Saturday, May 16, 2009

May 16.09 commentary.

 
Good morning Ladies and Gentlemen;
 
I guess everyone by now has figured out that the gold and silver markets are manipulated  every trading second.
 
It was no different yesterday.
 
Gold fell by 2.30 to 930.20.  Silver was under pressure from the cabel and fell 6 cents to 13.99.
 
The open interest on both silver and gold comex increased.
 
Gold OI rose by 1300 contracts to 363000 as speculators sense the deteriorating conditions around the globe.
Silver's OI continues to rise adding a further 700 contracts to 96700.
 
The COT report released after the market closed indicates that as of Tuesday, speculators continue to pile into both metals and the commercials are supplying the paper:
 

The Gold Cartel is HUFFING and PUFFING, and the Commitment of Traders Report reveals as such…

SILVER

*The large specs increased longs by 5,047 contracts and increased shorts by 1,351 717.

*The commercials decreased longs by 259 contracts and increased shorts by 4,869.

*The small specs increased longs by 1,564 contracts and increased shorts by 132.

GOLD

*The large specs increased longs by 13,016 contracts and increased shorts by 4,130.

*The commercials increased longs by 2,724 contracts and increased shorts by 13,459.

*The small specs decreased longs by 1,150 contracts and decreased shorts by 2,999.

 

end

 

The failed overnight loan that was stopped in London, turned out to be Yellowstone and it was stopped at only 3 billion dollars.  It seems cash is diasappearing down a sinkhole:

Jim Willie on that failed bank trade…

thanks, to you and your friend Greg 
the failed inter-bank trade that started in US, went to Hong Kong, then Singapore, 
and got hung up in London has been identified 
it was Yellowstone and it was $3 billion 
I had guessed $10 to $30 billion 
if any further details, pass them on 
jim

end.

Yesterday, the Dow fell badly, down by 62 points.  The 10 year treasury rose to 3.14% and the long bond settled at 122.2 down 1/3 point.

 

The Federal Debt continues to climb, rising a further 8 billion yesterday to 11.270 trillion dollars.

The White house expects that the Debt Ceiling will have to be raised from 12.1 trillion in the first few weeks of July.

In economic news, the consumer price index remained flat in April:

U.S. consumer prices unchanged in April 

WASHINGTON, May 15 (Reuters) - U.S. consumer prices were unchanged in April as expected, but recorded their largest 12-month drop since 1955, government data showed on Friday, as sluggish consumer demand limited companies' pricing power. 

The Labor Department said its closely watched Consumer Price Index was flat after falling 0.1 percent in March. Compared to the same period last year, consumer prices fell 0.7 percent, the biggest 12-month decline since June 1955. In March, the year-over-year CPI rate fell 0.4 percent. 

Core prices, which exclude food and energy items, rose a faster 0.3 percent versus a 0.2 percent increase in March. That compared to analysts' prediction for a 0.1 percent increase. Core prices rose 1.9 percent year over year after a 1.8 percent rise in March. 

Energy prices fell 2.4 percent after dropping 3.0 percent the previous month. The food index fell 0.2 percent in April, the largest drop since May 2002 and the third straight monthly decline. 

end.

 

Yesterday there were three important economic news reports.  The first saw the empire report or NY manufacturing report show a decline of 4.55 vs a consensus of negative 12.  The april reading was negative 14.65.  So there is definite manufacturing activity in NY.

The TIC report showed an inflow of 23 billion from a loss of 91 fillion in Feb.  They need about 60 billion dollars of fresh money to finance deficits in trade and service sector.  Money is also needed to cash all the bonds that China is bailing out of.

Industrial production continues to contract down .5%.  On a usa global picture production is still waning: Here are the stories:

 

08:30 May Empire Manufacturing (4.55) vs. consensus (12)
Apr reading was (14.65). 
* * * * *

09:01 Mar Total net TIC flows $23.2B vs. revised ($91.1B) in Feb
Net long-term TIC flows $55.8B vs. consensus $32.5B. The Feb total figure was revised from ($97.0B). 
* * * * *

09:15 Apr Industrial Production (0.5%) vs. consensus (0.6%); Capacity Utilization 69.1% vs. consensus 68.8%
Mar Industrial Production revised to (1.7%) from (1.5%); Capacity Utilization revised to 69.4% fro 69.3%. 

U.S. industrial production falls 0.5 pct in April 

WASHINGTON, May 15 (Reuters) - U.S. industrial production fell 0.5 percent in April, dropping for the sixth consecutive month but at a more modest pace than in recent months, Federal Reserve data showed on Friday. 

Economists polled by Reuters had expected a drop of 0.6 percent in April, compared with a 1.7 percent slide in March, which was initially reported as a 1.5 percent fall. 

