Saturday, June 13, 2009

June 13.09 commentary.

 
Good morning Ladies and Gentlemen:
 
Gold closed down by 21.40 to 939.30.  Silver retreated by 64 cents to 14.86.
 OI (Thursday basis) hardly budged on both metals.
 
It is clear that Larry Summers and company are frightened with the turmoil in the mortgage field and the fall in the dollar.
 
The 10 yr treasury is important to Main Street.
The 30 yr treasury bond is important to Wall Street (Financial )
 
We have many derivatives trading which is keeping the usa afloat.
 
The interest rate swaps as released by the BIS show a total of 410 trillion dollars in notional value with the top 4 usa banks in control of most of these structures:
 
JPMorgan has 66 trillion dollars in these and they are followed by Goldman Sachs, Citibank and Bank of America.
Generally these institutions swap bonds of long maturity with bonds of short maturity in the future
 
e.g.  a swap of a 30 yr treasury bond with a 2 yr treasury; 
        a swap of a 30 yr treasury bon with a 60 day note;
       or a swap of a 2 yr treasury with a 30 day note etc.
 
the swap is done in the future and these 4 banks all take the longer maturity on the "long" side and "short" the short maturity.  This has been going on for the last 15 years and it has artificially depressed bond yields and thus it keeps mortgage rates low for quite some time.
 
The one aspect that will destroy these 4 banks is the volatility and the rate of ascent of bond yields.
 
Lets take JPMorgan:  a rate increase in the future of 1% on the long bond will cause a loss  in their off balance portfolio of 1% x 66 trillion dollars or   660 billion dollars.
 
The other 3 banks collectively will produce losses of 300 billion or greater.
 
What is worse, is that these banks then could not pay the winners and the whole system falls.
 
There are two articles written about this subject.  One is written by Jim Willie at www.gold-eagle.com  (it is in the clear) and he refers to Rob Kirby's article
written in May 25.2009 on the subject.  I urge you all to read what they had to say.
 
On the gold front, there is no question that $960 is a defence line set up by cartel members.
It is important to know, that major players do not use comex to buy their metals.  They just line up at the wicket in London and buy whatever they are alloted.
This is why gold is always hit after 3 am  (the first morning fix has already been set and everybody does their business at that fix).
 
We have been witnessing Europe sales of gold go to zero.  That leaves the question:  who is supplying the gold?
We know that China has accumulated since March 31.09 36 tonnes of gold for their official reserves.  (1090 vs 1054 March 31.09).  We also know that their demand over supply is approximately 4 tonnes a month.
China produces 280 tonnes of gold a year and all of that goes for jewellry etc for the locals.  The demand is over 320 tonnes so they need a further 4 tonnes a month to satisfy its citizenry.
 
Russia is accumulating 13 tonnes of gold each month.  Venezuela and Ecuador are also accumulating gold and we are now beginning to see Brazil start to trade its usa dollars for gold.
 
The big news last week, was the GFMS release  showing 5,000 tonnes of "coin-melt" leaving the usa.
Those figures were from Jan 2007 through to December 2008.
 
We are now in June so one would expect another 1500 tonnes of usa gold coin melt to have left, bringing the total to 6500 tonnes.
 
The usa is holding 1700 tonnes of gold at West Point for the Germans.
 
So lets add all the figures:
 
6500 tonnes of gold exported up to June 30.09
1700 tonnes of gold belonging to the Germans:
total:  8200 tonnes.
 
The total tonnes of official gold held by the usa is 8170 tonnes.
 
This is why the Germans are clamoring for their gold back.
 
OK lets go for the regular news events of yesterday:
 
This was written by Garic and he is perfectly correct.  First his commentary:
 

Garic comes in with…

This morning the $ is rallying and Gold is selling off on the article in the Wall Street Journal "Fed to Keep Lid on Bond Buys". In the article Fed sources claim that they are unlikely to announce a major increase in Treasury purchases at the June meeting. Clearly this appears to be directly contrary to my Wednesday posting that I felt the Fed would announce a doubling down of the monetization of debt as next week’s triple witching bombshell. Looking at my screen I notice that S&P futures are basically unchanged, bonds are rallying and the dollar is rallying. Intuitively one would expect stock futures to be getting slammed if the Fed were really announcing an end to the extraordinary liquidity they are providing to the market. Since the Fed has proven to be in the game of managing expectations, instead of running monetary policy prudently, I am more interested in what they are doing than what they are saying.http://www.federalreserve.gov/releases/h41/Current/Yesterday, the Federal Reserve reported holding $1.133T in Treasury, Agency and Mortgage Backed Securities; a one week increase of $19B. Over the past 5 weeks the Federal Reserve has reported purchasing a total of $144B of these securities. An additional line item in the Fed’s balance sheet is called "Marketable securities held in custody for foreign official and international accounts (1)". Last week the Fed reported a $17.9B increase in these securities held. Over the past 5 weeks the increase in these securities held is $89B. Mainstream analysts would like us to believe this is where Foreign Central Banks report their Treasury holdings as they recycle their trade surpluses. Clearly these numbers are much larger than the $29B monthly trade deficit we have been reporting recently. Since the Federal Reserve refuses to be audited, I think it is reasonable to assume that the Fed is using this line item to accelerate their purchases of Treasury’s. Over the past 5 weeks the Federal Reserve has purchased as much as $233B in securities; yet, they want us to believe they are winding down their monetization of the debt. Lies, manipulation and the printing press appear to be functioning smoothly at the Federal Reserve.

***My bet is the Orwellians intervened in our financial markets because of the renewed slump in the US real estate market. There has been increasing talk how the jump in mortgage rates, related to the yield of the 10 yr T note, is have an increasing negative effect on that market. Hence, they went into action to take our rates down with as little fanfare as possible.

At the moment The Gold Cartel and other commercial shorts have had their way. They have MANAGED to turn the technicals bearish which will attract the usual obligatory selling of a number of trend following, technical trading systems. Do we have to go through many weeks of a tedious liquidation process? The answer to that question will depend on the amount of competitive demand for physical gold, now at cheaper prices. Should there be enough buyers who want in, then what we got today could just be a one day wonder and back up we go.

$930 is a key support point. If that level holds next week, and the cabal forces can’t gain any traction on the downside, we ought to make a quick U-turn and go right back up. Otherwise … drudgery for the early part of the summer.

Key silver support at $15 was shattered. JP Morgan and HSBC are smiling, looking for another kill. And people wonder how The Gold Cartel has made money during the bull markets of the past nine years … 50 cents here, 50 cents there … $3 here, $3 there. JP Morgan ought to be called The Fleece Patrol.

CNBC televised a presentation by Larry Summers at The Council on Foreign Relations in Washington. I wanted to throw up. He is a hypocritical, lying, bombastic buffoon. One day the world will see him for who he really is. Talk about an understatement…

 

end

Over the past 5 weeks, the Fed has increased in balance sheet by 233 billion dollars.

They have increased their own holdings of paper to 1.13 trillion dollars for a 5 day gain of 19 billion dollars and a 5 week gain of a huge 144 billion dollars.

Foreigners have bought a further 89 billion dollars of agency and other Treasuries.

 

This is what is causing turmoil in the 10 yr treasury and 30 yr treasury and as such the volatility is killing JPMorgan et al.  end

Give me a break: this is what Summers stated today:

Summers says U.S. acts in markets when necessary

By Robert Schroeder

WASHINGTON (MarketWatch) -- The U.S. acts in markets only when necessary and is trying to save them from their own excesses and improve them, White House National Economic Council Director Larry Summers said Friday. "The actions we take are those of necessity, not of choice," Summers said in remarks prepared for delivery at the Council on Foreign Relations. He said President Barack Obama didn't run for office to manage banks, insurance companies or auto manufacturers.http://www.marketwatch.com/story/summers-says-us
-acts-in-markets-when-necessary-2009612111550?siteid=rss
-END-

Here are some closing commodity and dollar prices yesterday:

The dollar rose .69 to 80.24 as the euro felll .0122 to 1.4001.

The yield on the 10 yr T note dropped to 3.78%.

Copper finished down 7 cents to $2.3675 per pound.

Crude oil only lost 64 cents to $72.04 per barrel.

