Saturday, August 22, 2009

August 22.09 commentary.

Good morning Ladies and Gentlemen:
 
Yesterday was a strange day for gold trading as Friday was options expiry.  Generally speaking, the stock market always goes up on this day and gold is whacked.
Not yesterday, as gold climbed by 12.60 to 952.20 and silver rose by 30 cents to 14.17
 
The open interest on gold comex fell by 2000 contracts as some commercials simply did not like the setup.  In silver comex, the OI dropped by 800 contracts as again we see some of the lesser commercials bail out.
 
This was confimed with the COT report:
 

In silver…

*The large specs decreased longs by 1443 contracts and decreased shorts by 1,484 contracts.

*The commercials decreased longs by 309 contracts and increased shorts by 466 contracts.

*The small specs decreased longs by 79 contracts and increased shorts by 813 contracts.

In gold…

*The large specs reduced longs by 8,522 contracts and increased shorts by 4,034 contracts.

*The commercials increased longs by 1,643 contracts and decreased shorts by 16,717 contracts.

*The small specs decreased longs by 3,932 contracts and increased shorts by 1872 contracts.

 

end.

 

Please take a look at the commercials in gold:  they increased long by 1643 contracts and decreased their shorts by a whopping 16717.

In silver the commercials are remaining comatose.

 

I find it amazing that Bloomberg and all newservices do not print the bank failures on Friday. 
However, as I reported to you on Thursday, Corvus bank and Guaranty Bank of Austin Texas were going to fail.

On Friday night, the 10th largest bank in the usa, Guaranty Bank,  along with 3 other banks were sent to morgue and shiva services will begin immediately  The loss so far will be 3 billion but it should rise to around 10 bilion dollars.  Here is the story:

 

Third largest bank failure of 2009 announced

Texas-based Guaranty Bank is bought by Spanish bank. Regulators also seize institutions in Alabama and Georgia, bringing this year's tally to 81.

EMAIL  |   PRINT  |   SHARE  |   RSS
By Ben Rooney, CNNMoney.com staff writer


 

T

NEW YORK (CNNMoney.com) -- Guaranty Bank was closed by federal regulators Friday in the third largest bank failure this year bringing the total number of failures to 81 in 2009.

The Federal Deposit Insurance Corporation was named receiver of the Austin, TX-based thrift, which had approximately $13 billion in assets and $12 billion in deposits as of June.

BBVA Compass, a U.S. subsidiary of Spanish bank Banco Bilbao Vizcaya Argentaria, agreed to assume all of Guaranty's deposits and will buy $12 billion of its assets. The FDIC said it would share losses on $11 billion of the failed bank's assets.

The 162 branches that Guaranty operated in Texas and California will reopen Monday as branches of BBVA Compass, which is based in Birmingham, Ala.

Guaranty was the third largest bank to fail in 2009. It tied for the title of 11th largest bank failure in U.S. history with First City Bancorporation, which failed in 1988.

The estimated cost of Guaranty's failure to the FDIC is $3 billion.

BBVA (BBV) emerged as the winning bidder for Guaranty's assets, beating out potential buyers including a private equity group led by investor Gerald Ford.

Jose Maria Garcia Meyer, chairman of BBVA Compass, in a statement said the transaction makes "excellent strategic sense" and represents an opportunity for BBVA to expand its presence in the "high growth Sunbelt Region."

The purchase marks the first time an overseas-based bank has bought a failed U.S. bank this year. However, the Bilbao-based bank made a series of acquisitions in Texas earlier this decade and already operates the fourth-biggest banking chain in the state by deposits.

Most of this year's failures have been small, regional banks that were brought down by rising delinquencies on home and other consumer loans as unemployment has risen to a 25-year high in one of the longest recessions on record.

Guaranty, which was the fourth Texas bank to fail this year, had a substantial number of risky mortgages made to California borrowers on its books. These loans became a severe liability as the housing market in California collapsed and borrowers defaulted in droves.

Option adjustable rate mortgages made up almost a third of Guaranty's single family mortgage portfolio, according to investor presentations on its Web site. Guaranty also had $1.2 billion of loans to homebuilders in California's overbuilt market.

BBVA said it will maintain regulatory capital ratios at a level that exceeds "well-capitalized" guidelines, and that the impact of transaction will be "immaterial" to BBVA.

California's housing woes also played a major role in last year's failures of Washington Mutual and IndyMac. WaMu, which had $307 billion in assets, was the largest U.S. bank failure on record.

