Saturday, July 11, 2009

July 11.09 commentary.

Good morning Ladies and Gentlemen:
 
First, this came last night concerning the story on the large financial giant CIT and its financial
troubles.
 
CIT Hires Bankruptcy Advisers After Rejection by FDIC, WSJ Says 
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By Jonathan Burgos and Jim McDonald

July 11 (Bloomberg) -- CIT Group Inc. hired the law firm of Skadden, Arps, Slate, Meagher & Flom LLP as an adviser as it prepares for a possible bankruptcy filing after failing to win access to government guarantees for its borrowing, the Wall Street Journal reported, citing people familiar with the matter.

The hiring of the prominent bankruptcy law firm doesn’t mean a company will actually make a bankruptcy filing, the report said. “The government has not said absolutely no to anything,” the newspaper cited a person familiar with the matter as saying.

The Federal Deposit Insurance Corp., run by Chairman Sheila Bair, is in discussions with CIT about how the lender can strengthen its financial position to get approval, including by raising capital, a person familiar with the matter told Bloomberg News yesterday. CIT’s measures to improve its credit quality, such as transferring assets to its bank, have been insufficient, the person said.

“CIT continues to be in active dialogue with the government,” the company said yesterday in a statement distributed by Business Wire. “There can be no assurance that CIT’s application will be approved by the FDIC, nor as to the timing or terms of any such determination.”

The century-old New York-based lender to 950,000 businesses became a bank in December to qualify for a government bailout and received $2.33 billion in funds from the U.S. Treasury. CIT, which has reported more than $3 billion of losses in the last eight quarters, faces $10 billion of maturing debt through 2010 and hasn’t had access to the corporate bond market in more than a year, according to data compiled by Bloomberg.

CIT’s $500 million of floating-rate notes due in November 2010 fell 3.5 cents on the dollar to 70 cents, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The stock fell 33 cents, or 17.7 percent, to $1.53 in New York Stock Exchange composite trading, after earlier falling as low as $1.13, the lowest in seven years.

To contact the reporter for this story: Jonathan Burgos in Singapore atjburgos4@bloomberg.net.

Last Updated: July 11, 2009 01:29 EDT 
end.
 
 
OK. lets start:
 
Gold closed down by 3.50 to 912.40.  Silver fared worse declining by 30 cents to 12.62.
 
The open interest on the gold comex contracted badly by 7000 contracts as Thursday was a rough day for gold.  Silver's OI dropped a further 2000 and it now stands at around 98000.
 
The cartel tried everything yesterday to knock gold and they failed. 
 
There were two news stories on the same subject yesterday whereby the CFTC was going to oversee speculative position limits on energy and SILVER and GOLD.  This is the first time this was announced ever!!
 
The second story had Geithner clamping down on derivative players and clamping down on free-wheeling markets and associated derivatives.  Here are the stories:
 
 
First, the Geithner story:
 
 

US's Geithner seeks clampdown on derivatives dealers

* Says aims to prevent mark manipulation, other abuses 

* Major dealers to be subject to supervision, regulation 

* SEC, CFTC would impose recordkeeping, reporting rules 

WASHINGTON, July 10 (Reuters) - U.S. Treasury Secretary Timothy Geithner on Friday proposed clamping down on dealers in freewheeling markets for little-understood derivatives that helped create a crisis in U.S. and world financial markets. 

In testimony at a joint hearing by two congressional panels that will play a role in writing legislation on derivatives, Geithner set out proposals that would make big dealers like JPMorgan Chase and Goldman Sachs subject to much stronger supervision than was the case in the past…

-END-

 
And now the bigger story:  the implemenation of speculative position limits on energy and precious metals:
 
 

CFTC to move quickly on position limits 

WASHINGTON, July 10 (Reuters) - The Commodity Futures Trading Commission will move aggressively to rein in excessive speculation in the energy and metals markets by focusing largely on expanding their existing authority, and could have new regulations in place as early as late October. 

"We're looking at a pretty fast time line," Bart Chilton, a CFTC Commissioner, said in an interview. "We're going to use our authority to the fullest extent possible. That doesn't mean we're going to be draconian or go too far." 

In response to recent swings in oil prices, the CFTC announced this week it was considering clamping down on big market players by implementing position limits on all commodity futures contracts, focusing especially on energy and metals such as gold and silver. 

Chilton said while he couldn't ultimately predict what the CFTC will do, he would like to put out proposed rules in September, open them up to public comment and implement them by late October or November.

-END-

 
Here is what many had to say about this:
 
 

What stood out was the mention of GOLDMAN SACHS and JP MORGAN CHASE in the first article and the mention of "focusing especially on energy and metals such as gold and silver" in the second.

This is quite the development because of the concentrated positions of JP Morgan Chase in both the gold and silver markets. How can their concentrated short position be allowed to stand for the public to see in the banking reports if Geithner is actually telling the truth and does what he says he is going to do? Goldman Sachs is now a bank, so that goes for them too.