The figures provided more evidence that the pace of recession may be easing after back-to-back quarters of sharp contractions in gross domestic product. 

The capacity utilization rate for total industry, a measure of slack in the economy, fell to 69.1 percent in April, the lowest level on records dating back to 1967. 

Production in manufacturing declined 0.3 percent in April, and was 16 percent below its recent peak in December 2007, which was when the current recession began. 

end.

Capital One Finance is the next bank to undergo trickery in its reporting:

Capital One Net Credit Card Charge-Off's fall?

The Orwellian fraud and lies get worse

More murkey and potentially fraudulent accounting games were released this morning by Capital One, as COF jubilantly announced that its rate of writing off bad credit card and auto loans decreased slightly in April. HOWEVER, upon closer examination, its revealed in the Company's dubious 8-K filing with the SEC that the Company decided to increase the window of time between when a loan goes bad and when they decide to completely write it off. A close reading of the 8-K also reveals that Capital One does not define this expanded window other than to say they used to charge-off bad loans within 2-3 days, and now they using a 30-60 day window.

All this is to say that Capital One is using accounting gimmicks to try and make their reported results look better this quarter. In fact, based on delinquency/charge-off trends reported by all banks in the 1st quarter of 2009, if anything, the amount of credit card and auto loans which ceased payments in April most likely INCREASED.

IF you look at COF's 1st quarter 10-Q, we find that it's net charge-off increased in Q1 2009 increased by 43% from 5.8% in '08 to 8.4% in '09 and 30+ day delinquencies increased over 20% for the same period. Their auto loan charge-offs/delinquencies also increased, and the charge-off/delinquencies for their mortgage segment (they acquired Chevy Chase bank, a big sub-prime lender) seriously accelerated in '09 vs. '08.

Looks like the stock market caught on the game being played, as COF's stock jumped over 10% at the open and now looks like it may go red on the day (10:16 a.m. NY time). Inquiring minds want to know, when will our Government - the Presidency and Congress - put a stop to this fraud?…

 

end.

I encourage everyone to take 5 minutes and watch the following video.  This man is the best retail analyst around and I have quoted him on many occasions.  Here is the passage and video:

 

this video needs to be watched

Howard Davidowitz, one of the most respected retailing analysts around, is one of the few truth-tellers who gets mainstream media time:

"If the consumer isn't petrified he is a damn fool. We've got an $8 trillion negative wealth effect from housing, our country will still have the same debt as our GDP, Obama's borrowing his brains out....and debt NEVER leaves"http://finance.yahoo.com/tech-ticker/article/248398/%22The-Worst-
Is-Yet-to-Come%22-If-You%27re-Not-Petrified-You%27re-Not
-Paying-Attention?tickers=^DJI,^GSPC,DDR,XLF,GM,RWR?sec=topStories&pos=9&asset=&ccode

***

end.

I was getting worried about California's huge growing deficit.  However my fears are receding quite a bit with this announcement as to how they care tackling this huge problem:

 

California To Hold State Wide Bake Sale To Close Budget Gap

Governor Arnold Schwarzenegger, along with the California State Assembly, today announced a state wide Bake Sale, in an effort to close the state’s worsening budget deficit.

The Bake Sale, to be conducted during the week of June 1, will run for 5 days throughout the entire state, the nation’s most populous…

-END-

General Motors and Chrysler have announced huge reductions in dealerships throughout the usa.

Both are eliminating over 2000 dealerships and that is going to have huge collateral damage, from coffee shops,  real estate, an increase in unemployment, and suppliers to these dealerships.

From Bill Holter:

Bill H:

The next downleg

To all; GM and Chrysler are eliminating over 2,000 dealerships between them, this will be a huge blow to the economy at large. Think of the ramifications, this will lead to several hundred thousand more unemployed and then the ripples will start to move outward. This also represents quite a substantial amount of commercial real estate square footage that will become empty. The loss of jobs, franchises, suppliers, etc. all the way down to the local coffee shops is a definite body blow to any recovery or so called "green shoots".

This is absolutely a deflationary event, the Fed and Treasury will now need to create even more Dollars. Can anyone see where this is going? The more things deflate, the more the Fed and Treasury will need to inflate to counter this. This inflation, once into the system cannot be withdrawn. What they are doing now will result in hyperinflation, tomorrow, next week, next month, whatever, it makes no difference when, as long as you know where we are going. We are moving very rapidly to a completely different financial environment that will include totally different perceptions and thoughts regarding all financial assets. Psychology will change.