The CRB gave only 3.62 to 262.55.

As you can see, the printed dollars went in support of the dollar, and short oil, gold, silver and basically all the crb components.

This next passage intrigues me.  First the passage:

Intervention is everywhere and awareness of it all is growing...

Zero Hedge Exclusive: Is State Street Trading For Federal Accounts?

Posted by Tyler Durden at 9:54 AMZero Hedge has always been fascinated by the behemoths of securities lending (or not so much lately) State Street and Bank Of New York: these firms, which allegedly had just marginal toxic exposure, were in the front lines for the TARP bailout and have traditionally been handled with velvet gloves by the administration. In fact, many would say the custodian firms are in a league of importance much higher than even Goldman or JP Morgan as with their repo activity, security lending and cash collateral reinvestment, they are the de facto center of the shadow banking system…

http://zerohedge.blogspot.com/2009/06/zero-he
dge-exclusive-is-state-street.html


end.

 

The rumours seem to indicate that the Fed has entered into the repo pool of lending out securities through State Street.

I bring this up because State Street is one of the custodians of the GLD and SLV along with Barclays.

Maybe this is why the Fed is  getting involved in this arena.  end

The first quarter has not been kind to Americans:

1st quarter wiped out $1.3 trillion for Americans

First 3 months of 2009 wiped out $1.3 trillion, driving Americans' net worth to '04 levels 

Jeannine Aversa, AP Economics Writer 
On Thursday June 11, 2009, 6:03 pm EDT 

WASHINGTON (AP) -- The brute force of the recession earlier this year turned back the clock on Americans' personal wealth to 2004 and wiped out a staggering $1.3 trillion as home values shrank and investments withered.

Net worth, or the value of assets such as homes, checking accounts and investments minus debts like mortgages and credit cards, declined 2.6 percent in the first three months of the year, the Federal Reserve said Thursday.

Those months were some of the worst of the recession so far for job losses, and the stock market sank to its lowest point of the year in March. Since then, some signs suggest the economy is stabilizing.

Still, partly because of the carnage earlier in the recession, Americans are putting plans on hold until the economy improves.

B. Smith, a conductor for a Chicago commuter rail line, is waiting to buy cars for two of his children. He spent $260,000 to build his suburban Chicago home about 10 years ago and watched its value spike to $380,000 in January 2008. Today, it stands at about $310,000. "I'm still ahead, but I'm not as ahead as I was before," he said.

Even if things improve, such a dramatic evaporation of wealth will probably make Americans more thrifty down the road, said Scott Hoyt, senior director of consumer economics at Moody's Economy.com.

"The bulk of consumers alive today have not experienced declines in wealth like this," Hoyt said. "They are already turning thrifty, and it will stay that way beyond the short term. This has been a significant learning experience."

Americans' personal savings rate zoomed to 5.7 percent in April, the highest since 1995. And the amount in savings -- $620.2 billion -- was the most on record dating to January 1959.

One way to save: Maurice Boler, a management consultant, said he does many repairs himself on his Indianapolis home rather than pay someone else. "I just take a little bit longer," said the 53-year-old father of four, three of whom live at home.

Even if the economy recovers and starts to thrive again, he said he probably won't break out the credit cards again. "It's really not about stuff," he said. "Stuff is nice, but life is not about how much more stuff can we get."

According to the Fed report, the biggest damage to wealth in the first quarter came from the sinking stock market. The value of Americans' stock holdings dropped almost 6 percent from the final quarter of last year -- in a market that was already brutal.

The Wall Street slide that began in 2007 wiped out more than half the value of the U.S. stock market, but investments have bounced back. Since the end of the period covered by the Fed report, the Standard & Poor's 500 stock index is up 20 percent.

Rick Thompson, 77, a retired broker from Huntingdon Valley, Pa., isn't losing sleep over the economy or the stock market despite seeing his net worth edge lower in recent months.

He and his wife, Faith, own the four-bedroom house where they've lived for 40 years. It may have lost some of its value, but not much, he said. A conservative investor, he shifted most of their portfolio from stocks to bonds in late 2007, when the then-soaring market made him uneasy.

He admits the recession has weighed on his psyche, but the rise in stocks since early March has lifted his spirits. Thanks to the Wall Street rally, they are going ahead with plans for a trip to Europe next year.

Another hit to household net worth in the first quarter came from falling house prices. The value of real-estate holdings fell 2.4 percent, according to the Fed report.

Collectively, homeowners had only 41.4 percent equity in their homes in the first quarter, the lowest on record dating to 1945, as Americans fell behind on mortgages or entered foreclosure. That was down from 42.9 percent in the fourth quarter.

The Case-Shiller national home price index, a closely watched barometer, last month estimated that house prices dropped 7.5 percent during the first quarter and have fallen more than 32 percent from their 2006 peak.

While the first quarter was ugly, the hit to Americans' net worth was worse late last year. In the October-December period, it fell a record 8.6 percent, according to revised figures. That was the largest drop on record dating to 1951.

If Americans continue to spend -- no guarantee -- Fed Chairman Ben Bernanke and other economists say they think the recession will end late this year. But if shoppers hunker down and cut spending again, that could delay any recovery. Late last year, Americans cut spending at the fastest rate in 28 years.

On Thursday, there was encouraging news: Retail sales rose slightly in May following two straight monthly declines, the Commerce Department reported. And the number of newly laid-off workers filing for unemployment fell by the lowest number since late January.

Kathy Bullard, a librarian in Providence, R.I., said she plans to be even more frugal in the coming months. At 58, with a 10 percent pay cut coming on July 1 and her pension plan frozen, she doesn't expect to buy more new clothes or books anytime soon.

"I have no idea what my net worth is," she said. "It would probably just depress me."

AP Business Writers Tim Paradis in New York, Dave Carpenter and Karen Hawkins in Chicago, Deanna Martin in Indianapolis and Kelsey Abbruzzese in Providence, R.I., contributed.

 

end.

The usa banks are still weakening:

MSNBC.com 
Most banks still weakening, analysis shows 
First-quarter reports show bad loans increasing at 60% of banks


By Bill Dedman
Investigative reporter

Bad loans on real estate continue to push harder on the nation's banks. 

At the end of the first quarter, six out of every 10 banks in the U.S. were less well prepared to withstand their potential loan losses than they had been at the end of 2008, according to a new analysis by msnbc.com and the Investigative Reporting Workshop at American University in Washington. Overall, bad loans rose another 22 percent in the quarter as the recession continued. 

Msnbc.com is publishing information on the nation's 400 largest banks as well as all banks with high ratios of troubled loans to assets. Information on the financial health of more than 8,000 banks nationwide is available at the updatedBankTracker site published by the American University group. 

The analysis relies on information reported through March 31 to the Federal Deposit Insurance Corp., calculating each bank's troubled asset ratio, which compares troubled loans against the bank's capital and loan loss reserves. A similar ratio, known as a Texas Ratio, is commonly used by bank analysts as a snapshot of a bank's financial health, though it can't capture all the nuances of a bank's condition. 

Although much attention has been focused on surprising profits at U.S. banks in the first quarter of 2009, under the surface lurks an industry still suffering from the recession. If you set aside the 10 largest banks, the rest of the industry lost money in the quarter, primarily because of very large losses at a few banks. 

While the 10 largest banks reported $10.2 billion in earnings for the quarter, the remaining 8,245 banks together lost $2.6 billion, according to the analysis. 

One in five banks lost money in the quarter, and several lost big, weighing down the rest. 

Four large banks account for more than $5 billion in losses. Huntington National Bank of Columbus, Ohio, lost $2.46 billion. FIA Card Services of Wilmington, Del., lost $1.47 billion. SunTrust Bank of Atlanta lost $783 million. Sovereign Bank of Wyomissing, Pa., lost $764 million. 

What's the trend in bad loans?

Continuing the trend from 2008, there was a significant deterioration in the first quarter in the ability of banks to withstand potential losses from troubled loans. 

If a troubled asset ratio of 100 is a sign of severe stress, then an additional 93 banks moved past that level in the quarter, for a total of 237. Still, that's only 3 percent of the nation's banks.

Some analysts have said that any ratio over 20 percent is an early warning sign. An additional 421 banks moved past that level, for a total of 2,692. That's 33 percent of the nation's banks. 

