe. The Treasury cannot directly do a deal with the Bundesbank because unlike the ESF, the Treasury is subject to Congressional oversight. So instead the Secretary of the Treasury and the President decide to use the ESF to set up a swap line for gold with the Bundesbank.

By so doing, the gold in the Bundesbank’s vault in Europe becomes ESF gold, to do with as they please – i.e., the ESF lends this metal to bailout certain bullion banks. And the Bundesbank now owns the gold in West Point, which as a result was purposefully re-classified from Gold Bullion Reserve to Custodial Gold because the Treasury no longer owns this gold, having swapped it out through the ESF in exchange for gold in Europe owned by the Bundesbank. Case closed. The mystery of the abnormally low gold price is solved. The ESF did it.

The abnormally low gold price is the result of the mounting irrefutable evidence that the ESF is deeply involved in the gold market, and I do mean deep. They are involved in some 1,700 tonnes worth because that is the weight of gold stored in West Point, which was probably being swapped at the rate of a few hundred tonnes per year from circa 1995 through 2000. There are two other tidbits that I would like to share with you that add even more validity to this supposition… Point



There have been many requests on our part to provide details on this transaction and it fell on deaf ears.  There is no question that the Germans own the gold on usa soil.

We know that the ECB central bank came to rescue of the comex by aiding Deutsche Bank in their shortfall in gold.  We know that the ECB were not thrilled with doing this transaction.  They could very easily have leant the gold to DB and the gold listed at the ECB would have remained at 536 tonnes and not go down to 501 tonnes.

The statement by the ECB was terse, a one liner. "The ECB on March 31.09 sold 35.5 tonnes of gold."


Now we hear that they want their gold back on their soil.  They are not to enthralled with activities by the usa. Maybe this gold is gone too?

OK. lets go to GE and there is fun over there.


Henry Bodget, filed a scathing commentary on GE and its hidden derivatives. He called it the hidden

bomb inside GE Capital.  Here is the paper:

The Earnings Bomb Inside GE Capital (GE)

…GE Capital is currently hiding $40-$45 billion of embedded losses in the GE Capital portfolio. This $40-$45 billion of losses, if rinsed through the income statement all at once, would wipe the company out. In fact, if GE weren't able to fund itself with the "heroin injection" of the government's commercial paper program, it would already be bankrupt.So is GE toast?…



The gold ETF remained constant for the 9th consecutive day at 1127 tonnes.  The silver ETF  SLV rose again to 270.4 million oz, rising by 5 million oz.


There is now no question that the 10 million oz of silver removed from the comex went to the SLV.

Barclays announced the sale of its  ishares SLV business to CVC Capital partners for 4.4 billion dollars.  They are loaning 3.1 billion dollars to CVC Partners or around 80% of the purchase price.  Closing will probably be in 2 or 3 months.  It seems that the lawyers wanted as much silver in the trust put back.


This from a cafe member on the SLV and silver situation:


Dave from Denver…

I think Bryant's post tonight about the reason for the big silver drawdown on Comex has a lot of validity. Anyone who buys the iShares business from Barclays would never close a deal until SLV had full custody of the silver it is supposed to have in the Trust. There would otherwise be too much liability exposure and any competent attorney would never permit its client to close such a deal. There is plenty of evidence to suggest that SLV is short the full amount of silver that it is supposed to have in custody and the timing, as pointed out by Bryant, seem more than coincidental.

This could get really interesting if Barclays has trouble finding enough silver to square up the SLV books. For sure, if it's the SLV Trust that is removing all that silver from the Comex, it suggests that ready stockpiles of silver on the open market are pretty much gone. The other aspect of this whole situation is that, unless a cartel bullion bank buys iShares, any new buyer will likely not be interested in playing games with the amount of actual silver SLV holds in custody.

One way or another the Cartel will eventually be brutally defeated by the laws of economics.



Now the race is on to replace all of the silver leased out on the SLV.  Maybe Johnson Mathey has a problem with this as well?


Yesterday, the Dow climbed by 242 points on news that Wells Fargo earned 3 billion dollars in the quarter.    First the news report:

Wells Fargo Quarterly Profit Climbed to $3 Billion

April 9 (Bloomberg) -- Wells Fargo & Co., the second-biggest U.S. home lender, earned about $3 billion in the first quarter, exceeding the most optimistic Wall Street estimates and spurring a rally in bank shares on speculation that the industry is shaking off the global credit crunch.