The equity market is rolling over from a loss of momentum, I believe we are primed again for a waterfall event very soon. If you thought the March lows exhibited panic, just watch what happens on this next downleg! You cannot trade here, you can't try to be fancy, you must have maximum exposure to anything precious metals related. We should witness a complete disconnect between Gold related assets and virtually everything else in this coming downleg. I am looking for "the day" where the equity market gets pummeled and everything precious metal moves hard to the upside. The bell will have rung! Have a nice weekend, Bill H.

end.

This is an article from Patrick Heller about the IMF gold. He basically is saying what I have been telling you that the IMF does not have any gold in its vaults.

Patrick stated that the IMF houses the gold in 4 country depositories.  He named  the USA as one and England another.  He did not know the other 2.  It is France and India.  Here is his article on this subject:

Press on the blue for the entire article:

Patrick A. Heller: Is U.S. buying back its own gold?

Submitted by cpowell on 12:38PM ET Friday, May 15, 2009. Section: Daily Dispatches

3:37p ET Thursday, May 14, 2009

Dear Friend of GATA and Gold:

Writing at Numismaster, Patrick A. Heller adds to skepticism that the International Monetary Fund has any of the gold it is always threatening to sell, noting GATA's unsatisfactory exchange with the agency in pusuit of details about its supposed gold hoard. Heller's essay is headlined "Is U.S. Buying Back Its Own Gold?" and you can find it at Numismaster here:

http://www.numismaster.com/ta/numis/Article.jsp?
ad=article&ArticleId=6691

end.

I am going to print off the silver and gold comex deliveries.  I do not believe in their accuracy so I will not comment  on it.  However this is what the comex reports:

COMEX Warehouse Stocks May 15, 2009

SILVER

ZERO ozs withdrawn from the dealer’s inventory 
265,915 ozs (net) deposited in the customer inventory 
Total dealer inventory 63.2 Mozs 
Total customer inventory 55.9 Mozs 
Combined Total 119.1 MOZ

GOLD

10,000 ozs deposited in the dealers (registered) category 
34,299 ozs deposited in the customer (eligible) category 
Total dealer inventory 2.47 Mozs 
Total customer inventory 6.03 Mozs 
Combined Total 8.5 MOZ

The major movement was again in silver but this was deposited in the customer inventory, it does not add to what the dealers have available to deliver which still stands at a paltry 63.2 Mozs. ,p> Meanwhile a very sizeable 101 delivery notices for gold were issued on the May contract bringing the cumulative delivery notices to 1333 or 133,300 ozs. In silver there were a very substantial 782 notices issued bringing the total to 3,682 or 18.4 Mozs. The silver delivery notices are now extremely significant at 29% of the dealer inventory. No such quantity of silver has either moved from the warehouse or changed from dealer to customer inventory. Just like previous months where I have been reporting on this, there is something seriously wrong with this picture. We have had a decade now of “accounting errors” that have been the dominant feature of a rotting Wall St. Perhaps the COMEX is one of a few organizations that have squeaky clean accounting….but then why doesn’t their warehouse inventory movements match the delivery notices? And why can’t a COMEX representative explain it? 
Cheers 
Adrian

end.

Gold has now pierced its 6 week moving average and will be poised to break about 935.00.

The resistance level for silver is around 14.00

 

To our Canadian friends, I wish you a very happy Victoria Day long weekend.  To out American friends, get back to work.

speak to you on Monday.

Harvey.

 

 

 

 

 

 

Thursday, May 14, 2009

I willl give a big commentary on Saturday which will take in two days worth of trading.
 
see you on Saturday.

Wednesday, May 13, 2009

May 13.09 commentary.

 
Good evening Ladies and Gentlemen:
 
Sorry about being late as I was learning about what is going on in the gold market.
 
Gold closed up by 2.50 to 925.50 and silver fell by 22 cents to 14.00.
 
The open interest on the gold comex rose a whopping 8700 to 359000 as specs are starting to pile on.
 
Silver OI continues to rise adding an additional 1000 to 96000 contracts
 
I learned about this story this evening and it has been verified by two sources.  First the story:
 

Jim Willie sent out the following this morning…

urgent notice on overnight bank loan failure

just got word from a reliable source with an excellent track record

he calls me every several weeks when he has something very critical to share

he wants me to put the word out and to see what comes back to confirm or add to the story

an extremely large overnight bank transaction loan failed last night, gathering major attention

it started in US west coast, went to Hong Kong, then Singapore, then London

it failed in London, by that is meant no return was given on the overnight loan

he guessed the size was something like $10 to $30 billion

he suspected (without much direct evidence) that it was Citigroup

he believes the failing bank is a London subsidiary for a giant US-based bank

he likened it to a plumbing blockage with extreme backup consequences

he expects a ripple effect to cause shock waves, or a flood of sewage

we wondered if it could have Commercial Paper consequences, since often used in overnights

he has five expert friends watching for specific market reactions, like LIBOR

this source said that in May June timeframe, foreign creditors will put the screws to the US bankers, who are recognized as totally corrupt ... foreigner big bankers want to remove some power levers from US control

QUOTE ME IF YOU WISH

 

end.