While the troubled asset ratio is not a predictor of bank failure, 29 of the 37banks that have failed so far this year had ratios of greater than 100 percent, reported Wendell Cochran, senior editor of the reporting project at American University. 

Most banks still have relatively low levels of troubled loans. But there was a worsening of the median troubled asset ratio for all banks, rising to 11.7 at the end of the quarter, up from 9.8 at year end 2008, and 4.9 at year-end 2007, when only one-quarter of the nation's metro areas were in recession.

The reports in most cases do not include the billions in federal money injected onto the balance sheets of bank holding companies in the form of so-called TARP funds. Although the public was told by members of Congress that one of the purposes of the TARP program was to increase lending, in nearly all cases that money has stayed with the bank holding companies as a cushion against hard times, and has not been passed on to their individual banks where it might be used to make loans. In fact, the total of loans outstanding declined again in the quarter as the recession continued…-END-

I will leave you with Bill Holters commentary on the subject of gold. He echoes my views totally:

 

Bill H:

One Ounce Of Gold In

German Markets

January 1919 170

September 1919 499

January 1920 1,340

September 1920 1,201

January 1921 1,349

September 1921 2,175

January 1922 3,976

September 1922 30,381

January 1923 372,477

September 1923 269,439,000

Oct 2, 1923 6,631,749,000

Oct 9, 1923 24,868,950,000

Oct 16, 1923 84,969,072,000

Oct 23, 1923 1,160,552,882,000

Oct 30, 1923 1,347,070,000,000

Nov 5, 1923 8,700,000,000,000

Nov 30, 1923 87,000,000,000,000Source: CIBC World Markets

To all; the above "Gold prices" were the result of German monetary policy from 1919 to 1923. It is very important to understand that I put "Gold prices" in quotes because this is how we Americans think. This is completely wrongheaded thinking. The truth of the matter is that German Reichmarks were valued in Gold ounces and the German currency collapsed in value, thus the amount of currency necessary to purchase 1 ounce of Gold exploded exponentially. Gold did not "go up", the Reichmark imploded.

We think in terms of Gold went up or down today when we should be thinking the Dollar went up or down. An ounce of Gold 200 years ago is still that same ounce of Gold today. 200 years ago Dollars did not exist, they may not exist in the near future. The point is that Gold or Silver is a constant or a measuring stick for other goods and for paper currencies, not vice versa.

Looking at the above numbers is certainly startling. I read about the Weimar Republic years ago (not in college because this is not something Americans "need" to know) and I knew the currency went to zero. What I did not know was how fast it really happened! In 3 years the Reichmark dropped 95% vs. Gold, it only took another 21 months to become worthless. Think about the numbers above. 87 trillion RM's for one ounce, 87 trillion?! You may be wondering why I am posting this. I am not trying to show you that you will become "rich" or that you will retain your purchasing power by owning Gold, by now I think we all understand the many reasons to own Gold and that hyperinflation and destruction of the Dollar is virtually a given.

I show you this because many people have asked me "what is our exit strategy"? This is always a logical question to ask and one that is always necessary when you first enter into an investment. I believe that what lies ahead of us will in no way resemble 1980 when Gold spiked and then plunged, only to barely tread water for the next 20 years. My thoughts are; that since the global currency markets are Dollar based, once the fiat Ponzi scheme collapses we will have plenty of time to survey the lay of the land and make intelligent investments from that point without time pressure to get out before Gold crashes again. Why do I believe it will be different this time? Simple, people will not trust another fiat currency again during our lifetimes because of the wealth destruction that has and will occur due to "funny money". Gold will be seen again for what it always has been, MONEY and a the ultimate store of value.

Because we live in a world with computers that provide instant information and communication, I believe the potential for a virtual 2 week tsunami of value destruction has a very good possibility of occurring. I see only one possible alternative. Once the "powers that be" see that Dollar destruction is imminent, I believe a new currency will be unveiled. Gold will be the new foundation and will be marked up accordingly, 10 to 1, 100 to one, 1000, etc. I have no idea what the number is, but it will be eye popping. I also believe the longer this is postponed the greater the mark up will be.

There have been many very well respected people throwing out Dollar/Gold numbers such as $1,650, $3,000, $6,500 and even higher than $10,000. I pay no attention to these numbers and think that anyone offering up a number is fooling themselves. There are just too many variables to arrive at a $/Gold number. Do we really know how many Dollars exist now that money supply is no longer reported? No. Do we have any idea how many synthetic Dollars exist in the derivatives markets? No. We do know that the government says they have over 8,000 tonnes of Gold, should we believe them? (I'll leave this one up to you). But what if there is only 4,000 tonnes, or 1,000? Or God forbid, what if it is all gone!? As I said, too many what if's. The only thing we do know for sure is that even if we believe every ounce of Gold is still in Ft. Knox, there is nowhere near enough to support the "admitted" money supply with each Dollar priced at 1/1,000 th per ounce.

I wanted to show you the Weimar experience because it is visually shocking. It is certainly a scary thought if Gold were to require $87 trillion to purchase one ounce. It is also important to screw our heads on straight as to thinking about Gold in Dollar terms since we know (were taught) no other way. When all is said and done, we will have to "relearn" how to value assets in terms of ounces rather than in how many pieces of paper with how many zeros.

The funny thing is that you don't even have to believe me or what I have said, just listen to Ben Bernanke, Tim Geithner, and our new President. They have told you exactly what they plan to do. They will borrow more (until there is no more) and they will use the electronic printing presses. When these begin to fail, then the real Weimar will emerge, the Fed will simply print more Dollars to purchase Treasury bonds that were left unsold because the world did not want them. In tandem the Dollar and Treasuries will go down the Weimar rat hole together unless and until we get a new currency that has Gold backing and the government completely restructures itself (read, banckruptcy) going forward with manageable and balanced budgets.

I will leave you with a couple of questions. Do you know of anyone (country, corporation, or individual) that went through bankruptcy with assets entirely of Gold bullion and no liabilities? During Weimar, Argentina, USSR, US 1930's, Zimbabwe, Iceland, US present (Zimbabwe II)? Were these not the absolute worst economic times in the last 100 years? Has anyone EVER gone broke owning nothing but paid for and in possession Gold? No, no, no, and double no! Regards, Bill H.

end

 

I wish you all a grand weekend.

and I will speak to you on Monday.

Harvey

 

 

 

 

 

Thursday, June 11, 2009

June 10.09 commentary.

 
Good evening Ladies and Gentlemen:
 
I am going to the theatre tonight so I will be brief but give you the important details of todays events.
 
Gold closed up by 8.20 to 960.70. Silver also rose closing at 15.48 up 33 cents.
 
The battle today was epic.  Cartel members tried to move gold below its 200 day moving average and succeeded early in the session.  However, the Germans were ready and started buying.  Silver joined in the fun and gold closed at its highest.  A gold price of 960 is an important resistance point which has been broken.
 
Copper rose another 8 cents today and oil crossed the 72 dollar market.  The dollar fell badly below the 80 level to 79.32.
 
Strangely the bonds seemed to rally with all this negative news.  The only explanation that I can give you today was that all the printed money going into existence went into QE and bought all the necessary bonds to lower yields and rise in prices.
 
The 10 yr bond yield closed at 3.84% and the long bond closed down in yield from 4.77% to 4.72%.  The long bond rose in price to 112.9
 
OK. lets go with economic news for the day:
 
First retail sales was a bit better.  However the biggest component was gasoline sales and gold sold off early in the session?
 
Here is the report:
 

U.S. retail sales rise 0.5 percent in May 

WASHINGTON, June 11 (Reuters) - Sales at U.S. retailers rose for the first time in three months in May as expected, lifted by strong gasoline and building material receipts, according to a government report on Thursday that bolstered views the recession was abating. 

The Commerce Department said total retail sales rose 0.5 percent after falling by a revised 0.2 percent in April, previously reported as a 0.4 percent drop. 

Excluding motor vehicles and parts, sales rose 0.5 percent in May, compared to a 0.2 decline the prior month. Vehicles and parts sales rose 0.5 percent after a 0.4 percent fall in April. 

