SILVER
ZERO ozs withdrawn from the dealer’s inventory.
600,434 ozs deposited in the customer inventory
Total dealer inventory 62.96 Mozs
Total customer inventory 52.99 Mozs,br> Combined Total 115.36 MOZ
GOLD
500 ozs deposited in the dealers (registered) category
96 ozs withdrawn from the customer (eligible) category
Total dealer inventory 2.54 Mozs
Total customer inventory 5.9 Mozs
Combined Total 8.44 MOZ
After only one day we are back to comatose movements in gold inventory despite 1.13 Mozs in delivery notices being outstanding.
end.
As for the gold comex, approximately 1.1 million oz has been delivered upon with an additional .2 million waiting to be hit.
It is strange that only 1 brick of gold (96 oz) left. With respect to silver, the dealer inventory (registered) is the smallest in quite some time.
Yesterday, Citibank released its earnings:
Citigroup Profit Exceeds Estimates on Trading Gains
April 17 (Bloomberg) -- Citigroup Inc., the U.S. bank rescued by $45 billion in U.S. taxpayer funds, ended a five- quarter losing streak with a $1.6 billion profit on trading gains and an accounting benefit for companies in distress…"We’ve seen good trading results from JPMorgan, from Goldman Sachs and now from Citi," said Gary Townsend, chief executive officer of Hill-Townsend Capital LLC…
end.
However, on closer examination, the profit was fictitious, as the clowns gave themselves a non-cash balance sheet adjustment profit based on the low trading of their own bonds. They adjusted their profits upwards by 2.5 billion dollars. This is nothing but a flagrant fraud and total misrepresenation to the public. The bank stated in Jan and Feb were great trading months for the bank and the strong growth translated into profits. This is a total lie.
Please read below the real story:
Citi/Vik Pandit Commit Legalized Fraud
Citi reported $1.6 billion in "profits" today. Before you get excited we have AT LEAST one non-cash bogus accounting to gain to strip out. I say "AT LEAST" because we won't be able to put together the rest of the LIES until they release their 10-Q (They have 45 days from the end of their quarter).
Citi recognized a NON-CASH profit on a DECLINE in the market value of their debt. HUH? Some moron at FASB (most-likely some whore Congressman who received large donations from Wall Street who forced this on FASB) decided that if the market value of a company's bonds and bank debt declines, the company might buy them back at a discount and thus save some money vs. waiting to pay them off at par. FASB decided that because of this remote buyback possibility, the company can recognize and accounting gain (not a bona fide economic-based, cash gain) by the amount that value of the debt declines.
Let's do an example. Citi issues $100mm of bonds in December 2008 at par (100). The market value of those bonds declines to 90 (i.e. falls to 90% is issue value) because of the perceived risk of Citi's business model by the market. Vik Pandit, Citi CEO says to his CFO: "hey man, if we were to have any TARP money left and we bought back that $100mm of debt of $90 million, we could recognize $10 million in profits."See where this going? To begin with, Citi doesn't have the cash available to spend 100's of millions required to buy back their debt, let alone enough to buy back the amount of debt required to generate a $2.5 billion accounting gain. THAT $2.5 BILLION, LIKE EVERYTHING ELSE ON WALL STREET AND ESPECIALLY WITH CITIGROUP, IS PURE FANTASY.In summary, Citi has actually lost AT LEAST $900 million this quarter ($1.6 billion less the $2.5 billion accounting fantasy/fraud). I would bet anyone anything that Citi's real loss is closer to the $5 billion loss they reported in Q1 2008. Citi's earnings are emblematic of the fraud and fairy tales being perpertrated at the highest levels of our system, beginning with the White House and Wall Street. Vik Pandit is a complete fraud, the Company he runs is hopelessly insolvent, and the best we can hope for is that the individual investor does not get sucked into buying Citi stock thinking it's a great buy here, because I guatantee everyone reading this, that the smart money is dumping their Citi stock and I will be we will eventually see millions of shares dumped by insiders. …
end.
I would also like to point out that the CEO Pandit did not appear on the telephone conference talking about the results of Citibank. The firm did not offer an excuse where he was hiding.
There may be other non cash adjustments on the first quarter. They have 45 days from the end of the quarter to adjust and I will bet there are more. Their earnings as I have suspected, were total fantasy and for that matter fraudulent!! Many investors have bought into the theory that the market is turning around. We do not think so.
Actually, their financial position is worsening:
Citi's Net Credit Losses are rapidly increasing. In fact, just on Consumer debt (credit cards and mortgages), their losses jumped from 8% of assets to 10% of assets from the 4th Qtr of 2008 to the 1st Qtr of 2009. That's a massive jump.
end.