Three other banks fail

Earlier in the day, regulators closed Birmingham, Ala.-based CapitalSouth Bank, which operated ten branches and had $617 million in assets and deposits of about $546 million.

Iberiabank, which is based in Lafayette, La, will assume all of the CapitalSouth's deposits and will purchase $589 million of its assets.

In Georgia, regulators closed Newnan-based First Coweta and arranged for United Bank, of Zebulon, to take over its four branches.

United Bank will pay the FDIC a premium of 1% to assume all of the First Coweta's $155 million in deposits and will buy $155 million of its assets.

Georgia regulators also closed the sole branch of Atlanta-based ebank, which will reopen on Monday as a branch of Stearns Bank.

St. Cloud, Minn.-based Stearns, which has bought a number of failed banks this year, will purchase the bulk of the failed bank's $143 million in assets and will assume all of its $130 million in deposits.

So far this year, 18 banks have failed in Georgia.

Friday's closure brings the total number of bank failures this year to 81, compared with a total of 25 in all of 2008.

The failures of CapitalSouth, First Coweta and ebank will cost the FDIC an estimated $262 million on top of the $3 billion from the failure of Guaranty Bank. Over the next five years, the agency expects roughly $70 billion in losses due to the failure of insured institutions.

Fortune's Colin Barr contributed to this report. To top of page


end
 
 
Yesterday, the dollar was hit pretty hard with this revelation from Nobel Prize laurate Stigliz:
 

Stiglitz Sees Risk to Dollar, Need for Reserve System 
Aug. 21 (Bloomberg) -- The dollar’s role as a good store of value is "questionable" and the currency has a high degree of risk, said Nobel Prize-winning economist Joseph Stiglitz. 

"There is a need for a global reserve system," Stiglitz, a Columbia University economics professor, said at a conference in Bangkok today. Support from countries like China should ensure orderly discussions on a new reserve system, he added. 

The dollar has lost 12 percent since March 5 against an index comprising the euro, yen and four other major currencies. China, the world’s largest holder of foreign-currency reserves, and Russia have both called for a new global currency to replace the dollar as the dominant place to store reserves. 

"The current reserve system is in the process of fraying," Stiglitz said. "The dollar is not a good store of value. Right now, the dollar is yielding almost no return and yet anybody looking at the dollar has to say there’s a high degree of risk." 

The dollar will weaken as the U.S. pumps "massive" amounts of money into the economy, according to Curtis A. Mewbourne, a portfolio manager at Pacific Investment Management Co., the world’s biggest manager of bond funds…

Policy makers in the U.S. and Europe have flooded the global economy with liquidity, which could lead to speculative bubbles due to limited opportunities for investment, Stiglitz said. The Nobel Prize winner said he was not confident of the Fed’s claim that it would withdraw liquidity when needed. 

Under Chairman Ben S. Bernanke’s stewardship, the Fed cut the benchmark lending rate to as low as zero and expanded credit to the economy by $1.1 trillion over the past year. In the euro region, the European Central Bank has reduced interest rates to a record low of 1 percent. 

"As the balance sheet of the Fed has blown up, as the deficit of the U.S. and the debt has increased, people have asked the obvious question: will there be inflation in the future?" Stiglitz told the conference. "Right now we’re facing deflation, but some time in the future, there will be consequences." 

Asset Bubbles 

The liquidity pumped into the U.S. economy may also end up elsewhere, including in Asian property and stocks, Stiglitz said later in Bankgok. 

"The liquidity is going to be spent, but not necessarily in America," he said. Asian economies may have to "protect against an American-led asset bubbles." …-END-

 

Here are some numbers are yesterday:

The yield on the 10 yr T Note rose to 3.55%. The dollar FELL .31 to 78.09, after recovering off of severe technical lows. The euro ended the day up .0069 to 1.4323. The pound was little changed, but the yen rose to 94.36.

Crude oil ended the day up 52 cents per barrel to $72.54.

The CRB went up 2.31 to 259.24.

end.

 

Yesterday was surprising for gold as it not only rose on options expiry but also on a speech on Beb Bernanke at Jackson Hole Wy.  Generally, when a Fed governor speaks, they always whack gold.

we have a stalker trader who has been very reliable in the past.  This was reported to us late in the day:

 

Just in late this afternoon ... our STALKER source called. He said they are waiting to hear back from their fabulous London trader as to what he is up to. Will get back ASAP on that one. In the meantime he said he was in touch with a New York trader friend he has known since the E.F. Hutton days of yore. Word from that trader is that Goldman Sachs and JP Morgan Chase were covering shorts today and going long December gold. Our Stalker source was skeptical and so am I. If gold had blown through $960 and roared $40 higher, breaking the 2% rule then I would be gleeful. However, gold traded like it usually does today. There was no change in the standard Gold Cartel drill.