 

The meaning:  insufficient capital as zero interest paid on the overnight loan.  I heard this for the first time this evening. I learned that  the bank in question is Citibank and it is from their London division.  This is serious stuff!!

Bill Murphy responded to Jim Willie, the first source on the story:

I responded with…

This is what I am hearing from my very good source:

It sounds like the Fed Bucket Brigade at work if it did occur ... meaning the loan was passed from the subsidiary of a large major bank to another. Then the collateral turned out to be bad, causing a failure. Thus, it ended up with the Fed supplying the money and taking the bad collateral, so as not to set off a bank run.

The other thing the source said was he thought the description of the problem sounded more like State Street, rather than Citi.

IF this occurred (NO CONFIRMATION thus far), it should show up tomorrow afternoon on FRB form H.4.1.

Time Will Tell. 

 

Libor continues to fall, dropping another 3 basis points to .88.  This is tremendous fuel for gold to rise.

 

If we see Libor rise from this point, then the Willie story is true and there is going to be severe consequences.

 

In economic news today retail sales fell badly by .4%:

 

U.S. retail sales fell 0.4 percent in April 

WASHINGTON, May 13 (Reuters) - Sales at U.S. retailers fell for a second straight month in April, pulled down by sluggish gasoline and electronic goods purchases, government data showed on Wednesday. 

The Commerce Department said total retail sales slipped 0.4 percent after falling by a revised 1.3 percent in March, previously reported as a 1.2 percent drop. 

Excluding motor vehicles and parts, sales dipped 0.5 percent in April, compared to a 1.2 percent decline the prior month. Vehicles and parts sales rose 0.2 percent after a 2.0 percent plunge in March. 

Analysts polled by Reuters had forecast retail sales to be flat in April. Excluding motor vehicles, sales had been predicted to rise 0.2 percent. 

Gasoline sales dropped 2.3 percent in April after tumbling 3.2 percent the previous month. Sales of electronic goods fell 2.8 percent, versus a 7.8 percent plunge in March, while building materials rose 0.3 percent after slipping 0.8 percent.

-END-

This came after the market closed.  (the dow plummeted by 185 points)

 

04:02 Regional banks threatened by commercial real-estate loan crisis - LA Times
The article focuses on banks in California. East West Bancorp (EWBC) chairman Dominic Ng is nervous about delinquencies on commercial mortgages, which make up 40% of the bank's loans. Many of them are essentially unsecured anymore, as the recession has wiped out developers' personal fortunes. Bankers interviewed largely say losses in the commercial real-estate loan sector are bound to rise.
Reference Link 
* * * * *

 

end.

Foreclosures continue to rise year over year:

 

00:06 US foreclosures rose 32% y/y in April according to RealtyTrac 
The online marketplace releases a report showing filings went up to 342K in April; the increase was less than 1% m/m. Percentagewise by state, Nevada, Florida, and California had the highest rates for the month. By totals, California and Florida had the most, with Nevada edging out Arizona for third place. 

 

end.

The federal debt continues to rise, it is now 11.262 trillion dollars.

Speak to you tomorrow

 Harvey.

 

Tuesday, May 12, 2009

May 11.09

 
First of all, it is with great sadness that I report on the passing of my good friend Mark Goldberg, an expert on gold coinage.  Mark always relayed to me the demand side of things from gold coins.  We will miss him greatly.
 
Gold closed up by 10 dollars.  Silver rocketed past 14.00 to close at 14.22 up 32 cents.
 
The gold comex open interest rose by 2300 contracts to 350000 as specs are starting to take on the cartel.
In the silver arena, again OI rose by 1000 contracts.  The heat is getting to the silver cartel.
 
Today, the dollar fell and long bonds hardly budged. The Dow recovered and did a hail mary closing up by 50 points.
 
Most commodities rose with the CRB up by .75 to 243.55.  The commodity followers are sensing massive hyperinflation down the road.
 
The Gold ETF has remained constant again.  This ETF is nothing but a fraud.
 
The ECB announced a tiny sale:
 
This week’s ECB statement of condition produced the news that consolidated "gold and gold receivables" had fallen by a paltry E12Mm, 0.54 tonnes at the present book value. This is exactly the same as last week – an unprecedented event. It was reported to be caused by a sale by one captive CB. Of course, this is well below the average sales pace needed to fill the WAG2 quota. (Renewal of this sales quota agreement is now quite overdue.)
 
end.
 