Could it be the Obama Administration is really going to do something meaningful when it comes to market manipulation? (Before I get a zillion emails decrying this notion, I am only saying there is a shot here.) That shot entails the Obama camp knowing the prices of gold and silver are WAY underpriced and undervalued due to the price suppression scheme. After all, the architects of the scheme include Geithner and key economic advisor, Lawrence Summers. But, the key is, if the GATA camp is correct, THEY know The Gold Cartel is going to hit the wall in the months and years ahead when it comes to available central bank gold and silver to meet annual supply/demand deficits. It just won’t be there, especially as other governments want to hold on to the gold they have left and other governments are accumulating gold.

At the same time, there could be a split in the Obama Administration … those who wish to continue the scheme and those who want it ended before it blows up. This might be the way the one camp opposed to the scheme gets their way.

On that score, The Gold Cartel has been effective with their mission. The specs are exiting.

The gold open interest fell 7134 to 366,909 and the silver open interest dropped 2082 contracts to 98,809. The gold open interest is only some 10,000 contracts off its recent low and a stunning 228,000 contracts off its highs when gold first reached $1,000 per ounce.

To rap this up, when I met with CFTC Commissioner Bart Chilton, and in subsequent conversations, he told me that results were what was important … not just concern and inaction. Bart C is well aware the problem in the gold and silver markets is with the concentrated SHORTS, not the long positions. The silver investigation goes on and on, with nothing of substance coming out of it. With the US Government as a price suppression scheme culprit, this is not an easy one to resolve by the players doing the resolving. GATA start some place.

IF what we are hearing is true, it just might be The Gold Cartel is playing its Swan Song for us, right now. Time will tell, but at least there is a glimpse of promise at the moment.

 
end.
 
I will write to Mr Gensler and ask how he is going to resolve the massive short by JMOrgan on July 6.08 and the massive financial damage done by them and their allies as per the banking participation report.
 
 
Friday night saw the release of the COT data and it is quite revealing.  Commercials are starting to liquidate their shorts:
 
The gold COT report revealed the following...

*The large specs reduced longs by 3,619 contracts and also reduced shorts by 3,577 contracts.

*The commercials increased longs by 4,761 contracts and reduced shorts by 1,750 contracts.

*The small specs decreased longs by 6,350 contracts and increased shorts by 119 contracts.

Interesting, the commercials began to cover before the big drop of the last few days and the little guys got out of their long positions. No doubt, the commercials have covered a great deal more on the latest drop ... which makes a recovery and the BIG MOVE we keep waiting for all the more likely.

end.

Here are some economic numbers from yesterday:

The yield on the 10 yr T note fell to 3.29%, a far cry from 4%.

The dollar rose .36 to 80.25.

The euro fell .0062 to 1.3948. The pound fell to 1.6205, while the yen rose .77 to 92.30, which continues to trade opposite to the euro.

Crude oil lost ground again, giving up another 52 cents per barrel to $59.89.

The CRB fell 1.08 to 233.45, which means it has corrected about 50% from its recovery high.

 

end.

On the trade front, the trade deficit narrowed to 26 billion dollars.  Imports dropped off badly as nobody is importing anything.  The economy is quite stagnant.

Gold exports are still extremely high.  It looks like the usa sold about 3 billion dollars worth of gold. This physical gold is going to refiners and then into the markets. The game is over when this gold is no longer available.

 

U.S. May trade gap narrows to lowest since 1999 

WASHINGTON, July 10 (Reuters) - The U.S. trade gap narrowed unexpectedly to $26 billion in May to the lowest reading since November 1999 as exports rose despite weak global demand and imports shrank, government data on Friday showed. 

The Commerce Department said exports increased 1.6 percent to $123.3 billion, while imports declined by 0.6 percent to $149.3 billion. 

Analysts polled by Reuters had expected the trade deficit to widen to $30.2 billion in May. The trade gap in April was revised to $28.8 billion from a previously reported $29.2 billion deficit. 

May's import level was the lowest since July 2004 and the 10th straight monthly decline, providing further evidence that the recession-mired United States has diminished as a source of demand for the rest of the world. 

The auto sector has been hard hit in the economic slowdown and May imports of automotive vehicles and parts slipped to $10.2 billion, the lowest level since March 1996, while auto exports were the lowest since July 1998. 

The monthly deficit on goods trade with China grew to $17.5 billion from $16.8 billion in April and was the largest with any single country. 

But the U.S. trade deficit with other big trading partners declined, falling to $2.8 billion with the European Union in May, for the lowest reading since March 1999, and retreating to $1.9 billion with Japan, which was the lowest since February 1984. 

Imported oil cost $51.21 a barrel in May, up from $46.60 in April. The value of crude oil imports in May declined only slightly to $13.4 billion, despite a sharper decline in the quantity of oil actually imported, to 262 million barrels from 293 million in April, the Commerce Department said.

-END-

US consumer sentiment fell badly again in June.  This is not good for the dollars' value:

US consumers' mood sours in early July - survey 

NEW YORK, July 10 (Reuters) - U.S. consumer sentiment soured in early July, slipping to its weakest since March, when confidence in the financial sector and economy were at a low ebb, the Reuters/University of Michigan Surveys of Consumers showed on Friday. 