Wait until commercial losses start to appear, and then the jumbo mortgages etc and the downward spiral will continue.
OK lets go for other news of the day:
Bloomberg reported that Goldman Sachs in now estimating that the Treasury will need 3.5 trillion dollars not the 2.5 trillion they reported would be needed in early Feb:
Today Bloomberg reported that Goldman is now estimating the Treasury financing need for this year to be $3.25T. Their last estimate I saw was $2.5T: "Treasuries Fall as Supply, Economy Overshadow Fed Debt Purchase….The U.S. needs to raise $3.25 trillion this fiscal year, according to primary dealer Goldman Sachs Group Inc., as the government seeks to finance bank bailouts, stimulate the economy and service deficits….."
end.
The National Debt lowered to 11.19 trillion dollars as tax dollars were credited to the treasury.
The Fed announced yesterday that they purchased 62 billion dollars of agency paper;
Today The Federal Reserve announced they purchased $62.6B worth of Agency, Mortgage Back and Treasury Security’s in one week:http://www.federalreserve.gov/releases/h41/Current/
end.
Janet Yellin, Governor of the Fed bank in San Francisco is also sounding the alarm bells:
Yellen says policymakers need to pop bubbles - Vindicates GATA
Bill,
http://www.marketwatch.com/news/story/SF-Feds-Yellen-says-unchecked/story.aspx?guid=%7B
8BD1918B%2DE3E6%2D4F16%2DBBF8%2D8A4889A8C2F9%7DThis article quotes Janet Yellen, a sitting Federal Reserve Governor. For those who haven’t spotted it yet she confirms that the Bond market is a bubble….
end.
Yellin is a non voting member of the FOMC. She believes that the bond market is becoming a bubble and must be broken.
The next area of great concern was the complete collapse in yield on the 1 month treasury bill to .04% per annum. If you parked 1 million dollars in this treasury bill you would earn a grand total of 31.00 for the one month for the priviledge of using your money.
However the longer term 10 year bond rose in yield to 2.95%.
I will reproduce the story:
This tells you all you need to know - there is another big problem that is going to soon hit:
YET, the yield on the 10 yr T note shot up to 2.95%!
I know it’s premature, as the government does ANYTHING possible, legal or illegal, to get their way.
But what I am watching now in the Treasury market is truly incredible.
The way I read it, the entire basis of the government’s bailout plan is printing money and keeping interest rates down. They even announced they will be buying back their own bonds in seemingly limitless quantities.
Yet, today the long bond has fallen to nearly the same level as when the quantitative easing announcement was made. Actually, TLT (the ETF for government long bonds) had fallen to a year-low of about 100.5 when the QE announcement was made, at which point it immediately rocketed up to 107.5.
However, it has continued to work down since then (no more than a month ago), and today is at 101.5, down 1.25. And this is occurring despite an apparent increase in Chinese buying last month.
end
Dave from Denver writes:
I had not noticed until today how low 1 month/3 month T-Bill rates are, and they've been dropping by quite a bit during this rally in the stock market. If this rally were bona fide based on fundamentals and real investor enthusiasm, shouldn't short rates be going a lot higher as investors move money out of cash-equivalents and into stocks? I think this is quite ominous for the stock market.
end.
If the economy was improving, then we would see one month treasuries rise in yield. The opposite is happening. It is as if an ecnonomic calamity is about to happen. Mexico Mike believes that the collapse in General Motors will trigger massive credit default swaps. First : his commentary and mine will follow:
from Mexico Mike...
GM bankruptcy pending
Hi Bill!
I have noticed that there has been a clear inverse relationship lately between the spot price for gold and the perception of GM approaching bankruptcy. On the surface there is not much to support that observation. GM has always been considered a driving force in the American economy, but most pundits are now willing to acknowledge that there must be some form of restructuring in order for the auto industry to survive on this continent. Its already all but priced in, so why is gold being adversely affected?
I think the key here is the unknown derivitive exposure for credit swaps related to GM and other auto sector companies. If we get the confirmation that GM has opted for Chapter 11, then I believe tens of billions of dollars in default swaps will be triggered, with AIG as the counterparty for a lot of that paper. Guess what? AIG is already in trouble and has been bailed out several times, and each time has triggered some form of selloff across the financial sector and spawned more financial uncertainty. Meanwhile, the administration is busy selling the story that we have reached a bottom and all is well. This next wave of angst over yet another huge handout to AIG will put a stop to all that propaganda yet again.