Analysts polled by Reuters had forecast retail sales rising 0.5 percent in May. Excluding motor vehicles, sales had been predicted to gain 0.2 percent. 

Gasoline sales jumped 3.6 percent in May after dropping 0.8 percent the previous month. Excluding gasoline, retail sales rose 0.2 percent. Sales of building materials climbed 1.3 percent in May, the biggest advance since April last year, after falling 0.6 percent in April. 

Soft spots in the report included sales of electronic goods, which fell 0.5 percent in May after declining 0.9 percent the previous month.

-END-

 

The jobless report was a touch better but still showing the economy as being very weak:

 

08:30 Jobless claims for w/e 6-Jun 601K vs. consensus 615K
Prior week revised to 625K from 621K. Continuing claims for w/e 30-May 6.816M vs. consensus 6.780M. Prior week revised to 6.757M from 6.735M. 
* * * * *

US jobless claims fell in latest week 

WASHINGTON, June 11 (Reuters) - The number of U.S. workers filing new claims for jobless benefits fell more than expected last week, government data showed on Thursday, pointing to an easing of labor market weakness. 

Initial claims for state unemployment insurance benefits fell 24,000 to a seasonally adjusted 601,000 in the week ended June 6, the Labor Department said. It was the fourth straight week the number of claims declined or was unchanged. 

Analysts polled by Reuters were expecting claims to drop to 615,000 from a previously reported 621,000. 

However, the number of people staying on the benefit rolls after collecting an initial week of aid rose to a record 6.82 million in the week of May 30, the latest week for which data is available. 

It was the 19th week in a row so-called continued claims set a record. 

The 4-week moving average for new claims, considered to be a better gauge of underlying trends because it smooths out week-to-week volatility, fell to 621,750, the lowest since Feb. 14.

-END-

 

Here is what one commentator had to say about this number today:

Unadjusted Year Over Year: Labor Department Initial Jobless Claims Up 55%

Here's the scoop on the Labor Department's weekly initial jobs claims report:

  • Associated Press Headline And Lead: "New jobless claims drop more than expected to 601K... The number of newly laid-off Americans filing for jobless benefits fell for the third time in the past four weeks, fresh evidence that companies are cutting fewer jobs."Labor Department News Release: click here.Key Numbers: The advance number of actual initial claims under state programs, unadjusted, totaled 576,695 in the week ending June 6, an increase of 76,312 from the previous week. There were 373,046 initial claims in the comparable week in 2008.

Quick Comment: Unadjusted jobless claims jumped 76,312 last week. After adjustment they "drop more than expected." Hmmm, when was the last time we saw adjusted numbers worse than the unadjusted numbers?

Here's my uneducated interpretation - Initial jobless claims is a leading indicator and clearly job losses are way worse than they were a year ago. The Associated Press, as usual, puts a "positive" spin on the numbers.MontyHigh, http://www.worldofwallstreet.us/

end.

 

The big news of the day was foreclosures and they have set another record.  Basically he had a delay with the banks and now they are going full tilt and repossessing homes:

 

00:04 US foreclosures rose 18% y/y in May according to RealtyTrac 
The online marketplace releases a report showing filings totaled 321K in May; the figure was a (6%) m/m decline. Percentagewise by state, Nevada, California, and Florida had the highest rates for the month. By totals, California, Florida, and Nevada had the most. 
* * * * *

May US foreclosures 3rd highest on month on record 

NEW YORK, June 11 (Reuters) - U.S. foreclosure activity for May ebbed from April's record, but mortgages still failed at a staggering pace as President Barack Obama's rescue programs had not had time to fully take root, RealtyTrac said on Thursday. 

Foreclosure filings dipped 6 percent in the month but increased 18 percent from May 2008, marking the third highest month on record. 

"There were almost one million foreclosure filings in a three-month period, and that's simply unprecedented," Rick Sharga, senior vice president at RealtyTrac in Irvine, California, said in an interview. 

Temporary freezes on foreclosure activity ended in March. Failures of many seriously delinquent loans that were put on hold during those moratoria have been thrust back into the foreclosure cycle. 

One in every 398 households with loans got a foreclosure filing in May. Filings, which include notices of default and auctions, were reported on 321,480 properties last month.

-END-

 

Commercial paper is contracting.  If we were to see green shoots, commercial paper would be rising in quantity not declining.  Note all levels of Commercial paper declining:

REUTERS US COMMERCIAL PAPER OUTSTANDING FALLS $14.8 BLN IN WEEK ENDED JUNE 10 VS $3.6 BLN FALL PRVS WEEK-FED

REUTERS US ASSET-BACKED CP OUTSTANDING FALLS $32.5 BLN JUNE 10 WEEK, VS $8.3 BLN FALL PREVIOUS WEEK-FED

REUTERS US COMMERCIAL PAPER OUTSTANDING $1.230 TRLN JUNE 10 WEEK, VS $1.245 TRLN PREVIOUS WEEK -FED 

REUTERS US ABCP OUTSTANDING $524.9 BLN WK ENDED JUNE 10 VS $557.4 BLN PREVIOUS WEEK -FED

REUTERS US UNSECURED FINANCIAL CP ISSUANCE ROSE $15.9 BLN JUNE 10 WEEK, VS $3.3 BLN FALL PREVIOUS WK-FED 

end.

Here is todays 30 yr bond auction results and they were pretty good as foreign countries came in and supported the sale:

30-yr bond auction draws 4.72%, with 83.46% allotted at high

Bid/cover 2.68 vs. average of the last 5 auctions 2.21Indirect participation 49% vs. prior 33% 

end.

This has the attention of WallStreet and will have tremendous implications for the usa dollar:

 

Brazil joins Russia, China in eyeing IMF bonds

By ALAN CLENDENNING , 06.10.09, 03:55 PM EDThttp://www.forbes.com/breakingnews/AP_full.html

SAO PAULO -- Brazil is looking to buy $10 billion in IMF bonds, Finance Minister Guido Mantega said on Wednesday, joining China and Russia in seeking to use the new instruments to diversify dollar-heavy currency reserves.

"This support is important to help end the international financial crisis," Mantega said, adding that a trade surplus and $204 billion in reserves has positioned Brazil to help the International Monetary Fund boost lending to other emerging economies.

Chinese officials have also expressed interest in buying as much as $50 billion in IMF bonds, while a Russian central bank official on Wednesday said his bank would reduce U.S. Treasury holdings to invest in the IMF notes instead. Russia now holds about $120 billion, or 30 percent, of its hard currency reserves in U.S. Treasuries and said it would redirect up to $10 billion to the IMF.

India also plans to buy some of the notes, although it has not yet said how much it will spend, Mantega said, according to the state-run Agencia Brasil news agency.

The announcements come just a week before the BRIC nations - Brazil, Russia, India and China - gather for talks in Russia, where they are widely expected to discuss alternatives to the U.S. dollar as the global reserve currency.

Russian officials have expressed concern about the dollar for several years and China has advocated a shift away from the greenback, warning that large U.S. budget deficits and monetary expansion could weaken the world's chief currency.

Commodity exporters like Brazil and Russia are particularly vulnerable because most raw materials including oil, soy and minerals are priced in U.S. dollars, making it even more likely that a weak greenback would slash their export income.

Russia is looking to diversify that risk with a move to IMF bonds, analysts said.

"They need to spread the risk out," said Ron Smith, chief strategist at Alfa Bank, one of Russia's biggest private lenders. "They've been doing some diversification for the past several years measuring everything against the dollar-euro basket."

In a statement from the Washington-based lender on Tuesday, IMF managing director Dominique Strauss-Kahn welcomed news of China's interest, saying its investment would "boost the Fund's capacity to help" emerging economies weather the world crisis and "benefit all members by facilitating an early recovery of the global economy."

He said the bonds will offer "a safe investment instrument with reasonable return," but gave no other details, noting only that IMF staff will present plans to the board to allow the bond issue "as early as possible."

The bonds, which have yet to be issued, will be denominated in special drawing rights, an artificial currency used by the IMF.

Leaders of the so-called Group of 20 nations, which include the four BRIC powerhouses, agreed at a London summit in April to boost contributions to the IMF by as much as $500 billion to help it increase lending to nations battered by the global downturn.