Consumers' escalating concerns about an extended economic downturn, job security and erosion of wealth were the main factors depressing sentiment, the survey said. 

Its preliminary index of confidence for July fell to a reading of 64.6 from the final reading for June of 70.8. 

July's preliminary reading was well below economists' median forecast for 70.5. 

The index of consumer expectations fell to 60.9 from June's final reading of 69.2. 

The index of current economic conditions slipped to 70.4 
from June's final reading of 73.2. 

"Consumers concluded that the economic downturn would last longer and their personal finances would not recover as quickly as they had previously expected," the Reuters/University of Michigan Surveys of Consumers said in a statement. 

Recent income gains were reported by the fewest consumers in the more than fifty-year history of the survey, the statement said.

-END-

This next story is another bombshell that is going to hit the markets and it concerns public pensions and they are plummeting in value.  Here is a story on New Jersey's pension plan.

California's pension plan is also in disarray as is Colorado's. Here is the report:

I said more than 3 months ago that public pension plans would be the next massive area of bailout. Here's commentary on how much trouble New Jersey's plan is in:http://pensionpulse.blogspot.com/2009/07/jerseys-jitters-omen-for-public-plans.htmlIt's interesting that we never hear about California's public pension plan. If New Jersey's plan is in big trouble, California's must be in a terminal coma. I know Colorado's public fund was down 60% thru year end and was hopelessly underfunded at that point. AND they admitted that they had not yet "marked to market" all of the private equity and real estate investments.

The interior mechanisms of our whole system are melting down behind the veneer of Obama's highly polished, mass population hypnotising teleprompter speeches. It's almost become robotic in the spirit of Aldous Huxley's "Brave New World."

Barring a massive acceleration of the U.S. dollar printing presses and Bernanke sending out large air force transport planes instead of helicopters to drop the money in football field size bales, all signs are pointing to some kind of catastrophic economic (and maybe political collapse) before the end of the year.

***

To receive the article on New Jersey press on the blue.

General Motors came out of bankruptcy protection after being in the can for only 40 days.

 

The problem is the continuing spiral downward in the markets.  We may see General Motors go back into bankruptcy protection very shortly.

Obama is trying to get the Fed to be the overseer of derivatives and be a watchdog over the derivative mess.

It looks like there is mounting opposition to this:

 

Lawmakers Call for Probe of Fed Role in Bank of America Merger

July 10 (Bloomberg) -- House lawmakers are calling for an investigation of the Federal Reserve’s conduct in Bank of America Corp.’s takeover of Merrill Lynch & Co. before they consider granting more powers to the central bank.

In a letter to President Barack Obama, 14 Republicans and three Democrats said there is a "considerable amount" of evidence that calls into question Federal Reserve Chairman Ben S. Bernanke’s testimony last month that the Fed didn’t put undue pressure on executives to carry out the takeover last year…

http://www.bloomberg.com/apps/news?pid
=20601087&sid=aaHk9YEopsAg

-END-

Here we go again.  AIG is totally bust and they want to give retention bonuses to employees?

AIG Wants To Pay Financial Products Group $235 Million In Bonuses

Uh oh. Here we go again.

From The Associated Press:After its bonus payments ignited a firestorm of criticism earlier this year, American International Group is asking the federal government to weigh in on the insurer's plan to resume paying millions in promised retention incentives next week, according to media reportshttp://www.businessinsider.com/aig-wants-to-pay-financi
al-products-group-235-million-in-bonuses-2009-7

end.

Another bank failed last night, the Bank of Wyoming.  It is small bank with assets of only 70 million.

There are only 13 billion dollar left in the FDIC and a bankruptcy of CIT will adsorb all of those dollars.

California still does not have a budget and the banks have stated that they will not honour the IOU's.  The public are furious in that the Federal Government bailed out the banks and these same banks cannot help out a struggling state.

On that note, I leave you with Bill Holter's commentary on IOU's:

Bill H:

IOU World

To all; can you imagine living in IOU world? You go to work and at the end of the week your company gives you an IOU. You go shopping for food and give the smiling cashier an IOU and then stop at the gas station to fill 'er up and give some more IOU's. April 15th comes around and it's time to pay your taxes but you are a "little cash strapped" so you send Uncle Sam an IOU. If you are fortunate and have a refund coming back, the IRS (since they are REALLY cash strapped) sends you an IOU. Does any of this sound vaguely familiar?

The reality is this is the world we live in today. THIS is what the entire world has been subjected to since Aug. 1971. Dollars have been circulating throughout the world and have been used to "settle" international trade but in reality, none of this trade has ever been settled because these Dollars are nothing more than IOU's. Sure, the game of "hot potato" has gone on a long, long, time but if you hold onto your Dollars until the end of the game you won't even have a potato to show for your hard work and savings.