So why hit gold now? It has to be assumed that the dollar is going to take a hit when GM implodes and a big bailout package for AIG has to be paid for. By driving gold down into technical breakdown territory, the corresponding flight into gold after all of this settles out will just put the metal back where it was before the wheels came off. Say what you want about the crooks, I think we can at least admit that this is brilliant crisis management strategy.
I would have to assume that we will see a sudden blip higher in gold and the mining stocks right before the GM bankruptcy is announced. That would be from the short covering when all of the easy money has been stripped. I am looking for that day when we get a strong rally in the metals and the stocks for no apparent reason. Then we can expect the bomb to go off on the rest of the market shortly thereafter. Lets see how this all goes down in the days ahead, but as usual there is plenty of smoke out there to know there must be a fire around somewhere and it would not be the first time that extensive rigging in the gold sector was tied to an unrelated bad news disclosure somewhere else.
Those who are buying the dips for the metals will come out as clear winners in the long term. I think so much frustration is geared towards the trading in gold because people expect that just by getting the message out on the manipulation we could expect that something would be done to bring the scam to an end. Unfortunately, like the skinny kid in the lunchroom, its does not do any good to report bullying if the adminstration says "Go back and work it out for yourself". What needs to happen is for someone to take on the Cartel and create so much financial pain that they are forced to back down.
If GATA is right there is very limited physical bullion left for the CBs to dispose of. Meanwhile the reckless monetary policy that is in play worldwide has assured more paper money is floating around than at any other time in history. How long can it be until someone is willing to throw a few billion towards buying up every ounce of gold or silver left in circulation and driving the metals higher for good?
We can describe what is going on in the markets and complain all we want about the abuses, manipulation, insider trading, regulatory incompetence, etc. Sooner or later the situation will be resolved by direct confrontation and the paper rigging games will come to an end for good. Until then, we put up with little raids and traps like we have seen this week.
cheers!
MexicoMike
end.
General Motors, as has been reported has over 1.3 trillion of credit default swaps written on it. That means bets have been placed by various financial institutions on whether it will succeed or go bankrupt. This figure is over 1 and 1/2 years ago. I will bet that it must be 1.5-2 trillion dollars by now.
Then you add Chrysler to the mix. They had over 200 billion dollars of CDS's written on them.
The bulk of the underwriting of these instruments was done by AIG with secondary help from JPMorgan. So we are now going to enter a very tricky phase if GM goes bust. Will the USA government pony up more money to AIG who will deliver more money to the financial institituions with the taxpayer footing the bill?
Taxpayers are getting fed up with this nonsense. Tea parties are springing up all over the usa. Getting additional monies to rescue the banks will be difficult.
On top of GM and Chrysler, they will need to rescue over 100 firms that supply parts to GM.
On top of that, the GM debt alone is over 100 billion dollars.
The Credit Default Swap is really revenue neutral to the banks. They own a huge chunk of the 100 billion of debt and the CDS was written to offset the risk of a default.
When Goldman Sachs announced to the world that AIG was small to them in revenue, they were right. They owned 12 billion dollars of notes from Lehman and had a corresponding 12 billion CDS swap to offset that risk.
Can you imagine the following scenario: GM defaults and congress refuses to give any more money for AIG. Then the banks will take a loss on its GM bonds and then lose the revenue from the AIG as they would then default.
Life would get very interesting from there.
Nobel Prize winner Sitglitz came out yesterday with a scathing attack on the banks. Here is the report:
OFFICIAL SAYS FED MULLS EXPANDING TALF IN COMING MONTHS TO INCLUDE CMBS WITH TERMS LONGER THAN 3 YRS
Stiglitz lays out it. As the American people come to understand this, THERE WILL BE RIOTS!
Stiglitz Says White House Ties to Wall Street Doom Bank Rescue
By Michael McKee and Matthew Benjamin
April 17 (Bloomberg) -- The Obama administration’s bank- rescue efforts will probably fail because the programs have been designed to help Wall Street rather than create a viable financial system, Nobel Prize-winning economist Joseph Stiglitz said.
"All the ingredients they have so far are weak, and there are several missing ingredients," Stiglitz said in an interview yesterday. The people who designed the plans are "either in the pocket of the banks or they’re incompetent."
The Troubled Asset Relief Program, or TARP, isn’t large enough to recapitalize the banking system, and the administration hasn’t been direct in addressing that shortfall, he said. Stiglitz said there are conflicts of interest at the White House because some of Obama’s advisers have close ties to Wall Street.
"We don’t have enough money, they don’t want to go back to Congress, and they don’t want to do it in an open way and they don’t want to get control" of the banks, a set of constraints that will guarantee failure, Stiglitz said.