Net income rose about 50 percent from $2 billion a year earlier, the San Francisco-based lender said today in a statement. Per-share profit fell to about 55 cents from 60 cents after the bank sold more than $12 billion of shares in November to help fund the purchase of Wachovia Corp., which Wells Fargo said is exceeding expectations. The stock jumped 27 percent…



Please remember that these guys got 25 billion dollars from the usa government who got pref shares yielding 5%.  This money (5% dividend) is due annually.

They reported strong banking conditions and strong mortgage activity. They were thrilled with their purchase of Wachovia.


Here is what one cafe member thought of this issue:

WFC blows more Orwellian poisous gas - our system is doomed

This is beyond belief. Wells Fargo's 1st quarter profit forecast goes way beyond any fairy tale ever written in history. Here's what they say: Chief Financial Officer Howard Atkins says the results "reflected strength in our traditional banking businesses, strong capital markets activities, and exceptionally strong mortgage banking results." Mr. Atkins, you are an outright liar and fraud.

Hmmm..."strength in tradition banking?" Who is borrowing that money and making their interest and principal payments on time? Has there been a bunch of businesses started no one is aware of yet? Are existing businesses expanding? You've got to be kidding me.

"strong capital markets activities." Where is this revenue coming from? Any big equity IPO's during Q1 that we missed? Corporate debt issuance was occurring, but at a very low rate and Wells Fargo is not a real player in that business. Mortgage securitizaton? I'm not aware of any. Please explain to me, Mr. Atkins, the source of your "strong capital marekts acitivities."

"exceptionally strong mortgage banking results." This one is the most puzzling and troubling to me. We know, with hard data and facts, that home sales and mortgage issuance is plummeting every day. Where are the revenues coming from in this area? Mr. Marks goes on to cite that WFC's acquisition of Wachovia boosted their results. How on Earth can this be? Wachovia's balance sheet is mostly the kinds of subprime mortgage assets that are melting down to zero.

The only possible source of extraordinary revenues I can think of for WFC during Q1 would have been WFC's use of the massive amount of Treasury and Fed money extended to banks at little or no cost and being put to work in Treasury bonds and WFC earning the positive interest carry.

In fact, we know from hard data released every week that the very business activities that Wells says are creating massive profits are, in fact, melting down quickly in every corner of the U.S. and global economy.

For WFC to come out and make those claims is beyond fairy tale - it's outright fraud. And lest we forget, the beloved Warren Buffet owns over 10% of WFC, and thus de facto is standing behind this massive fraud. George Orwell is laughing uncontrollably in his grave now.


And then this from Bix Weir"

Why is everyone so surprised about the Wells Fargo earnings? The change in "mark-to-market" accounting allows banks to hide ALL portfolio losses if they deem them "temporary" market dislocations. Basically, Zombie Banks have been legitimized and quarterly reports from here on out will only count gains more asset value losses need to be disclosed. That is why Wells Fargo is jumping up and down about what a great deal the Wachovia transaction was with no more write-downs on all those pesky mortgage backed securities. 

The sad thing is that according to most outside sources, house prices plummeted in the first quarter and without the fraudulent accounting cover ALL the banks would have had to report substantial Tier 1 Capital deterioration when there was no room left to go lower. This accounting cover-up will not fix the underlying true value of these "assets" as the credit losses and cash flow streams continue to deteriorate substantially over time. 

Meanwhile, the derivative bomb grows and awaits the final detonation. From my sources, it may be the long awaited GM bankruptcy. Not because of the harm it will cause the directly related parties or the US economy but because of the TRILLIONS in toxic Credit Default Swap bets that have been placed on GM. That is the "Elephant in the Room" and the reason for prolonging the inevitable bankruptcy. 

AIG is the likely counter-party on most of the GM CDS's and the Congressional potential for further bailouts to this corrupt institution is SLIM TO NONE! 

"Operation Confidence Con" continues and threatens to exaggerate the next market downturn to the extreme! 

Take cover as we approach a Summer from Hell. 

Normally this miss would be a market negative...



I believe the prifts Wells fargo earned came from the AIG settlements in February through the Government. Wells Fargo, Citibank, JPMorgan, Goldman Sachs and bank of America received big sums of money.

We also believe that they are not writing down any of their level 3 assets per the new FASB rules.