I would like everyone to read this passage.  It is extremely important:
 

London calling..

Hi guys, 
Take it easy and relax. I spoke to a Swiss banker yesterday and he said that the demand for gold is high and he wishes he had put more clients into it before now.I didn't bother to send it to you so you could get back in peace, but this weekend the normally sane Professor Buiter who writes a blog in the FT, lost the plot and wrote a piece advocating negative nominal interest rates. He mentioned that Greg Mankiw was also saying the same and also that Buiter had just made a presentation to Otmar Issing who was the ECB's first economist on the subject. The presentation is on his blog at http://blogs.ft.com/maverecon/ under the topic negative interest rates. The presentation is an easier read than the blog.Here are three conclusions from the above.

First, it is clear that the crisis is far from over and that behind the scenes the establishment do not know what to do. Who would bet against seeing some fairly dramatic indications soon that things are still worsening? If Buiter or Mankiw thought the crisis was over then they would not be floating this idea.

Secondly, if serious economists are floating this idea then there is a chance of it becoming official policy. If it becomes official policy then it seems likely that people will simply stop holding government money and invest their savings into commodities or whatever. Indeed, I think it could almost herald a return to barter and then gold and silver will become the assets of choice of just about anybody who can lay their hands on them.

Thirdly, that famous gold bug, Lawrence Summers, is the author of a paper which shows what should be the relationship between real interest rates and the gold price. I imagine that negative nominal interest rates would be like placing a tank load of rocket fuel under the gold price and simply waiting for a spark to ignite it. Add this to Chinese buying and the short positions of some major western banks and their governments and it seems to me that the gold price could go to.....a very high number.

Long ago I gave up thinking that the authorities had any common sense, but as this unfolds it seems that those in charge are dysfunctional and it is now wholly likely that they are going to destroy national currencies faster than ever seen before. Surely somebody in power understands that they caused the crisis by forcing interest rates to be too low. More of the same is insanity.

I expect you remember reading all about our MP's and their totally ridiculous expense claims last week whilst you were here. Well this week the coverage is simply getting worse as it is clear that the Conservatives have been as bad as Labour. Apparently, one MP who has a moat around his rather large house even charged the cost of clearing the moat to the taxpayer. If it was not so serious it would make a very amusing comedy sketch, but the standing of our entire political system has never been lower in modern times.

A few months ago when the failed bankers such as Sir Fred Goodwin were hauled before a committee of MP's to be publicly castigated it seemed fair enough in one sense, but now to know that probably over half of MP's had been abusing their own expenses system makes them all appear rotten to the core. No wonder people here are buying gold.

Thanks for coming here and setting out the facts of the gold price suppression scheme or as I now prefer to think of it the let's help China buy gold cheaply scheme. 
Bob

"First, it is clear that the crisis is far from over and that behind the scenes the establishment do not know what to do."

That is exactly the way I see it, as do some of our top sources, and have been reporting as such in this column for months. The Obama Administration is buying time, kicking the can, in order to try and come up with some solutions created by the policies of previous administrations, the greedy banks on Wall Street and a number of corrupt or failed corporations, and the shady activities our Fed and Treasury.

Bottom line: It’s TOO BIG TO BAIL!

 

end.

Porfessor Buiter is one clever individual and we must pay attention to what he says.

The OMB now states that Fannie and freddie will need another 100 billion dollars.

Dave from Denver…

Fannie and Freddie will need at least another $100 billion

according the OMB (Office of Management and Budget):

"The OMB says that the two companies will need at least $92.2 billion more in fiscal 2010. This is on top of the $78.2 billion in aid they've received since they were taken over by the government in September."http://www.businessinsider.com/fannie-and-freddie-
will-need-almost-100-billion-in-2010-2009-5
Quite frankly, the Government's OMB forecast is way too low. Fannie Mae alone has close to a $1 trillion balance sheet. And this does not include the massive derivatives mess that is off-balance-sheet and beyond the public's ability to analyze. If we assume that mortgage default rates top out at 20% - and it's likely to be a lot higher, this suggests that Fannie alone will need over $200 billion in capital, before taking into account all the cash flow liabilities they have off-balance-sheet. Using Enron as a realistic model of off-balance-sheet catastrophes, it's safe to assume that my $200 billion estimate is very low. As the linked article states:

"The two government run mortgage finance companies have been scandalously costly for tax-payers, costing Americans far more in bailout money than they ever saved in cheaper mortgages"

 

end.

The trade deficit narrowed but it was due to lousy exports:

08:30 Mar Trade deficit widens to $27.6B vs. consensus of $29.0B
Feb deficit revised to $26.1B from $26.0B. 