On the grandest of scales, this is what foreign nations are all coming to grips with now. The world led by Russia, China, India and Brazil are all cutting deals amongst themselves to conduct trade in their own currencies and thus reducing greatly the artificial demand for Dollars that has existed for years. Back in the early 70's John Connally the Sec. of Treasury at the time knew the Dollar had huge problems since it was being over printed and was no longer backed by Gold. He said "it's our Dollar but it's your problem" to the rest of the world. Then around 1973 Henry Kissinger cut a deal with the Saudis and OPEC that required all oil sales to be conducted in Dollars. This created $ billions in artificial demand that is now waning on a daily basis.

The Dollar is losing demand and as such will more and more have to stand on its own pathetic merits. Other than the "synthetic short" demand that requires debt to be paid back in Dollars, there are no more rabbits left in Uncle Sam's hat. One could say we are fortunate to be alive and witnessing such a major event in financial history but the only way to be "fortunate" is to not play on the railroad tracks and step as far away from the this failing system as possible. The movement away from Dollar settlement is gaining steam quite rapidly and fits neatly into an end of summer catastrophe. Keep the faith and do not let loose of even one ounce, we have come too far for too long to give anything away now. IOU world is very close to termination. Regards, Bill H.

end.

 

speak to you on Monday

Harvey.

 

 

 

 

 
 
 
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Thursday, July 9, 2009

July 9.09 commentary.

Good evening Ladies and Gentlemen:
 
gold closed up by 6.90 to 915.90. Silver rose by 8 cents to 12.92.
 
The gold comex OI rose by 1058 contracts despite yesterdays big fall in price.  Probably most of the contracts were short sales and probably we even expect some of the speculators went short due to the massive intervention by the cartel bankers.  The silver OI also rose by 400 contracts.
 
Here are some numbers for todays trading:
 
The dollar FELL a steep .82 to 79.87.
*The euro ROSE .0168 to 1.4030 after making a 1.4071 high. 
*The pound GAINED .0309 to 1.6343.
 
The yield on the 10 yr T note rose to 3.39%.

Crude oil rose 27 cents per barrel to $60.41.

The CRB gained 3.32 to 234.53.

 

end.

This news story rocked Wall Street early in the session.  Only another hail Mary which saw the Dow sneak to a gain of 5 points saved today:

Commercial Real Estate Is a Ticking ‘Time Bomb,’ Maloney Says

July 9 (Bloomberg) -- The $3.5 trillion commercial real estate market is a ticking "time bomb" that could lead to a second wave of losses at large U.S. banks, congressional Joint Economic Committee Chairwoman Carolyn Maloney said.

About $700 billion in commercial mortgages will need to be refinanced before the end of next year and "doing nothing is not an option," Maloney, a New York Democrat, said in a statement at a committee hearing today.

This "looming crisis" in commercial real estate lending could lead to significant losses for banks, force shopping center and hotel owners into bankruptcy, push real estate prices down and impede economic recovery, she said.

 

end.

She even commented that she expects to see banking holidays something that I have reported will happen probably in Sept or Oct.

The other big news of the day is the huge collapse in the shares of AIG.  Today the stock plummeted a full 3.69 to 9.41 as news of credit default swaps  surfaced.  Here is the news story:

AIG continues to trade TERRIBLY, to put it midly. Yet another AIG fiasco is vying with California for the next BLOW UP which will send the US stock market into a tailspin. AIG fell a stunning 28%, or $3.69 to $9.41, with nary a mention in Muppet Land...http://finance.yahoo.com/q?s=aig...Hi Bill, 
RECAP AIG

AIG TOOK $122.8 BILLION OF TAXPAYER MONEY!They got an $85 billion bridge loan in exchange for an 80% equity stake.The Fed threw A.I.G. the $85 billion lifeline shortly after the collapse of Lehman Brothers.

At the time, the Fed’s loan was the most radical intervention ever by the central bank in a company’s affairs.THEN A.I.G. to Gets an ADDITIONAL $37.8 Billion.The Federal Reserve Bank Of New York accepted up to $37.8 billion of fixed-income securities from A.I.G.’s regulated life insurance subsidiaries and gave the subsidiaries cash collateral in return.

In that business, the insurers lent securities to investors, like hedge funds, and received both the value of the securities and a fee in return. The insurers then invested those funds in other instruments, such as mortgage-backed securities.

But since then, the value of mortgage-backed securities has plummeted, A.I.G.’s insurance subsidiaries do not have the money to repay their securities-lending partners when they bring back the securities they borrowed and want their money back.

By stepping in then, and permitting A.I.G. to lend the securities onward to the New York Fed, the Fed allowed A.I.G. to preserve cash. It kept A.I.G. from having to mark down the value of the securities at a time when their market value is constantly changing.

But now that the value of mortgage-backed securities has plummeted, A.I.G.’s insurance subsidiaries do not have the money to repay their securities-lending partners when they bring back the securities they borrowed and want their money back.THIS STOCK IS DESTINED TO GO TO Z=E=R=O ... AND ...

TAXPAYER LOSES COULD BE STAGGERING!

end.

 

You will recall that AIG had a reverse split where a consolidation of a 1:20 ratio caused the price of AIG to be 24.00 instead of 1.20.  You received 1000 shares for 20,000 shares handed in.