The bond issue is part of the effort to meet that goal, said a spokesman for the fund in Washington. He was unable to give any other details and declined to be named.

In Brazil, Mantega echoed Strauss-Kahn on Wednesday, saying that his country's $10 billion loan would help troubled economies recover, reviving global trade and ultimately benefiting net exporters including Brazil.

"Brazil is facing solid conditions to loan to the IMF. In the past, the opposite was true: the fund loaned to Brazil," said Mantega, who has lobbied for reforms that would boost developing countries' voting rights within the IMF. It was not clear if a bond purchase would change that.

The IMF has lent Brazil billions of dollars in the past, but the country became one of the fund's creditor countries for the first time this year.

The majority of Brazil's foreign reserves are held in dollars.

-END-

In other words, these countries wish to bypass the usa altogether.  The dollar will be toast if this occurs at full tilt and others join in.

The following video is from a guy who is totally fed up with the antics of the usa.

 

It is quite humourous.  The language is bad but the subject matter is quite funny.

 

Here it is:

 have seen you get pretty upset before at the GOld Cartel antics, but this guy is US FED up!!

Wonder how some Americans are taking the "recession"? Here's a guy who needs some anger management, but

I have a feeling he is the tip of the iceberg! This is JOE SIX-PACK figuring things out!

CAUTION ... crazy behavior and bad language ...

LINK: http://tinyurl.com/nhccyy

 

OK got to go.

 

I will bring you a comprehensive review on Saturday as is my custom

over and out

harvey.

 

 

Wednesday, June 10, 2009

June 10.09 commentary.

 
Good evening Ladies and Gentlemen:
 
Gold was all over the map settling down by 20 cents to 952.90.  Silver rose by 3 cents to 15.15.
 
Lets go right to the heart of business activity today, the bond market:
 
13:02 10-yr note auction yields 3.99% with 46.85% allotted at the high 
Bid/cover 2.62 vs average of the past 10 auctions 2.40 
Indirect participation 34.2% vs average of the past 10 auctions 28.23% 
In reaction: 
2-yr (3/32) to 1.26% 
5-yr (8/32) to 2.89% 
Dow 8724.14, (38.62) 
end/
 
The 10 yr note auction performed poorly today as they needed to give a 13 basis point increase in yield in order to sell the issue.
 
Other years included the 2 yr up to 1.26% in yield.  The 30 yr bond rose in yield for 4.55% or a price of 112.8
 
This is from Dave (Denver):
 

Dave from Denver…

The 10-year Treasury auction was very ugly

Don't be fooled by the fancy bid-to-cover ratio of 2.6 or the Foreign Central Bank participation rate of 34%. They have to back up the rate at auction from where the 10yr was trading this morning by 13 basis points to 3.99% in order to price the deal. And this is even after the Fed bought $3.5 billion in longer maturity bonds in the marketplace to help prop up the auction. The proverbial "Bell" is tolling for the U.S. economic system. If ya don't got gold, you better get it while it's still cheap and before big investors start flooding the precious metals market with capital.

 

end.

and he further comments:

Follow up on the 10yr Treasury auction

The Fed effectively bought 18.4% of this auction by buying up 3.5 billion of 10yr and longer maturity paper this morning. Assume the Street dealers heavily shorted the 10yr area of the curve ahead of this auction, knowing that it would be a tough sell and knowing they would have buy anything that didn't clear. Outside of the 34% of the deal bought by Foreign Central Banks, not a lot of new "real" investor money came into the deal. This auction is a stone's throw from being considered a failure. As long a the Fed continues to monetize new Treasury deals, the U.S. can avoid a failed auction like we saw in England several weeks ago. BUT, the Treasury yield curve will continue to blow out and steepen, as the world perceives and runs from the ongoing devaluation of the U.S. dollar.

 

end.

The usa dollar initially tanked on this news as did the Dow.  Only a Hail Mary saved it again:

 

REUTERS U.S. TREASURIES EXTEND LOSSES AFTER RUSSIA SAYS WILL CUT SHARE OF US TREASURIES IN RESERVES

Dollar slides, UST yields rise after Russia comments 

LONDON, June 10 (Reuters) - The dollar slipped against a range of currencies, while U.S. Treasury yields rose on Wednesday after Russia's central bank said it will cut the share of its currency reserves invested in U.S. Treasuries and buy IMF 
bonds.

The dollar index <.DXY> fell as low as around 79.483 after the Russian central bank's first deputy chairman said it would increase its share of reserves placed in foreign banks' deposits [nLA1036154]

The index was at 79.662 shortly before the comments. U.S. Treasuries fell further after the comments, pushing up the benchmark 10-year T-note yield more than five basis points to a session high of 3.92 percent.

Analysts said that the Russian comments stung the dollar, given the massive amount of U.S. Treasuries held by global central banks.

"This is potentially quite negative for the dollar," said Geoff Kendrick, senior currency strategist at UBS in London….

-END-

The trade deficit was released this morning and it was dismal.  It shows that exports are still declining and imports are still waning:

08:30 Apr trade balance ($29.2B) vs. consensus ($29.0B)
Mar figure revised to ($28.5B) from ($27.6B). 
* * * * * 

U.S. April trade gap widens on softening exports
 

WASHINGTON, June 10 (Reuters) - The U.S. trade gap widened to $29.2 billion in April as exports weakened again in a reflection of waning global demand, a U.S. government report on Wednesday showed. 

The Commerce Department said total exports fell 2.3 percent to $121.1 billion, the lowest level for foreign sales since mid-2006. Exports have dropped in eight of the past nine months. 

Imports declined in April for a ninth straight month but by a smaller amount than exports, down 1.4 percent to $150.3 billion. That was the lowest value for imports since September 2004, more evidence that the recession-struck U.S. economy was not generating as much demand as it once did. 

Imports of industrial supplies and materials, which include minerals, chemicals and lumber used in U.S. manufacturing, fell in April as did imports of new cars and parts. But imports of consumer goods like televisions and cosmetics and pharmaceuticals rose modestly from March levels. 

The monthly deficit on goods trade with China climbed to $16.8 billion from $15.6 billion in March and was the largest with any single country. During a visit to Beijing last week,

Treasury Secretary Timothy Geithner said U.S. consumers were no longer in a position to keep powering global growth with the United States in recession since late 2007. 

U.S. exports to nearly all of its major trading partners fell. Exports to Japan plummeted to a 15 year low of $3.9 billion, while exports to the European Union dropped 9.9 percent to $17.8 billion. 

Despite soft demand, oil prices rose to their highest level this year. Imported oil cost $46.60 a barrel in April, up from $41.36 in March.

-END-

Obama does not like this:

 


Treasury Secretary Timothy Geithner said U.S. consumers were no longer in a position to keep powering global growth with the United States in recession since late 2007. 

U.S. exports to nearly all of its major trading partners fell. Exports to Japan plummeted to a 15 year low of $3.9 billion, while exports to the European Union dropped 9.9 percent to $17.8 billion. 

Despite soft demand, oil prices rose to their highest level this year. Imported oil cost $46.60 a barrel in April, up from $41.36 in March.

-END-

07:01 MBA mortgage purchase applications index +1.1% in 5-Jun week; total market index (7.2%) 
Compares to +4.3% and (16.2%), respectively, in prior week. The refi index was (11.8%) vs. (24.1%) in the prior week. The 30-year fixed rate +32bp to 5.%; 15-yr. fixed rate +29bp to 5.10%. 
* * * * *

Rising U.S. mortgage rates sap loan applications 

NEW YORK, June 10 (Reuters) - A spike in U.S. mortgage rates drove down total home loan applications last week as demand for refinancing shriveled to the lowest level since November, the Mortgage Bankers Association said on Wednesday. 

Borrowing costs have soared as bond yields have risen, even as the Federal Reserve has sopped up hundreds of billions of dollars in bonds to keep rates low and stimulate the housing market. 

The average 30-year fixed mortgage rate jumped 0.32 percentage point in the June 5 week to 5.57 percent. That was nearly a full point above the record low rate of 4.61 percent in March, the trade group said. 

The vast majority of mortgage activity this year has been from homeowners cutting costs with new loans at rock-bottom rates. 

The Mortgage Bankers Association's seasonally adjusted index of total applications dropped 7.2 percent to a four-month low of 611.0 in the latest week. 