US confidence continues to deteriorate:

U.S. consumer confidence dips in May - IBD 

NEW YORK, May 12 (Reuters) - U.S. consumer confidence fell slightly in May as Americans' views on personal finances and government policy deteriorated, said a survey released on Tuesday. 

Investor's Business Daily and TechnoMetrica Market Intelligence said their IBD/TIPP Economic Optimism Index slipped to 48.6 in May from 49.1 in April, which had been the index's strongest level since November 2008. A reading below 50 indicates pessimism. 

The index is 4.2 points above its 12-month average of 44.4 and 2.7 points below its all-time average of 51.3. 

"Consumer confidence is sustaining the momentum it picked up last month, reflecting the strength we are seeing in the stock market," said Raghavan Mayur, president of TIPP, a unit of TechnoMetrica Market Intelligence, IBD's polling partner. 

"Looking forward six months, Americans are convinced the economy will be in recovery mode," he said. 

As of the close on Monday, the S&P 500 stock index <.SPX> had risen more than 35 percent from the 12-year low reached in early March. 

The IBD/TIPP surveys more than 900 adults generally in the 
first week of the month. The margin of error is plus or minus 3.3 percentage points.

-END-

 

And finally house prices continue to deteriorate.  This is the collateral for the banks:

 

Home Prices in U.S. Drop Most on Record in Quarter

May 12 (Bloomberg) -- Home prices in the U.S. dropped the most on record in the first quarter from a year earlier as banks sold seized homes and foreclosures in California and Florida dominated sales.

The median price fell 14 percent to $169,000, the National Association of Realtors said today. Pricesdropped in 134 of 152 metropolitan areas, with the deepest declines in Cape Coral-Ft. Myers, Florida, and the San Francisco and San Jose areas.

Distressed sales increased transactions in 17 states from the fourth quarter as speculators and first-time buyers purchased bank-owned properties. Such homes typically sold for 20 percent less than others, the NAR said today. The inventory of previously owned homes on the market dropped to 3.7 million in March from 3.8 million a month earlier, according to NAR data. The number of new homes for sale fell to 311,000, the lowest since January 2002, according to the Commerce Department.

http://www.bloomberg.com/apps/news?
pid=20601087&sid=aKkPN8keugMw&refer=home

-END-

I am now reading the explosive Ted Butler paper and I will report on this tomorrow.

I am now going to my son in law;s birthday party.  So I have to go.

 

speak to you tomorrow

Harvey

 

Monday, May 11, 2009

may 11.09 commentary.

 
Good morning Ladies and gentlemen:
 
gold fell by 1.00 to 913.00.  Silver fell by 2 cents to 13.91, holding up pretty well despite the constant bombardment by cartel members.
 
Interestingly gold open interest fell by 5000 contracts on Friday to 348000 as gold refused to go down.
The silver OI rose again by 533 contracts to 94500 as the silver shorts find the steam room a little too hot and they are beginning to bail out of their shorts.
 
Not much action today, the Dow fell by 156 points and thus there was a little movement to safety so bond prices rose a bit and the dollar firmed.  Europe seems to be very concerned about its banks and Eastern Europe.
 
I guess this is the big news of the day:  Meredith Whitney states that the banks are still sitting on rotting toxic assets:
 
15:28 Bank analyst Meredith Whitney says a lot of banks are sitting on "rotting assets" -- CNBC
In an interview on CNBC, Whitney continues to be cautious on the sector and says this will not be the last time that banks have to raise money. Whitney recommends shorting retail, consumer discretionary and holding onto cash. 
end.
 
The White House has just announced that the 2009 deficit will be 89 billion dollars higher than forcast.
They new budgetary deficit is now 1.84 trillion dollars.
 
If I am a betting man the deficit will come in at 2.5 trillion dollars and the usa will need to  print over 4 trillion dollars:
 
1.  2.5 trillion for the deficit
2.  1 trillion for the spending push
3.   .8- 1 trillion dollars as China cashes its treasuries to purchase gold, oil, silver etc.
 
Here is the big stories written today:
 

White House forecasts higher U.S. budget deficit 

WASHINGTON, May 11 (Reuters) - The White House on Monday pushed up its forecast for the U.S. budget deficit for this year by $89 billion, reflecting the recession, a raft of new unemployment claims and corporate bailouts. 

A fresh estimate of the deficit showed it coming in at $1.84 trillion -- representing a massive 12.9 percent of gross domestic product -- in the current 2009 fiscal year that ends on Sept. 30. A prior White House forecast released in February projected a deficit of $1.75 trillion, or 12.3 percent of GDP. 

The report may add to the political challenges facing President Barack Obama as he seeks to push through a new healthcare plan and other big domestic initiatives.