 

Now the stock has plummeted down to 9.41 which is equivalent to the old  47 cents.  Clearly they are blowing up. 

 

Here is a story on AIG issued by Citibank early in the session:

 

AIG May Have Zero Value After Rescue, Citigroup Says

July 9 (Bloomberg) -- American International Group Inc., the insurer bailed out four times by the government, will likely have no value left for private shareholders after repaying the U.S., Citigroup Inc. said.

"Our valuation includes a 70 percent chance that the equity at AIG is zero," said Joshua Shanker, an analyst at Citigroup, in a note to investors late yesterday cutting his price target on the New York-based insurer by more than half.

Outgoing Chief Executive Officer Edward Liddy is under pressure from lawmakers to sell assets to help repay the $182.5 billion rescue package that was required to prop up the insurer after losses on credit-default swaps tied to U.S. home loans. The company said last week that other derivatives, backing about $193 billion in assets for European banks, could have a "material adverse effect" on AIG’s results..

 

end.

The big operation B and B over in England has defaulted on notes.  This is owned 80%  (I believe) by the Bank of England. Here is the story:

Bradford & Bingley Swaps Triggered by Credit Event

July 9 (Bloomberg) -- Bradford & Bingley Plc’s failure to pay interest on some of its subordinated bonds will trigger settlement of credit-default swaps linked to about $414 million of the nationalized mortgage lender’s debt.

Dealers and investors agreed today that the Bingley, England-based company’s decision not to pay interest on 125 million pounds ($202 million) of 6.625 percent subordinated bonds maturing 2023 was a "credit event," the International Swaps and Derivatives Association said on its Web site....

-END-

I can asssure you that AIG has credit default swaps on this entity.  Also there is still no word on the credit default swaps on General Motors. However it certainly is having its effect on the AIG  stock.

 

Word also came early in the session that CIT may default on its bonds. Its stock is trading in the low 1's.

Last night, we got word that the Baltic Dry Index has plummeted as cargo ships lie idle as they are just not carrying any goods.

OK.  lets move on..

 

You have to see this video. JIm DeMint is trying to get the GAO to audit the Fed.:

 

DeMint Amendment to Audit Federal Reserve Blocked by Senate Leadership

http://caps.fool.com/Blogs/ViewPost.aspx?
bpid=224946&t=01007146184382914537

 

end.

Tomorrow is the last day that the banking sector will cash  California's IOU's.  There is a stalemate in California between the Republicans and Democrats.  Citizens have voted for no tax increases.

Democrats want no cuts in services. Republicans want a balanced budget and thus a huge cut in services and want employees to take time off with no pay.

It is going to be very interesting in California tomorrow night.

 

 

I leave you with Boll Holter's commentary for today:

 

Bill H:

To all; more and more rumblings about auditing the Fed, giving them more power, abolishing them altogether, or even rolling them into a "super" central bank that calls the shots worldwide. Just the fact that there are so many different proposals should tell you that something is afoot. Something must be wrong because none of this talk has ever occurred in the Fed's 95 year history, not even in the 70's.

The audit proposal has been stalled by Mrs. Pelosi and Barney Frank and has met opposition in the Senate. No matter, over the next few months the market pressures on the Dollar will produce enough noise that even shoeshine boys will know there is a problem. The BRIC nations have united in their call for a different reserve currency to use for settling cross border transactions. I think that as this currency crisis matures we will witness several "block" currencies arise such as the Amero and probably a Mideast and Asian currency and in some fashion these will be tied to Gold.

It is obvious that the power structure in the US does not want to "pull their skirt up" and let anyone see what the Fed has done nor what their balance sheet consists of. We are presently in a "don't ask, don't tell" stage where the world knows the Fed and Treasury have gone belly up, but it is better not to speak of it and create the panic that they all know is coming. The ultimate destruction of the value of the Dollar has been sealed many times over the last two years, now the only remaining variables are how, and when.

If you understand this concept, nothing can shake your Gold positions loose and you will not try to trade your insurance. Would you ever wake up one morning and decide to "suspend" your auto or homeowners insurance because you just don't think you will have a claim for several weeks or months? Of course not! This is why at this point in time you can no longer "trade" your Gold positions because the fiat collapse can happen now at any time. Make no mistake about this, the Dollar is a mathematically untenable currency that will implode in value, it is now only a matter of time. While mentioning time, do you know which currency has NEVER lost value over a long period of time to any fiat paper currency in all of history? Yes, that's correct, your insurance policy known as Gold! Regards, Bill H.

The HUI went up a scant 1.32 to 314.30 and the XAU rose .99 to 130.24.

This is SO SICK. The Gold Cartel won't quit. They have now taken gold down $4 off its Comex close in the Access Market with silver giving up its pitiful gains on the day. Why? The DOW sold off and so did the euro ... just what I mentioned earlier regarding The Gold Cartel's modus operandi. This is a criminal operation of epic proportions.

The last number of weeks have been brutal. However, the old adage, "it's darkest before dawn," comes to mind. Six months from now this recent drubbing will be a distant memory. Time to focus on "the donut, not the hole."