As for the retail end of things, sales are falling at WalMart and plummeting elsewhere:

Wal-Mart Sales Are Short of Retail Metrics Estimate

April 9 (Bloomberg) -- Wal-Mart Stores Inc., the world’s largest retailer, reported comparable-store sales in March that rose less than some analysts estimated, pushing the shares down the most in two months in New York trading.Revenue from U.S. stores open at least a year advanced 1.4 percent in the five weeks ended April 3, the Bentonville, Arkansas-based company said today in a PR Newswire statement. That missed the 3.2 percent average estimate compiled by Retail Metrics Inc., a Swampscott, Massachusetts-based consulting firm. In February, same-store sales gained 5.1 percent…

It wasn’t only Wal-Mart…

Nordstrom March same-store sales down 13.5%; Dillard's March same-store sales down 19%;
Saks Inc. March same-store sales down 23.6%; Kohl's same-store sales down 4.3%; J.C. Penney same-store sales down 7.2% in March; Gap Inc. same-store sales fall 8% in March; Abercrombie & Fitch March same-store sales down 34%.


With this news, it was no surprise to see the jobless advance again

Other U.S. economic news, which stinks too:

08:30 Jobless claims for w/e 4-Apr 654K vs. consensus 660K
Prior week revised to 674K from 669K. Continuing claims for w/e 28-Mar 5.840M vs. consensus 5.800M. Prior week revised to 5.745M from 5.728M. 
* * * * *

Jobless claims fell 20,000 last week 

WASHINGTON (Reuters) - The number of U.S. workers filing new claims for jobless benefits fell more than expected last week, but so-called continued claims scaled another record high in late March, government data showed on Thursday. 

Initial claims for state unemployment insurance benefits fell 20,000 to a seasonally adjusted 654,000 in the week ended April 4, from an upwardly revised 674,000 the week before, the Labor Department said.

Analysts polled by Reuters had forecast 660,000 new claims versus a previously reported count of 669,000 the prior week




Preliminary figures for April indicate that a further 700,000 people will have lost their jobs which will bring the total to 6 million workers and a 9% unemployed rate.  My bet is the John Williams Shadow government stats would show 20% or greater umemployment or underemployment.


The economy is continuing on its spiral downwards.  The IMF this week came out at stated that the global losses will be 4 trillion dollars with 3 trillion coming from the usa.

On Wednesday, we saw that the trade deficit fell badly to 26 billion revealing a huge drop in imports.  Exports rose a bit.

In other words, the consumer is not shopping. They are hoarding cash.

We will have to wait for the TIC report to see how the usa is financing its trade and service deficits with its budgetary deficit.  This figure is the most important for us to see.

However, we witnessed for the first time a small increase in economic activity with the rising in short term commercial paper by 53 billion dollars:

US commercial paper outstanding surges in week-Fed

NEW YORK, April 9 (Reuters) - The U.S. commercial paper market surged this week as companies tapped short-term funding in the midst of a prolonged economic downturn, Federal Reserve data showed on Thursday. 

For the week ended April 8, the size of the U.S. commercial paper market, a vital source of short-term funding for daily operations at many companies, rose by $56.9 billion, the biggest rise since early January, to $1.533 trillion, from $1.477 trillion the previous week. 

Asset-backed commercial paper outstanding rose $3.5 billion after a drop of $1.1 billion the previous week. 

U.S. asset-backed commercial paper outstanding rose to $704.5 billion in the latest week from $700.9 billion the previous week. 

Unsecured financial issuance outstanding rose $40.9 billion after a drop of $9.3 billion the previous week. 

The overall U.S. commercial paper market peaked at about $2.2 trillion outstanding in August 2007 when the credit crisis broke out.


Late in the day we got word that S and P were downgrading the life insurers.  This is not good.