The refinancing index slumped 11.8 percent to a nearly seven-month low of 2,605.7 last week, and refinancing accounted for about 59 percent of all applications, the lowest share since November. As recently as April, refinancings accounted for almost 80 percent of all home loan applications. 

Purchasers have been slower to act in the current housing market, with some waiting in hopes that prices will fall further and others paralyzed by unemployment or wage cuts. 

Demand for loans to buy homes was little changed last week, rising 1.1 percent to 270.7, having basically been stuck in neutral throughout the important spring sales season. 

"I'm not optimistic for 2009 or 2010," Mark Goldman, real estate lecturer at San Diego State University and mortgage broker, said on Tuesday. 

The swift percentage point rise in mortgage rates cuts the purchasing power of a borrower by about 10 percent, he estimated. 

–END-

The Beige book is out and again it states that the economy is still weak:

14:01 Beige Book reports economy remains weak
The report does note that 5 of 12 districts report there are signs that the decline is moderating. 
* * * * *

Fed says economy weak, but some hopeful signs 

WASHINGTON (Reuters) - U.S. economic conditions were weak or got worse through May, but some areas of the country saw signs the contraction was moderating, a Federal Reserve report said on Wednesday. 

Fed contacts in several regions said their expectations for the economy have improved, but that they still don't expect much of an increase in economic activity in 2009. 

The Fed's "Beige Book" of reports gathered from the 12 Fed districts showed widespread economic weakness with a few glimmers of hope. 

end.

The May budgetary deficit was out and it too was pretty dismal rising by 189.7 billion dollars in the month:

14:00 May budget deficit widens to $189.7B vs. consensus $181.0B 
* * * * *

US MAY BUDGET GAP $189.65 BLN, RECORD FOR MAY (CONSENSUS $181.0 BLN GAP) VS MAY '08 GAP $165.93 BLN 

FISCAL 2009 YEAR-TO-DATE DEFICIT $991.95 BLN VS SAME PERIOD YEAR-AGO GAP $319.40 BLN-TREASURY 

US MAY OUTLAYS $306.89 BLN, RECORD FOR MAY, VS $290.20 BLN IN MAY 2008-TREASURY 

U.S. MAY RECEIPTS $117.24 BLN VS $124.27 BLN IN MAY 2008-TREASURY 

U.S. TREASURY SAYS PURCHASED $9.9 BLN GSE MBS IN MAY, $140.60BLN IN FISCAL YEAR TO DATE

end.

Here is Andy H. on the bond scenario of today:

  The James Joyce Table  
Midas du Metropole

Topic du Jour

 


June 10  Gold $952.90 down 20 cents - Silver $15.15 up 3 cents

Gold, Silver Perform Well Despite Massive Gold Cartel Onslaught

"Nobody grows old merely by living a number of years. We grow old by deserting our ideals." … Samuel Ullman

GO GATA!

This morning is another one of those times to walk away from the quote machines, in order to keep the blood pressure down. It is especially aggravating because I just returned from a Vancouver arena in which many of the old guard in the gold letter writing arena, infected with the not invented here syndrome, refuse to acknowledge the gold price manipulation scheme … even as they malign the obtrusive interference by the Fed and Treasury in our financial markets.

Over the past week the basic tactics of The Gold Cartel couldn’t be clearer…

*One is to defend $960 on a closing basis.

*Two is to keep the price of gold relatively weak to a sinking dollar, waiting for the dollar to correct to the upside when they will bomb the price, attracting other sellers in the process. We have seen the way they operate for so many years now, this is just routine observation.

Garic puts it more eloquently…

For what it’s worth:

For years I have claimed the way the Commercials manipulate the Gold market is by shorting Gold above the moving averages as technically driven commodity funds get long the market. They then use whatever market that is falling at the time to correlate Gold to and overwhelm the market with more sell orders than the market can handle. As Gold is driven through the moving averages the technically driven funds sell and the commercials cover.

As you have pointed out we are at another crucial point. As Ted Butler has also pointed out the Commercials once again have established one of the largest speculative short positions in history. This most recent sell off started by the BLS reporting another fraudulent employment report which the commercials used to force a short covering rally in the $ and drive Gold down on Friday afternoon (after the physical markets had closed for the week). Monday Gold was manipulated below the 20 day moving average as the Euro continued its Friday correction; interestingly Gold ended up closing above the 20 day moving average. My guess is the physical market was stronger than the forced liquidation in the futures market.

Today Gold has once again been driven below the 20 day moving average as an early morning sell off in S&P futures were used to drive the HUI lower and GLD was hit with what appeared to be large naked short sales on downticks. For Gold to explode to the levels which we believe are fair market values, one of these manipulative washouts will need to fail. Sooner or later serious buyers of physical Gold will bid on all the available Gold below the moving averages and the commercials will not have time to cover. At that point your long awaited Commercial failure will be imminent. Whether this one will be the failure is anyone’s guess. What I do know is the amount of intelligent people who understand how reckless our Treasury and Federal Reserve has become is growing every day.

This afternoon we will report a truly scary Budget Deficit for the month of May only 1 hour after another large 10 year note sale and a day before another large 30 Year Bond sale. I personally think it is a matter of time before the Fed is forced to double down on their monetization of the debt to fight rising mortgage rates. When that happens I expect Gold will blow through its head and shoulder neckline. The way I see it Larry "expectations are more important than reality" Summers has a choice to make here. If they stop supporting the S&P and let the bear market in stocks resume then the deflationary scare will resume and his hedged fund crony’s will be wiped out for good. I am betting this is just another rear guard maneuver and this will prove to be the last trip below the 20 day moving average before the next leg in the Gold bull begins. 
Garic…

As far as the timing of the Federal Reserve doubling down is concerned:

Next week is triple witching. The following week is the next Federal Reserve meeting. We know that Bush, Paulson & Bernanke loved to give their friends and primary dealers a boost during the large quarterly options expiration cycle. Last December Bernanke announced the unlimited supply of $’s to the banking system as Bush outlined a bailout of the auto industry. During first quarter triple witching week the Fed announced the largest monetization of debt in the history of the world for the benefit of his friends and primary dealers. It seems to me a leak in the "double down" of the monetization or some other revolutionary event is in store for next week. So one last attempt to help the commercials cover their shorts in Gold and Silver here and now makes perfect sense. Time will tell.

***

Fortunately, after running some errands, I turned the quote machines back on … and it was a pleasant surprise … no great joy, but a potential technical disaster was averted.

Early this morning gold surged to $964.90 and silver to $15.47. The AM Fix was a healthy $961.25. A weak dollar began to firm up and The Gold Cartel gang went into blitzkrieg action, taking gold down to $945.80. At this point we had an outside day key reversal to the downside … a higher high than yesterday and lower low. A close below that low would have done the trick and sounded technical alarm bells.

However, with both precious metals reeling and looking like they would fall apart, a surge of buying showed up in each, even though the dollar continued to strengthen. This buying took gold back up on the day until the final seconds of trading.

Silver made a penny new low for the correction at $15.01, then managed to come back and close positive. That makes three times silver has bounced off key support at $15 and has held that support … a good sign.

Regardless of the managed short term price action thanks to the cabal forces, the scenario for much stronger gold and silver prices continues to intensify for the very reasons presented in this column for some time…

*Talk of accelerating inflation in the US continues to proliferate, especially among those who have historic credibility…

  • JUNE 10, 2009
Get Ready for Inflation and Higher Interest Rates

The unprecedented expansion of the money supply could make the '70s look benign.

By ARTHUR B. LAFFER

Rahm Emanuel was only giving voice to widespread political wisdom when he said that a crisis should never be "wasted." Crises enable vastly accelerated political agendas and initiatives scarcely conceivable under calmer circumstances. So it goes now…

http://online.wsj.com/article/SB124458888993599879.html

-END-

*Concerns over money creation/inflation are sending longer term interest rates higher…

13:02 10-yr note auction yields 3.99% with 46.85% allotted at the high 
Bid/cover 2.62 vs average of the past 10 auctions 2.40 
Indirect participation 34.2% vs average of the past 10 auctions 28.23% 
In reaction: 
2-yr (3/32) to 1.26% 
5-yr (8/32) to 2.89% 
Dow 8724.14, (38.62) 
* * * * *

Dave from Denver…

The 10-year Treasury auction was very ugly

Don't be fooled by the fancy bid-to-cover ratio of 2.6 or the Foreign Central Bank participation rate of 34%. They have to back up the rate at auction from where the 10yr was trading this morning by 13 basis points to 3.99% in order to price the deal. And this is even after the Fed bought $3.5 billion in longer maturity bonds in the marketplace to help prop up the auction. The proverbial "Bell" is tolling for the U.S. economic system. If ya don't got gold, you better get it while it's still cheap and before big investors start flooding the precious metals market with capital.