For months now I have reported, through Cafe sources, the US economic scene is far worse behind the scenes than The Muppets have been telling us on CNBC. The news of late has BEGUN to confirm our input. The likelihood of a new financial crisis in the US is extremely high ... one that will be TOO BIG TO BAIL! When this new crisis kicks in, the prices of gold and silver will go ballistic ... perhaps out of nowhere. Those out of position will find it difficult to get onboard because they won't want to pay up.

The moves in gold and silver will be historic and will MORE than compensate for the aggravation we have had to deal with in gold and silver of late, and for more than two years in the junior/exploration share sector.

end.

 

I will speak to you on Saturday

Harvey.

 

 

 

 

 

 

 

Wednesday, July 8, 2009

July 8.09 commentary...important

good evening Ladies and Gentlemen:
 
Ted Butler delivered this paper last night and it is important for you to read.
 
At long last, the CFTC will engage themselves to speculative position limits on the part of speculators and this will hold for the short side of the equation as well.
 
First the article:
 
Ted Butler Commentary 
July 7, 2009
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This May Be The Last Time

(This essay was written by silver analyst Theodore Butler, an independent consultant. Investment Rarities does not necessarily endorse these views, which may or may not prove to be correct.)

When I decided on the title of this article, I had the old Rolling Stones tune in mind. But in checking the lyrics on the Internet, I came across this version by the Staple Singers some years earlier, from which the Stones song was derived. I have to say the gospel version was more in line with what I am trying to convey.
Click Here

What is this “last time” I refer to? I think we are approaching the final stages of the great silver manipulation. While I can’t give you a date, I’d like to review the reasons why I think that‘s the case. If I’m correct, it means that the days of depressed silver prices will soon be over. It means the price will, at a minimum, reach the true free market price, which is much higher.

It appears that we’re well into the liquidation cycle on the COMEX. The falling price of silver and gold futures has been engineered by the big commercial shorts who use selling by long holders to buy back their short contracts. This is both the rhythm of the market and the manipulation. It’s the premise behind the COT (Commitment of Traders). I started writing about this latest liquidation towards the end of May.

The current liquidation cycle that we appear to be in, is only the latest in a long string of short selling on rising prices and liquidating on declining prices that has been played out on the COMEX, quite literally, for decades. Due to the repetition of this tech fund/dealer tango, and the total market control the big shorts seem to exert, at least in the short term, it is widely assumed this dance will go on forever. So why am I referencing gospel songs depicting that this may be the last time?

History has shown that whenever previous liquidation cycles have exhausted themselves, low-risk entry points have been presented. These sell offs caused the low risk buy points. The coming end to this current liquidation should prove no different. But what will determine whether it is the last one is the behavior of the big shorts on the eventual rally that follows.

The evidence of a silver manipulation grows stronger by the day. Awareness of the silver (and gold) manipulation has never been more widespread. This is unprecedented. We have never had a situation where hundreds of citizens have petitioned the regulators to end a manipulation. If allegations of a silver manipulation are on the mark, as I believe, surely such public petitioning will hasten its end.

When manipulations end, there is a sudden and violent price movement in the opposite direction from which prices were manipulated. Almost all previous manipulations have been to the long side, where prices were artificially elevated. When those manipulations were terminated, prices then collapsed. The silver manipulation is to the downside, and when it is terminated, the price will soar. If the silver manipulators are as smart and powerful as I have suggested, after they buy back as many short contracts as possible on a sell-off, they will likely step aside from selling new contracts short. If anyone can see the silver manipulation, it is the perpetrators. At some point, they will look to protect themselves when they see no hope in continuing. That will mean no new shorting.

Certainly, the data flow from the CFTC is showing an alarming trend towards super-concentration on the short side in silver (and gold). It’s really getting obvious. For almost a year, the four big commercial shorts have held more than 100% of all commercial net short positions. Recently, the 4 big shorts have held 70% and more of all the true net positions of all traders, commercial, non-commercial and non-reporting combined (when all spreads are removed). Such extremes can not continue, and they certainly can’t intensify. This suggests we have hit the limit in concentration levels.

We also have some interesting dynamics evolving at the CFTC, the chief regulator of silver and gold futures trading. In a few months, we will hit the one-year mark in their current silver investigation. This is the third silver investigation since 2004. Never has the CFTC investigated a commodity so frequently. Never has it investigated any commodity for allegations of manipulation based upon public petitions. The CFTC has often been accused of being an industry lap dog, more interested in cozy industry relations (and post-regulatory employment opportunities), than the public welfare and rule of law. There may be signs of change.

The new chairman of the CFTC, Gary Gensler, has more practical market experience than any previous chairman or commissioner. In every speech or in his congressional testimony he has spoken against fraud, abuse and manipulation. He has endorsed the need for legitimate speculative position limits. These are the specific issues in silver. He has yet to publicly acknowledge that banks speculate when they pretend to be hedging and that they need to be limited, both on the long and short side. Certainly he must have made that acknowledgement privately.