These people insure everybody and this will be catastrophic is they go under.  Anyway, here is the news report:

18:04 S&P downgrades all major US mortgage insurers
S&P says the downgrades reflect a significant increase in its estimate of mortgage insurers' loss costs for loans insured through the flow channel and the impact this revision will have on the companies' operating results, capitalization, and competitive positions. 
United Guaranty Residential Insurance to 'BBB+' from 'A-' . Ratings removed from CreditWatch with negative implications. 
Radian Guaranty counterparty credit and financial strength ratings to 'BB-' from 'BBB+'. Counterparty rating on Radian Group to 'CCC' from 'BB', Ratings removed from CreditWatch Negative. 
Radian Insurance counterparty credit and financial strength ratings to 'BB-' from 'BB+'. Ratings remain on CreditWatch with negative implications. 
Radian Asset Assurance counterparty and financial strength ratings to 'BBB-' from 'BBB+'. Rating remains on CreditWatch negative. 
PMI Mortgage Insurance (PMI Europe) to 'BB-' from 'A-'. Ratings remain on CreditWatch negative. 
Genworth Mortgage Insurance Corp counterparty credit and financial ratings to 'BBB+' from 'A+'. Ratings removed from CreditWatch negative. 
Republic Mortgage Insurance credit and financial strength ratings to 'A-' from 'A'. Ratings removed from CreditWatch negative 


From the King report we are witnessing a rise in vacancy in apartments throughout the nation. I would have thought that they would be lessening.  I am wrong:

From The King Report…

The WSJ: Landlords See a Jump in Vacancy Rates Even as Rents Drop; More Apartment OwnersAre Pushed Into Delinquency Amid Renter Job Losses The nation's apartment market deteriorated inthe first quarter as rising unemployment dashed landlords' hopes that the housing downturn would create a soft landing by bringing former homeowners back as renters.

The vacancy rate for the top 79 U.S. markets jumped to an average 7.2%, a full percentage point increase over the past two quarters and the highest level since the first quarter of 2004, according to statistics from Reis Inc., a New York real-estate-research firm.

As for the commercial end of things..again deterioration:

The WSJ: Occupied Commercial Space Takes a Fall as Tenants Cut Back, Go Out of Business

Commercial landlords continue to lose retail tenants at an accelerating pace, indicating that the industry's troubles are worsening.

The amount of occupied space in U.S. shopping centers and malls declined a net 8.7 million square feet in the first quarter of 2009, according to real-estate-research company Reis Inc. The amount of occupied space lost in that one quarter was more than the total amount of space retailers gave back to landlords in all of 2008 and any other year in recent history, according to Reis.

Early this morning we have two stories, one from Reuters and one from Bloomberg that the usa is going to delay releasing the stress tests on banks until after earning season reporting (ends April 24)/


Note the story out today from Reuters:

It seems that the results of the stress tests for the financials are going to be delayed. I think this must mean that the results are going to be terrible, and the new normal for all reporting is to trumpet good news from the ramparts, but suppress bad news and hope
that no one notices. Just as we have observed how bank failures are only reported on Fridays after the markets have closed and when fewer people are likely to notice, I would imagine the bad news on the strength of the balance sheets for the nation's largest banks will also be dealt with the same way.

And this from Bloomberg:

Fed Said to Order Banks to Stay Mum on ‘Stress Test’ Results 

Share | Email | Print | A A A


By Bradley Keoun and Scott Lanman

April 10 (Bloomberg) -- The U.S. Federal Reserve has told Goldman Sachs Group Inc., Citigroup Inc. and other banks to keep mum on the results of “stress tests” that will gauge their ability to weather the recession, people familiar with the matter said.

The Fed wants to ensure that the report cards don’t leak during earnings conference calls scheduled for this month. Such a scenario might push stock priceslower for banks perceived as weak and interfere with the government’s plan to release the results in an orderly fashion later this month.

“If you allow banks to talk about it, people are just going to assume that the ones that don’t comment about it failed,” said Paul Miller, an analyst at FBR Capital Markets in Arlington, Virginia.

Regulators are using the tests to determine whether the 19 biggest banks have enough capital to cover loan losses during the next two years if the economy shrinks, unemployment surges and housing prices keep declining. The tests are a linchpin of the plan Treasury Secretary Timothy Geithnerannounced in February to bolster confidence in the nation’s banks and restore financial-market stability.

Geithner has likened the stress tests to those used by doctors to evaluate a patient’s health. They’re designed to mesh with the administration’s effort to remove distressed mortgage assets from banks’ balance sheets. The Fed is overseeing the administration of the tests, people briefed on the matter say.

Progress Report

President Barack Obama is scheduled to get a progress report on the tests today during a meeting with his economic team. Geithner will attend, along with Federal Reserve Chairman Ben S. Bernanke and Sheila Bair, chairman of the Federal Deposit Insurance Corp.