Follow up on the 10yr Treasury auction

The Fed effectively bought 18.4% of this auction by buying up 3.5 billion of 10yr and longer maturity paper this morning. Assume the Street dealers heavily shorted the 10yr area of the curve ahead of this auction, knowing that it would be a tough sell and knowing they would have buy anything that didn't clear. Outside of the 34% of the deal bought by Foreign Central Banks, not a lot of new "real" investor money came into the deal. This auction is a stone's throw from being considered a failure. As long a the Fed continues to monetize new Treasury deals, the U.S. can avoid a failed auction like we saw in England several weeks ago. BUT, the Treasury yield curve will continue to blow out and steepen, as the world perceives and runs from the ongoing devaluation of the U.S. dollar.

***

REUTERS U.S. TREASURIES EXTEND LOSSES AFTER RUSSIA SAYS WILL CUT SHARE OF US TREASURIES IN RESERVES

Dollar slides, UST yields rise after Russia comments 

LONDON, June 10 (Reuters) - The dollar slipped against a range of currencies, while U.S. Treasury yields rose on Wednesday after Russia's central bank said it will cut the share of its currency reserves invested in U.S. Treasuries and buy IMF 
bonds.

The dollar index <.DXY> fell as low as around 79.483 after the Russian central bank's first deputy chairman said it would increase its share of reserves placed in foreign banks' deposits [nLA1036154]

The index was at 79.662 shortly before the comments. U.S. Treasuries fell further after the comments, pushing up the benchmark 10-year T-note yield more than five basis points to a session high of 3.92 percent.

Analysts said that the Russian comments stung the dollar, given the massive amount of U.S. Treasuries held by global central banks.

"This is potentially quite negative for the dollar," said Geoff Kendrick, senior currency strategist at UBS in London….

-END-

*Concerns over our US Government's fiscal policy and money creation is putting continued pressure on the dollar, despite today’s bizarre reversal.

*The price of crude oil continues to rise, adding to the inflation concerns. It closed at another high for the move, up $1.32 per barrel to $71.33.

*The CRB continues to move higher, up .63 to 261.07.

*Gold and silver have held their own despite the big rises in stock markets and a diminishing of general public crisis buying. The growing realization of the pickle the US government is in regarding their ability to maneuver from hereon in is beginning to catch hold. This was reflected in a weakening DOW during the latter trading hours. As mentioned yesterday, it is very likely some event is going to enhance public concern and give gold and silver some hefty safe haven bids.

The yield on the 10 yr T note was last at 3.95%.

The dollar is 80.33, up .48, closing well off its lows. It got stronger for no reason other than the the DOW began to sink. This has been a recurring pattern for some time.

The euro was all over the place, making a high of 1.4144 and a low of 1.3915 before coming back to 1.3990.

More gold goodies:

Tuesday, June 09, 2009

West intimidated?

Monday’s down $10.10 Comex day saw 2,940 lots (9.14 tonnes) added to open interest on volume of 106,240 (15.4% above estimated). Divergences from the generally accurate estimated volume are usually indicative of special stresses in the market.

Today’s Comex open was buoyant, with Comex gold up $12 shortly after 9AM. But Western follow through was lacking: volume almost disappeared after 11AM and estimated volume between 1PM and the close was only 2,300 lots - which might be a record. August gold finished up only $2.20 with estimated volume of 86,944 contracts.

MarketVane’s Bullish Consensus, the HGNSI and the GLD ETF’s alleged gold holdings were all unchanged at 80% 36.8% and 1132.15 tonnes respectively. Gold shares were noncommittal, with the HUI closing down 0.55% and the XAU up .03%; both leaving minor amounts into the close.

In the absence of Western initiative the role of the rupee becomes crucial.

***

Wednesday, June 10, 2009

India buys; NY sells: Surprise!

Indian ex-duty premiums: AM $3.24, PM $3.86, with world gold at $957.75 and $960.76. Ample for legal imports. The rupee was firm today, closing at $1=R47.24 (Tuesday R47.48). The stock market added 2.25%, a new 2009 high and in fact the highest since last August 11th.

Following its new talkative policy, the Bombay Bullion Dealers Association has reported the India imported 17.8 tonnes of gold in May. This is perhaps a bit more than followers of the subjective comments in these notes might have guessed, and therefore is in a sense gratifying. The BBA says this is 39% below May of last year (which was a fairly normal month). It brings the total for 2009 to 51.8 tonnes compared to 115 tonnes in 2008. Virtually all of this has been imported in the last two months. Indian gold imports are spectacularly volatile. See

http://in.reuters.com/article/domesticNews/idINBOM13242920090610

Vietnam local gold this morning stood at a $3.77 premium to world gold of $964.47.

I omitted the ECB weekly statement of condition yesterday. Sorry .Two captive CBs were said to have sold E18Mm of gold settling last week; 0.81 tonnes. The previous week’s volume was 0.63 tonnes. Such tiny amounts suggest option positions triggering off. Far below the notional average needed to meet the WAG2 quota.

Presumably the gold market will soon have to deal with the fanfare announcing IMF gold sales, permission for which is currently being smuggled through Congress.

TOCOM again took a mildly benign stance towards gold today. On light volume equal to only 6,751 Comex lots, open interest rose 2.39 tonnes (769 Comex lots) and the public added 2.1 tonnes to its long. The active contract gained 10 ten and world gold came in some $3 and went out 6.50 above the NY close.

Today world gold rose steadily from a late NY low, peaking some $10 up shortly before the Comex open. It also gained some 5 Euro: the strength was not simply due to the dollar. Since 9AM it has met a somewhat pronounced effort of the usual sell-off attempt, more or less similar in $US and Euro: a vivid example of the malign forces deployed on Comex and very convenient for the Indian arbitrage dealers.

***

CARTEL CAPITULATION WATCH

The DOW came back again. Down over 120 after the 10 yr auction results were annnounced, it surged late in the day to only close 24 lower to 8739. The DOG lost 7 to 1853.

Can't see why the US stock market should gain much traction from these levels.

Government Sachs: Goldman's Close Ties To Washington Arouse Envy, Raise Questions

Questions that GATA has been raising for a decade.

U.S. economic news:

08:30 Apr trade balance ($29.2B) vs. consensus ($29.0B)
Mar figure revised to ($28.5B) from ($27.6B). 
* * * * * 

U.S. April trade gap widens on softening exports
 

WASHINGTON, June 10 (Reuters) - The U.S. trade gap widened to $29.2 billion in April as exports weakened again in a reflection of waning global demand, a U.S. government report on Wednesday showed. 

The Commerce Department said total exports fell 2.3 percent to $121.1 billion, the lowest level for foreign sales since mid-2006. Exports have dropped in eight of the past nine months. 

Imports declined in April for a ninth straight month but by a smaller amount than exports, down 1.4 percent to $150.3 billion. That was the lowest value for imports since September 2004, more evidence that the recession-struck U.S. economy was not generating as much demand as it once did. 

Imports of industrial supplies and materials, which include minerals, chemicals and lumber used in U.S. manufacturing, fell in April as did imports of new cars and parts. But imports of consumer goods like televisions and cosmetics and pharmaceuticals rose modestly from March levels. 

The monthly deficit on goods trade with China climbed to $16.8 billion from $15.6 billion in March and was the largest with any single country. During a visit to Beijing last week,

Treasury Secretary Timothy Geithner said U.S. consumers were no longer in a position to keep powering global growth with the United States in recession since late 2007. 

U.S. exports to nearly all of its major trading partners fell. Exports to Japan plummeted to a 15 year low of $3.9 billion, while exports to the European Union dropped 9.9 percent to $17.8 billion. 