In addition, the new general counsel of the CFTC was a principal architect of the recently released Senate report on excessive manipulation in wheat. He surely sees the connection to silver and has discussed this with the chairman. Both of them know they have a limited time to act on the silver manipulation in order to not be blamed for it. Otherwise, they will inherit the responsibility for it. If the CFTC does decide to enforce existing law and move to end the illegal control by the big shorts, COT analysis becomes moot. You want to hold as much silver as possible before that happens.

As this article was about to be published, a new statement was issued by Chairman Gensler concerning new CFTC initiatives on speculative position limits and changes in the COT reporting. These are issues that go to the heart of the silver manipulation. My sense is that this statement is very important and will directly impact silver. I will be writing about this in the near future. Click Here

At this point, I don’t know how deep the silver and gold sell-offs might be. I will look for signs that suggest it may be over. It could be over quickly, there’s no real way to determine that in advance. In the meantime, the price drop has already removed much risk from the market. We are back to prices that are close to the real cost of production for the primary silver miners. Thousands of contracts have already been liquidated. We are now at prices much more attractive for buying than anytime in the past few months. Besides, you want to play it like it could be last one because if it is, there will be no second chance.

If this plays out as usual, the final sell off engineered by the short sellers will take place amidst a price bottom and doubts about silver’s long-term prospects. I can tell you that all such previous capitulation points proved to be remarkable good buy points. This one will as well. In addition, it may be the last one. If I am right, this could very well be your last great opportunity to buy silver at under $20.

(Editors note: When silver was at $4.10 an ounce, Ted Butler called it one of the great buying opportunities of a lifetime. Our customers have made hundreds of millions following his advice. If he is right this time, as he has to often been, this will be the final great buying opportunity.)

Here is a link to a new interview I did with Eric King of King World News on July 2
Click Here

A WORD FROM IZZY
By Israel Friedman

(Israel Friedman is a friend and mentor to Theodore Butler. He has followed silver for many decades. He has written articles for us in the past. Investment Rarities does not necessarily endorse these views.)

It's time that banks close their trading desks which are only a casino and concentrate on real banking. If the traders and their bank officers don't understand the risk they are taking, it's time they should study the articles written by Mr. Butler. After studying the rarity of silver in the world they will stop holding the price of silver down, and they will look to cover their position of 250 million ounces of silver.

It is only a question of time when the shortage of silver will come. The USA and other world countries donate gold to the IMF but not silver. Why? They don't have silver. The USA has enough gold for 1,000 years of future defense needs, and not one day’s worth of silver. There is no extra silver left in the world.

Don't forget for one moment that silver is a very important strategic metal for the defense industry, and in a case of a shortage, and no silver available, the big short sellers will have jeopardized the national security of the USA. We need today for defense more silver that we can mine in the USA. We are going to depend in the future on imports of silver from unreliable sources. Today’s naked short sellers will be facing the courts and will be charged not only with capping the price for years and producing the world shortage, but also for endangering the national security of the USA.

With all the contraction of world economies, silver is still in a deficit when investment demand is counted. How the naked shorts will cover their obligations at the same time the users and the investors want more silver I don’t know. It will not happen with low prices.

If you think like me that silver is in short supply and sooner or later a shortage will come, you should get your silver before it goes up. All these things these big shorts have been doing to keep the price low makes the coming price rise more certain. When it comes, it will go so high the whole world will ask how this could happen.

end.

 

The CFTC know that they have very little time left before the whole things blows up in smoke.  They must act now and it looks like they are ready to put on these position limits.  This will scare the shorts to cover and drive the price of the precious metals northbound.

 

Today, gold was whacked, down by 20.10 to 909.10.  Silver fell by 39 cents to 12.84.

The open interest continues to contract falling by 1600 for gold comex and 400 for comex silver.

You can see that speculators just do not want to play in this rigged game.

The only way to play is to take delivery.

 

The physical players do not play in NY.  The line up at the wicket in London and buy whatever is available.

The cartel engineered the fall in the Dow to bolster the bond auction:

Treasuries Rise as Refuge Demand Bolsters 10-Year Note Auction

July 8 (Bloomberg) -- Treasuries surged as investors seeking refuge from an economy whose recovery may take longer than expected submitted the most bids on record at today’s $19 billion auction of 10-year notes.

Yields on the securities touched the lowest since May 21 after the auction drew a yield of 3.365 percent. The bid-to- cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 3.28, the highest on record. The note sale is the third of four this week totaling $73 billion. Stocks fell as traders speculated that company earnings reports scheduled to start today will show profits fell in the second quarter.

"The recession is still here, so the demand was strong," said Andrew Richman, who oversees $10 billion in fixed-income assets as a strategist in West Palm Beach, Florida, for SunTrust Bank’s personal-asset management division…

-END-

Over at the ECB, the central bank announced the sale of a huge 5 million dollars or .23 of a tonne.  ( just kidding about the size).

 

Please remember this:  if Europe is not supplying the gold metal then who is?

The Dow which was down 75  points did a Hail Mary and closed up by 14 points.

AIG however continued to falter:

AIG continues to stink up the place, falling 65 cents to $13.10.
http://www.stockwatch.com/utilit/utilit_snapsh_result.aspx

They have huge derivative problems with respect to General Motors, Lear, and quite possibly California.