Goldman Sachs plans to report first-quarter earnings April 14, followed byJPMorgan Chase & Co. on April 16. Citigroup reports April 17, and Morgan Stanley announces April 21. All four banks are based in New York.

Spokesman for the banks declined to comment.

“No matter what the result, the stress tests are going to move markets,”Camden Fine, president of the Independent Community Bankers of America, said in an interview yesterday. “That’s the tricky part. If they don’t give out enough information or the information is presented in the wrong way, that could cause markets to plunge.”

Silent on ‘Process’

Banks should stay silent because a focus on the tests would be “a harmful distraction” from earnings, said Scott Talbott, senior vice president for government affairs at the Financial Services Roundtable in Washington.

“It is premature for banks to talk about the stress tests,” Talbott said yesterday. “They aren’t finalized yet and there is no framework to evaluate the results.”

Wells Fargo & Co. Chief Financial Officer Howard Atkins declined to discuss the tests yesterday after his bank reported a record first-quarter profit that beat the most optimistic Wall Street estimates.

“We haven’t commented on regulatory matters and we won’t start now,” Atkins said in an interview. “We don’t comment on the process.”

In a separate interview later, Wells Fargo spokeswoman Julia Tunis Bernarddeclined to say whether the bank had been told by regulators to keep silent. “We don’t comment on our discussions and conversations with regulators and officials,” she said.

Under the Treasury’s plan, banks would have six months after the reviews to raise any new capital they might need. If the money isn’t obtained from private investors, the government will provide the funds from the $700 billion bank-rescue plan.

To contact the reporters on this story: Bradley Keoun in New York; Scott Lanman in Washington


Lastly, we have now learned that trailing  S and P earnings are now 8.00 per 500  S and P shares or a Price/earnings ratio of 100.00  .  A P/E over 100?  And the stock market is rising?


You can expect to see earnings to continue to disappoint with the exception of the phony bank "profits"

The banks have leveraged their balance sheets at least 30 to one.  As the deleveraging process is carried out, the usa dollar rises with this death dance.

The big problem will be this:  the usa government  has committed over 12 trillion dollars to fill this black hole.  How on earth are they going to retrieve all this liquidity when the GDP is around 13.5 trillion dollars now?

There is no chance of this happening.  Once the economy takes hold, hyperinfaltion will follow.

Speak to you on Monday


Tuesday, April 7, 2009

April 7.09 commentary.

Good evening Ladies and Gentlemen:
gold closed up by 11.20 to 882.00.  Silver rose by 10 cents to 12.21.
The gold comex OI fell by 8000 to 343000.  Silver'sOI again hardly budged.
The GLD gold inventory remained flat for the 7th consecutive day, at 1127 tonnes of gold.
In economic news, the CEO confidence number remains in the doldrums:

U.S. CEO confidence falls to record low-Roundtable 

BOSTON, April 7 (Reuters) - U.S. chief executives' confidence in the economy fell further in the first quarter, setting a second consecutive all-time low, according to a Business Roundtable survey released on Tuesday. 

In a sign that businesses and workers have more worries ahead of them, more than two-thirds of CEOs surveyed said they planned more layoffs and cuts to capital spending in the next six months, as they brace for lower sales. 

The quarterly CEO Economic Outlook Index fell to negative 5 
-- the first negative reading in the survey's six-year history 
-- and down from a fourth-quarter reading of 16.5. A reading below 50 means CEOs expect contraction rather than growth. 

The CEOs, who were polled between March 16 and March 27 -- during the recent rally in U.S. stocks -- said they now expect real U.S. gross domestic product to decline 1.9 percent this year. That is below their December forecast, which anticipated flat GDP. 

The majority of CEOs -- 71 percent -- said they expected to cut their U.S. workforces over the next six months and 66 percent said they expect to reduce capital spending. That came as 67 percent said they expect lower sales over that period. 

Business Roundtable member companies together employ almost 10 million people and generate about $5 trillion in annual revenue.