Despite soft demand, oil prices rose to their highest level this year. Imported oil cost $46.60 a barrel in April, up from $41.36 in March.

-END-

07:01 MBA mortgage purchase applications index +1.1% in 5-Jun week; total market index (7.2%) 
Compares to +4.3% and (16.2%), respectively, in prior week. The refi index was (11.8%) vs. (24.1%) in the prior week. The 30-year fixed rate +32bp to 5.%; 15-yr. fixed rate +29bp to 5.10%. 
* * * * *

Rising U.S. mortgage rates sap loan applications 

NEW YORK, June 10 (Reuters) - A spike in U.S. mortgage rates drove down total home loan applications last week as demand for refinancing shriveled to the lowest level since November, the Mortgage Bankers Association said on Wednesday. 

Borrowing costs have soared as bond yields have risen, even as the Federal Reserve has sopped up hundreds of billions of dollars in bonds to keep rates low and stimulate the housing market. 

The average 30-year fixed mortgage rate jumped 0.32 percentage point in the June 5 week to 5.57 percent. That was nearly a full point above the record low rate of 4.61 percent in March, the trade group said. 

The vast majority of mortgage activity this year has been from homeowners cutting costs with new loans at rock-bottom rates. 

The Mortgage Bankers Association's seasonally adjusted index of total applications dropped 7.2 percent to a four-month low of 611.0 in the latest week. 

The refinancing index slumped 11.8 percent to a nearly seven-month low of 2,605.7 last week, and refinancing accounted for about 59 percent of all applications, the lowest share since November. As recently as April, refinancings accounted for almost 80 percent of all home loan applications. 

Purchasers have been slower to act in the current housing market, with some waiting in hopes that prices will fall further and others paralyzed by unemployment or wage cuts. 

Demand for loans to buy homes was little changed last week, rising 1.1 percent to 270.7, having basically been stuck in neutral throughout the important spring sales season. 

"I'm not optimistic for 2009 or 2010," Mark Goldman, real estate lecturer at San Diego State University and mortgage broker, said on Tuesday. 

The swift percentage point rise in mortgage rates cuts the purchasing power of a borrower by about 10 percent, he estimated. 

–END-

14:01 Beige Book reports economy remains weak
The report does note that 5 of 12 districts report there are signs that the decline is moderating. 
* * * * *

Fed says economy weak, but some hopeful signs 

WASHINGTON (Reuters) - U.S. economic conditions were weak or got worse through May, but some areas of the country saw signs the contraction was moderating, a Federal Reserve report said on Wednesday. 

Fed contacts in several regions said their expectations for the economy have improved, but that they still don't expect much of an increase in economic activity in 2009. 

The Fed's "Beige Book" of reports gathered from the 12 Fed districts showed widespread economic weakness with a few glimmers of hope. 

–END-

14:00 May budget deficit widens to $189.7B vs. consensus $181.0B 
* * * * *

US MAY BUDGET GAP $189.65 BLN, RECORD FOR MAY (CONSENSUS $181.0 BLN GAP) VS MAY '08 GAP $165.93 BLN 

FISCAL 2009 YEAR-TO-DATE DEFICIT $991.95 BLN VS SAME PERIOD YEAR-AGO GAP $319.40 BLN-TREASURY 

US MAY OUTLAYS $306.89 BLN, RECORD FOR MAY, VS $290.20 BLN IN MAY 2008-TREASURY 

U.S. MAY RECEIPTS $117.24 BLN VS $124.27 BLN IN MAY 2008-TREASURY 

U.S. TREASURY SAYS PURCHASED $9.9 BLN GSE MBS IN MAY, $140.60BLN IN FISCAL YEAR TO DATE

Andy…

ALERT: Treasury Bonds Tanking

All,
I have been very vocal in recent months about the impending collapse of U.S. Treasury Bonds, going as far as to say 
I am as bearish on T-Bonds as I am bullish on gold.

Despite execution of the U.S.’s new "Quantitative Easing" program, which simply means printing money to buy such bonds, U.S. Treasury Bonds have been collapsing rapidly all month, with the yield on the 10-year note spiking up to 4% today (from 2.5% two months ago) following another hopelessly pathetic auction.

The last stool to go before hyperinflation sets in is a collapse in demand for government paper (dollars and T-Bonds), suggesting that capital is rapidly leaving the U.S. and its overvalued financial assets. And if you think 4% sounds low, it is, nearly as low as it ever has been thanks to the Federal Reserve’s maniacally loose monetary policy this past decade.

When hyperinflation starts, it moves very quickly. That is why you must PROTECT YOURSELF by owning objects of real value, such as gold, silver, food, and other life necessities.

The steep decline in T-Bonds may be the watershed event that gets the issues I have been talking about in motion, so time could be short to PROTECT YOURSELF.

Andy

P.S. And for the few that still believe in "green shoots of economic recovery", keep in mind that the only "business" of the U.S. this past decade has been real estate, which is in all-out collapse right now due to the credit crisis. But despite the Fed having lowered official interest rates to 0% this winter, real rates are rising, which will CRUSH any hope for a real estate and/or consumer spending recovery. And given that unemployment continues to rise sharply, the concept of such recoveries are ridiculous to start with.

Andy.

Nouriel Roubini is pounding the table that the green shoots in the economy are yellow weeds.

He lists 10 reasons why the economy is falling flat on its face:

Roubini: Those Are Yellow Weeds, Not Green Shoots

By WSJ Staff

The still-pessimistic Nouriel Roubini offers 
*nine* reasons for pessimism:

First, employment is still falling sharply in the U.S. and other economies. This will be bad news for consumption and the size of bank losses.Second, this is a crisis of solvency, not just liquidity, but true deleveraging has not really started, because private losses and debts of households, financial institutions, and even corporations are not being reduced, but rather socialized and put on government balance sheets. Lack of deleveraging will limit the ability of banks to lend, households to spend, and firms to invest.

Third, in countries running current-account deficits, consumers need to cut spending and save much more for many years. Shopped out, savings-less, and debt-burdened consumers have been hit by a wealth shock (falling home prices and stock markets), rising debt-service ratios, and falling incomes and employment.

Fourth, the financial system — despite the policy backstop — is severely damaged. So the credit crunch will not ease quickly.

Fifth, weak profitability, owing to high debts and default risk, low economic — and thus revenue — growth, and persistent deflationary pressure on companies’ margins, will continue to constrain firms’ willingness to produce, hire workers, and invest.

Sixth, rising government debt ratios will eventually lead to increases in real interest rates that may crowd out private spending and even lead to sovereign refinancing risk.

Seventh, monetization of fiscal deficits is not inflationary in the short run… slack product and labor markets imply massive deflationary forces. But if central banks don’t find a clear exit strategy from policies that double or triple the monetary base, eventually either goods-price inflation or another dangerous asset and credit bubble (or both) will ensue.

Eighth, some emerging-market economies with weaker economic fundamentals may not be able to avoid a severe financial crisis, despite massive IMF support.

Finally, the reduction of global imbalances implies that the current-account deficits of profligate economies (the U.S. and other Anglo-Saxon countries) will narrow the current-account surpluses of over-saving countries (China and other emerging markets, Germany, and Japan). But if domestic demand does not grow fast enough in surplus countries, the resulting lack of global demand relative to supply — or, equivalently, the excess of global savings relative to investment spending — will lead to a weaker recovery in global growth, with most economies growing far more slowly than their potential. So, green shoots of stabilization may be replaced by yellow weeds of stagnation if several medium-term factors constrain the global economy’s ability to return to sustained growth. Unless these structural weaknesses are resolved, the global economy may grow in 2010-2011, but at an anemic rate.

-END-

Ron Paul has 207 sponsors to audit the gold at Fort Knox.  This is going to be interesting.

 

Ron Paul's Audit the Fed Bill now has 207 co-sponsors

including Ed Perlmutter, D-Colo and member of the House Financial Services Committee.

Going to be interesting to see what Obama does with this when Congress passes a Bill requiring an audit of the Fed's gold (a sister Bill is percolating in the Senate)

 

 

end

I may not give a presenation tomorrow as I will be working late. 

all the best.

Harvey.

 

 

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