-END-

White House: Budget deficit to top $1.8 trillion

White House: Budget deficit to top $1.8 trillion, 4 times 2008's record 

Andrew Taylor, Associated Press Writer 
On Monday May 11, 2009, 11:09 am EDT 

WASHINGTON (AP) -- With the economy performing worse than hoped, revised White House figures point to deepening budget deficits, with the government borrowing almost 50 cents for every dollar it spends this year.

The deficit for the current budget year will rise by $89 billion to above $1.8 trillion -- about four times the record set just last year. The unprecedented red ink flows from the deep recession, the Wall Street bailout, the cost of President Barack Obama's economic stimulus bill, as well as a structural imbalance between what the government spends and what it takes in.

As the economy performs worse than expected, the deficit for the 2010 budget year beginning in October will worsen by $87 billion to $1.3 trillion, the White House says. The deterioration reflects lower tax revenues and higher costs for bank failures, unemployment benefits and food stamps.

For the current year, the government would borrow 46 cents for every dollar it takes to run the government under the administration's plan. In one of the few positive signs, the actual 2009 deficit is likely to be $250 billion less than predicted because Congress is unlikely to provide another $250 billion in financial bailout money.

The developments come as the White House completes the official release of its $3.6 trillion budget for 2010, adding detail to some of its tax proposals and ideas for producing health care savings. The White House budget is a recommendation to Congress that represents Obama's fiscal and policy vision for the next decade.

Annual deficits would never dip below $500 billion and would total $7.1 trillion over 2010-2019. Even those dismal figures rely on economic projections that are significantly more optimistic -- just a 1.2 percent decline in gross domestic product this year and a 3.2 percent growth rate for 2010 -- than those forecast by private sector economists and the Congressional Budget Office.

For the most part, Obama's updated budget tracks the 134-page outline he submitted to lawmakers in February. His budget remains a bold but contentious document that proposes higher taxes for the wealthy, a hotly contested effort to combat global warming and the first steps toward guaranteed health care for all.

Obama's Democratic allies controlling Congress have already made it clear that they will reject key elements of his plan. Already apparently dead is a plan to raise $267 billion over the next decade to pay for his health care initiative by curbing the ability of wealthier people to reduce their tax bills through deductions for mortgage interest, charitable contributions and state and local taxes….

-END-

 

Obviously there must be more problems at the banks.  They are planning to increase the borrowing capacitiy of the FDIC.  Here is the story:

 

09:35 President Obama proposes increasing the FDIC's borrowing power with the Treasury to $100B from $30B -- wires
Recall last week a Senate bill proposed increasing the FDIC's borrowing power with Treasury to $500B. The House has passed legislation that included a $100B Treasury line of credit for the FDIC as part of a combination with the mortgage cramdown measure.
end

Does this make sense?

The Treasury issues $14 billion in 30-yr bonds on Thursday, and the Federal Reserve buys back $3.5 billion of it today:

http://www.marketwatch.com/news/story/Fed-buys-351-billion-Treasurys/story.
aspx?guid=%
7B46224442%2DE23D%2D4530%2D9C5E%2DAA34B6B3EC9E%7D

The Fed is continaully engaging in quantitative easing as they are buying up all bonds not taken up by buyers.

It is going to be very scary next month as over 900 billion dollars of new money must be raised.  It also includes many rollovers of  previous bonds.

The White House expects that the debt ceiling (the new debt ceiling of 12.1 trillion) will be reached by July 1.09.

Fannie Mae also ran into trouble this weekend and they are in need of 19 billion dollars which must be funded by the taxpayer.

 

AIG also fared better, they lost only 4 billion dollars and they  also must get a handout from the taxpayer.

This just in:  the Bank of England is now bracing for another financial  crisis:

 

Bank of England braced for third wave of financial crisis

Surprise £50bn cash injection is attempt to avert new phase of credit crunch

Bank of England governor Mervyn King.

Bank of England governor Mervyn King. Photograph: Alessia Pierdomenicao/Reuters

The Bank of England is concerned that the UK's banking system is heading for a third wave of crisis that could snuff out fragile signs of recovery in the economy.

On Thursday the Bank surprised the City by announcing that it would pump an extra £50bn of new money into the economy despite recent stockmarket rallies.

Now the Guardian has learned that this increase in quantitative easing was driven by fears in Threadneedle Street that the credit crunch is still sucking the life out of the British economy and the banking sector remains in deep trouble.

The new mood of caution chimes with comments from business leaders yesterday, who warned that apparent green shoots in the economy had shallow roots.

Richard Lambert, director general of the CBI, said: "The fact is that for all the injections of taxpayers' money, the credit markets are still not working properly."