This was the big news of the day, the IMF stating that they believe the global toxic debt will exceed 4 trillion dollars.  If you remember what I told you last year, I thought that global debt will exceed at least 4 trillion dollars.  Now the IMF is confiming this total:

17:50 IMF to warn toxic debts could reach as high as high as $4 trillion - London Times
The Times reports that new forecasts from the IMF suggest that toxic debts incurred by banks and insurers could reach as high as $4 trillion. Recall that the IMF said back in January that it expected writedowns to hit $2.2 trillion by the end of next year. However, the paper notes that the agency is understood to be considering raising that figure to $3.1 trillion in its next assessment of the global economy, which will be published on 21-Apr. In addition, it is likely to boost that total by $900B to account for toxic assets originated in Europe and Asia. Banks and insurers have recorded nearly $1.3 trillion in writedowns thus far.
Reference Link 


Garic writes this very important piece stating that all of the governments rescue of the economy are falling apart.  Please read carefully what he has to say:

The government finance bubble appears to be failing. The PPIP applications are way below expectations. The TALF which was supposed to issue $1T in consumer and business credit now looks like a failure. Last month TALF was $8.2B; this month’s auction which is today is forecast at $1.4B. Yesterday, the Fed bought $1.13B of 10 year Treasuries; they were offered $11.6B. Private capital is starting to reject government finance. More and more investors are realizing what GATA has known for a while, if you are an insider you are protected if you are not you are on your own. Hopefully, this disenfranchised capital will continue its move to physical Gold.



Please read what this author has to say about the economy:

Economy Falling Years Behind Full SpeedBy LOUIS UCHITELLE
As the recession grinds on, more and more of the nation’s means of production — its workers, its factories, its retail outlets, its freight lines, its bank lending, even its new inventions — are being mothballed.

This idled capacity, like baseball players after a winter off, takes time to bring back into robust use. So even if the recession miraculously ended tomorrow, economists estimate that at least three years would pass before full employment returned and output rose enough for the economy to operate at full throttle. 

While stock market investors have embraced tentative signs of improvement in the mortgage market and elsewhere, even a sharp pickup in demand for products and services will take considerable time to play out. 

The mathematics are daunting. The shortfall is running at more than$1 trillion in annual sales and other transactions. Only once since the Great Depressionhas there been such a severe loss of output — in the 1981-82 recession— and after that downturn, it was seven years before the economy regained the lost production…




Mortgage delinquencies are up 50% year over year.  Here is the article on this subject:


US mortgage delinquencies up 50 pct yr/yr-Equifax 

* Housing market has yet to hit bottom-Equifax 

* 39.8 pct of subprime homeowners late on mortgages in Feb 

* Banks closed 8 million credit card accounts in Feb

NEW YORK, April 7 (Reuters) - More U.S. consumers are falling behind on their mortgages, an indication that the housing market has yet to hit bottom, a top credit bureau 
executive told Reuters. 

Dann Adams, president of U.S. Information Systems for Equifax Inc , reported that 7 percent of homeowners with mortgages were at least 30 days late on their loans in February, an increase of more than 50 percent from a year earlier. [ID:N0622272] 

He also said 39.8 percent of subprime borrowers were at least 30 days behind on their home mortgage loans, up 23.7 percent from last year. 

"I'm trying to find optimism in these numbers, but I'm pretty hard pressed to do that," Adams said, despite a recent burst of relatively positive news that has fueled hope that the U.S. housing market has turned a corner. 

Late last month the Commerce Department reported that sales of newly built U.S. single-family homes rose to a 337,000 annual pace in February, the highest in 10 months. 

Such news has boosted homebuilder shares, which are up about 45 percent since March 6, according to the Dow Jones U.S. Home Construction Index <.DJUSHB>. 

But Adams said the continued increase in mortgage delinquencies revealed in his data foreshadows more foreclosures, short sales and home price declines as homeowners default and banks then repossess the homes to sell them at deep discounts.


I would now like to draw your attention to the physical silver and gold market.


In gold there still remains 1.08 million oz of gold standing.  There have been small removals of gold from the comex.


I pointed out to you yesterday that the ECB have bailed out the comex gold and in doing so the short position of Deutsche Bank.


However, in silver there is no central bank to bail anybody out.  In the previous 3 sessions 6 million oz of silver were removed from the comex.  Lo and behold another 2 million oz of silver was removed today bringing the total to 10 million oz.  Please note that April is a non delivery month so this is so out of the ordinary.


It looks like we have a determined purchaser and they are removing the maximum 2 million oz per day.

I will forward to you what many are writing on the subject.  It is difficult to get a handle on the situation, however it is real...massive amts of silver are leaving.  I will follow this for you.