The return to taxpayers from the TARP is as low as 25 cents on the dollar, he said. "The bank restructuring has been an absolute mess."
Rather than continually buying small stakes in banks, weaker banks should be put through a receivership where the shareholders of the banks are wiped out and the bondholders become the shareholders, using taxpayer money to keep the institutions functioning, he said.
Nobel Prize
Stiglitz, 66, won the Nobel in 2001 for showing that markets are inefficient when all parties in a transaction don’t have equal access to critical information, which is most of the time. His work is cited in more economic papers than that of any of his peers, according to a February ranking by Research Papers in Economics, an international database.
The Public-Private Investment Program, PPIP, designed to buy bad assets from banks, "is a really bad program," Stiglitz said. It won’t accomplish the administration’s goal of establishing a price for illiquid assets clogging banks’ balance sheets, and instead will enrich investors while sticking taxpayers with huge losses.
"You’re really bailing out the shareholders and the bondholders," he said. "Some of the people likely to be involved in this, like Pimco, are big bondholders," he said, referring to Pacific Investment Management Co., a bond investment firm in Newport Beach, California.
Bigger Losses
Stiglitz said taxpayer losses are likely to be much larger than bank profits from the PPIP program even though Federal Deposit Insurance Corp. Chairman Sheila Bair has said the agency expects no losses.
"The statement from Sheila Bair that there’s no risk is absurd," he said, because losses from the PPIP will be borne by the FDIC, which is funded by member banks.
"We’re going to be asking all the banks, including presumably some healthy banks, to pay for the losses of the bad banks," Stiglitz said. "It’s a real redistribution and a tax on all American savers."
Stiglitz was also concerned about the links between White House advisers and Wall Street. Hedge fund D.E. Shaw & Co. paid National Economic Council Director Lawrence Summers, a managing director of the firm, more than $5 million in salary and other compensation in the 16 months before he joined the administration. Treasury Secretary Timothy Geithner was president of the New York Federal Reserve Bank.
‘Revolving Door’
"America has had a revolving door. People go from Wall Street to Treasury and back to Wall Street," he said. "Even if there is no quid pro quo, that is not the issue. The issue is the mindset."
Stiglitz was head of the White House’s Council of Economic Advisers under President Bill Clinton before serving from 1997 to 2000 as chief economist at the World Bank. He resigned from that post in 2000 after repeatedly clashing with the White House over economic policies it supported at the International Monetary Fund. He is now a professor at Columbia University.
Stiglitz was also critical of Obama’s other economic rescue programs.
He called the $787 billion stimulus program necessary but "flawed" because too much spending comes after 2009, and because it devotes too much of the money to tax cuts "which aren’t likely to work very effectively."
"It’s really a peculiar policy, I think," he said.
Plan Deficient
The $75 billion mortgage relief program, meanwhile, doesn’t do enough to help Americans who can’t afford to make their monthly payments, he said. It doesn’t reduce principal, doesn’t make changes in bankruptcy law that would help people work out debts, and doesn’t change the incentive to simply stop making payments once a mortgage is greater than the value of a house.
Stiglitz said the Fed, while it’s done almost all it can to bring the country back from the worst recession since 1982, can’t revive the economy on its own.
Relying on low interest rates to help put a floor under housing prices is a variation on the policies that created the housing bubble in the first place, Stiglitz said.
"This is a strategy trying to recreate that bubble," he said. "That’s not likely to provide a long run solution. It’s a solution that says let’s kick the can down the road a little bit."
While the strategy might put a floor under housing prices, it won’t do anything to speed the recovery, he said. "It’s a recipe for Japanese-style malaise."
-END-
There is another big development occurring in the currency swap arena. I will try and be brief. A currency swap is basically an interest free swap between two countries. Let us say Britain wishes to swap with the USA. The usa gives Britain say 100 million usa dollars and Britain gives the usa 65 million British pounds. The interest is zero as they must return the same quantities borrowed in a fixed time period.
The usa has announced 2 swaps with the rest of Europe, Switzerland, England and Canada. They reaffirmed the same deal with the exception of Canada. It seems that there are huge problems with dollars , pounds and Euros falling into the black holes of balance sheets of the banks. The deleveraging (the fall of debt from global accounts) is creating havoc for our central bankers.
Ambrose Evans Pritchard commented that England is in desparate shape as they have little foreign reserves. They have no usa reserves and they need dollars badly. The usa is seeking ways to get rid of the pounds and euros that they received from the swaps.
The reason, I bring this up is that the swaps are not returning and for that matter they are expanding which generally means trouble.
Speak to you on Monday
Harvey.