Bank of England officials are concerned that big banks now supported by the taxpayer, such as Royal Bank of Scotland and Lloyds Banking Group, are struggling to increase lending volumes, as they had promised in return for help from the government.

The governor, Mervyn King, and several other members of the Bank of England's monetary policy committee are said to be unconvinced by talk of green shoots that has helped propel the FTSE 100 share index up by more than 20% over the last month.

Fears of a false dawn echo the mood at the beginning of the year, when apparent recovery in financial markets was wiped out by a second wave of crisis led by RBS and Lloyds.

This week both banks again warned of sharp increases in bad loans to British business customers. RBS said yesterday it was seeing little sign of green shoots.

Continued weakness at these banks may prevent the increase in lending that ministers are desperate to see, and dash hopes of a pre-election recovery for Labour.

The Bank of England is also worried that continued stresses in the global financial system will suck money out of the UK as cash-starved international banks bring money back home. Foreign banks are thought to be withdrawing funds from Britain once loans expire, rather than roll them over.

In return for support from the government, both RBS and Lloyds had pledged to increase lending to homeowners and businesses to compensate for declining foreign lending. Instead Stephen Hester, chief executive of RBS, said yesterday that demands for loans had contracted as customers "quite properly" try to reduce their borrowings as therecession bites.

King presents the MPC's latest quarterly inflation report next Wednesday and speculation was rife in the Square Mile last night that the report would contain gloomy forecasts for economic growth and inflation, which will probably be projected as being below its 2% target in two years' time, even though it is currently at 2.9%.

Last year King was criticised by some experts for failing to cut interest rates fast enough as the economy slid into recession. But from September, when US investment bank Lehman Brothers collapsed, he led the MPC in slashing rates to an all-time low of just 0.5% and embarked on the unconventional quantitative easing in March, a policy the European Central Bank said on Thursday said it would follow.

Poor lending decisions by HBOS, now part of Lloyds, and RBS, along with the rapid deterioration in the economy, mean that the two banks in which the government has major stakes could alone account for £25bn of bad debts by the end of the year.

Both banks believe these losses will count towards the "first loss" they must bear before their insurance – through the government's asset protection scheme – kicks in.

The extent of the rise in bad debts has surprised some commentators who now believe the taxpayer could be on the hook for losses under the asset protection scheme faster than first expected.

There has been some evidence of a small increase in mortgage lending in Britain, but it is not nearly strong enough to prevent house prices, which are down nearly a quarter from their 2007 peak, falling further. And unemployment is expected to continue rising well into next year, something that is likely to restrain consumer spending.

Many economists have been encouraged by some better figures on consumer confidence and forward-looking surveys into thinking that the 1.9% contraction in the economy in the first quarter of the year – the worst for three decades – will not be as severe in the second quarter. But they say that this only marks a slower pace of contraction, not a rapid return to growth.

Few share the chancellor's belief that the economy will recover strongly in 2009, and nor does the Bank of England.

 

END

 

The federal debt continues to climb rising 6 billion dollas in one day.

The new federal debt is 11.258 trillion dollars.

I leave you tonight with a report on silver and gold physical movements out of the comex warehouse.

I will report the figures but I have extreme doubt as to their accuracy.

They are definitely fooling around with the figures.

Here is what they reported:

 

OMEX Warehouse Stocks May 8, 2009

SILVER

46,439ozs withdrawn from the dealer's inventory. 
19,647ozs (net) withdrawn from the customer inventory 
Total dealer inventory 63.3 Mozs 
Total customer inventory 54.5 Mozs 
Combined Total 117.8 MOZ

GOLD

100 ozs withdrawn from the dealers (registered) category 
ZERO withdrawn from the customer (eligible) category 
Total dealer inventory 2.5 Mozs 
Total customer inventory 5.99 Mozs 
Combined Total 8.49 MOZ

The warehouse movements are beyond a joke! 100ozs of gold moved out of the dealers category…was that collected by taxi or was it someone on a bicycle? And this goes on day after day and is a total disconnect with the delivery notices. By COMEX rules deliveries must be made to and from a COMEX registered warehouse so delivering from other sources is not an option so this can not explain why there is so little metal moving yet so much being requested for delivery.

Meanwhile 12 delivery notices for gold were issued on the May contract. The cumulative delivery notices on May 7 were 1096. COMEX report that 1096 plus 12 is 1098! It should be 1108 but this is the least of the issues I have on their accounting practices, but the fact that they can't tally delivery notices should be noted! In silver there was 1 notice issued bringing the total to 2,699 or 13.5 Mozs (they managed to add 1 to the total of May 7 without error!). 
Cheers
Adrian

speak to you tomorrow

Harvey.

 

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