My suggestion to all:  get Central Fund of Canada   CEF. A  (silver and gold).   Something serious is going on.  Here is what cafe members are writing on the silver and gold situation:

COMEX Warehouse Stocks

COMEX Warehouse Stocks April 6, 2009

The mass exodus of metal from the COMEX continues. Today April 6 2.1 Million ozs of silver were withdrawn from the dealer’s inventory. The dealers have now had 8.5Mozs of silver withdrawn in 4 days. This is truly phenomenal. The breakdown is as follows:


2,092,227 ozs withdrawn from the dealer’s inventory. 
496,039 ozs deposited in the customer inventory
Total dealer inventory 64,904,847 Mozs
Total customer inventory 52,848,067 Mozs
Combined Total 117,752,915 MOZ


ZERO ozs withdrawn from the dealers (registered) category

63,249 ozs deposited in the customer (eligible) category

Total dealer inventory 2.695 Mozs

Total customer inventory 5.889 Mozs

Combined Total 8.584 MOZ

The drawn down in silver running at 2 million ozs each day needs to be watched closely. To put this in perspective 2 Million ozs is 10% more than all the silver mined in the world in a day! It is 62 tonnes, or 2000 times one thousand ounce bars which would need 4 tractor-trailers to move it. In reality it will not be moved by tractor trailer but by Brinks security trucks which probably can’t take more than 4 tonnes so 16 Brinks security trucks would be needed each day. This is a massive amount of silver withdrawal.

There are still 1.08 Mozs of gold delivery notices for April outstanding which is 40% of the dealer inventory. These physical moves are totally incongruous with the COMEX price action unless you know what GATA knows.

In our telephone conversation last night you mentioned that there may be a program purchasing and delivery schedule of some big entity on the silver side from COMEX. You may well be right. It could be that the amount being taken each day is the maximum that the COMEX warehouses can physically handle being limited by available secure trucks, time and manpower to load them.

In the last few days these were the withdrawals

4/1 Net withdrawal 2.193Mozs….. 1.2 Mozs from Dealers inventory 0.993 Mozs from Customers inventory

4/2 Net withdrawal 2.18Mozs ….. 1.2 Mozs from Dealers inventory 0.981 Mozs from Customers inventory

4/3 Net withdrawal 2.02Mozs…. 2.1 Mozs from Dealers inventory 0.094 Mozs added to Customers inventory

4/6 Net withdrawal 1.6Mozs …… 2.09 Mozs from Dealers inventory 0.496 Mozs added to Customers inventory

The gross amount of metal being handled each day is 2-2.5 Mozs.

This could get interesting!…

(LATE ADD, it sure is)...


COMEX Warehouse Stocks April 7, 2009

EVEN MORE STUNNING! Today April 7 we had yet another 2 Million oz withdrawal day from the COMEX warehouses. The breakdown is as follows:


1656332 ozs withdrawn from the dealer’s inventory. 
495,057 ozs withdrawn from the customer inventory
Total dealer inventory 63,314,243 Mozs
Total customer inventory 52,287,283 Mozs
Combined Total 115,601,526 MOZ


1584 ozs withdrawn from the dealers (registered) category 
ZERO ozs withdrawn from the customer (eligible) category 
Total dealer inventory 2.692 Mozs
Total customer inventory 5.889 Mozs
Combined Total 8.583 MOZ

The drawdown in silver has no been running at 2 million ozs each day for 5 straight days. This MASSIVE demand is of course totally coherent with the price of silver being trashed recently (cough, cough!)

Delivery notices…

The COMEX April Contract delivery notices in silver just doubled today! They stand at 327 contracts or 1.63 Mozs. The delivery notices issued today were 166 contracts but yesterday there was only an Open Interest left in April of 49 contracts. Today the OI is has INCREASED to 196 contracts not decreased. Strangely the estimated volume in the April Contract is 5 contracts …it seems to me their estimated volume is very suspect! What this appears to me is that someone purchased 313 contracts in the April Contract and immediately stood for delivery on 166 of them to leave an OI of 196.

The silver volcano is rumbling.



The registered silver inventory is now down to 63 million oz the lowest in recorded time.


I will not official write until Saturday.  However, the silver comex is extremely important.  If something urgent comes along I will try and  send it down to you.

I wish everyone a very Happy Easter and to all our Jewish friends, a very happy Passover.

all the best




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