This is a big article on the effect of debt explosion in the usa. It is from the UK Telegraph:

US lurching towards 'debt explosion' with long-term interest rates on course to double

The US economy is lurching towards crisis with long-term interest rates on course to double, crippling the country’s ability to pay its debts and potentially plunging it into another recession, according to a study by the US’s own central bank

http://www.telegraph.co.uk/finance/financetopics/financia
lcrisis/5754447/US-lurching-towards-debt-explosion-with-long-term
-interest-rates-on-course-to-double.html

 

-END-

Gordon Brown today warned that the G8 that they are heading for another recession:

 

Gordon Brown to warn G8 leaders of threat of second recession

http://www.telegraph.co.uk/news/newstopics/politics/
gordon-brown/5770712/Gordon-Brown-to-warn-G8-l
eaders-of-threat-of-second-recession.html

« Mr Brown will try to win support for new international market rules to ban speculative trading in oil, which officials say threatens to push up prices.

"We have to ensure the oil market does not get ahead of itself and choke off the global economy," said a British official.

At a meeting in France with President Nicholas Sarkozy on Monday, Mr Brown called for new market rules to prevent "undue speculation or speculation that is unfair in the oil market".

Mr Brown and Mr Sarkozy believe world leaders could try to set a "price range" for oil, attempting to set upper and lower limits within which prices could fluctuate. »END

Best

 

 

 

Finally, this commentary from Bill Holter on the supposed "green shoots" that are failing to materialize:

 

A dangerous game

To all; after 3 months of hearing about "green shoots", even CNBC is throwing in the towel. All day yesterday and today the "green shoot" theory has been attacked and discredited as well it should have. From the very beginnings of this depression we have been fed nothing but spin, green shoots being the latest fallacy.

For the last week or so the spinmeisters have been grooming the next topic of misdirection, the reserve status of the Dollar. We are being told the "Chinese and others are (just talking), they don't really want the Dollar replaced". Nothing could be further from the truth and if you swallow this one you are putting your financial life in jeopardy of death. The problem with this spin is that these very same foreigners that are calling for a change of monetary system, can and actually do read U.S. spin publications. This is a very bad situation as the media is actually fanning the flames of anger by duped foreign lenders.

Another twist to this same story is the day to day (it is day to day now because Treasury MUST borrow more EVERY DAY) hurrah regarding Treasury auctions. It is completely obvious that the Fed has and is stepping up and monetizing debt to make it appear scarce and well bid. My guess is that at some point foreigners will "gang up" in a boycott that results in panic selling which will overwhelm the Fed. A side note regarding these huge borrowings is that supposedly only 10% of the fiscal stimulus plan has been funded and spent which means another $700 billion of borrowings will need to be added to the current beggings.

The G-8 ministers are meeting this week and boy oh boy are we showing them how "good" and how "strong" Dollars and Treasuries are this week. Commodities including oil and Gold have been hit hard over the last week to "display" (and create Treasury demand) just how strong U.S. paper is. This game of smashing the inflation trade and then letting air out of the deflation trade has been going back and forth faster and now exponentially faster for over 20 years. The swings are getting wider and wider and now less and less time between gyrations. This action will cause more traders to "bust" and increases the potential for a massive derivatives blowup.

This is a very dangerous "game" that came within hours last October of pulling the plug on the entire system. Last year the U.S. Treasury and Bank of England put their "pristine" balance sheets on the line to prevent a meltdown. Another replay of last year cannot be saved again by these two overlevered entities. You can do the math and reason the logic from 100 different angles and they all come up the same, BANKRUPT sovereigns and massive devaluations of their paper. In the end, the safest and most solid currency in history will attract more capital than it can possibly accommodate at even $5,000 or $10,000 per ounce. You must own it now and not have your convictions shaken no matter what. Your financial survival depends on this. Regards, Bill H.

PS, this just in, John Merriweather the famed Long Term Capital mastermind has done it again! He is closing his most recent hedge fund after blowing up himself and customers. Might I be so bold as to suggest that he apply for the potential vacant Fed chairmanship or possibly even Mr. Geithner's job? After all, he does have experience navigating sinking ships in derivative infested waters....

To all; say it isn't so! Hannibal Lechter had his market manipulation tool stolen from him and what does he do? He runs to the police crying foul like a drug dealer that got held up and had his drugs stolen. To be honest, I wouldn't have guessed that Goldman would ever have divulged this theft. How could they divulge that they have a super duper trading platform that used (im)properly could manipulate markets? But then again, these guys who are smarter and more honest than us "serfs" would never ever manipulate a market. Why would they need to? They are smarter than us and always make money. They must be on the up and up because the regulators haven't put them in jail yet. Like I said the other day, this is systemic and even the core (regulators) are rotten. Regards, Bill H.

end

The jury is still out on the theft of Goldman Sachs proprietary software. 

I believe that the Germans are behind this as they demand for gold which was swapped for Bundesbank gold.

We just do not know.  Let's see how this develops.

 

See you tomorrow

Harvey.

 


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