That said, we have some smoke. Perhaps that smoke will lead to THE FIRE. It is possible they were buying, but the price shot up so much so fast, word came back to halt the advance and save the rest of their buying for another day. While Goldman and Morgan could have been operating on the OTC market, we should still see some open interest reduction on the Comex should this "word" be fact.

Either way, it is only a matter of time before we get a Commercial Signal Failure and the cabal forces get blown out of the water. There is no way the cabal shorts can cover their positions without gold going berserk.

end.

Next week, there is going to be another treasury auction.  No doubt the usa government will be buying its own bonds.  Last week, the Fed bought 76 billion on its own bonds:

Next week should be interesting. With another record Treasury Auction on the schedule, with the $ yet again sitting on the cliff and stock option expiration out of the way, the obvious move from the "powers to be" will be to engineer the deflation trade one more time (by allowing the stock futures to sell off). One of these times Gold is going to blow right through one of these interventions and the short squeeze will be on. Unfortunately, the Treasury’s finances continue to implode and just in the last week the Fed bought $76B in mortgages, agencies and Treasuries with newly created $’s:

http://www.federalreserve.gov/releases/h41/Current/

 

end.

 

OK lets go to the news of the day:  existing home sales shot up by 7.2%:

US July existing home sale pace fastest in 2 years 

WASHINGTON, Aug 21 (Reuters) - Sales of previously owned U.S. homes in July notched their fastest pace in nearly two years, an industry survey showed on Friday, the strongest sign yet that housing was pulling out of a three-year slump. 

The National Association of Realtors said that sales jumped 7.2 percent to an annual rate of 5.24 million units, the highest since August 2007, beating market expectations for a 5 million unit pace. Sales were at a 4.89 million pace in June. 

July's percentage increase was the largest monthly gain since the series started in 1999 and marked the fourth straight monthly advance. The last time sales rose for four consecutive months was in June 2004, the NAR said.

 

end.

 

Please remember that many of thse homes are first time buyers who received 8,000 dollars of grant and also half are foreclosed properties.

Dave Krentzler has given his commentary on yesterdays strong home sales:

Dave from Denver…

Friday, August 21, 2009

The Existing Home Sales "Bounce" Will Be Brief

The existing home sales number released today showed a slightly better than expected number for the month of July. Given that we are in the heart of home buying season, given all of the money pumped into the system by the Fed AND especially given the $8,000 first time home buyer tax credit, we shouldn't be surprised to see a small, seasonal bounce in home sales right now. 

As pointed out by Clusterstock.com: 
Existing Home Sales would have been negative over June if not for the increase in Northeast Condo sales, Single Family Detached sales were DOWN 5000 units June to July, and in the all-important Western region, existing sales were down 10%.

But let's look at the underlying factors and data to understand what is really going on with the "seasonally adjusted" and polished-up-for-public-presentation number released by the National Association of Realtors. Here are the factors we see that will undermine this brief respite from the ongoing housing Depression:

1) The universe of qualified first-time home buyers gets exhausted; 2) Distressed investors step away as the ever-present "shadow" inventory becomes actual inventory (shadow inventory is bank-owned homes and would-be sellers waiting for "a bounce in the market"); and 3) The massive wave of prime mortgage foreclosures will flood the market, putting pressure on prices in every price-segment AND on buyer demand.

First-time home buyers and foreclosure/short-sale buyers - so-called distressed investors - represented 61% of the estimated sales for July. This metric is not a sign of a healthy, sustainable market for a couple reasons. First-time buyers are most likely "pulling" future sales into the present, as the first-time home buyer tax credit of $8,000 is set to expire in December. Home sales drop off anyway after August, so we would expect to see an even bigger drop in the third and fourth quarters, even if Obama extends taxpayer subsidization of first-time buyers.

As for the distressed investor segment, many of these buyers will look to "flip" their "distressed" purchase fairly quickly or they'll be forced to rent out the property to avoid the negative cash flow hit from holding investment homes. But renting will be made a lot more difficult by the record inventory of rentals units currently on the market, and growing. I would expect to see a lot of "investors" look to try and unload their property if they can't rent it out or become nervous about the market.

And finally, the inventory levels are still at unusually high levels. We know for a fact that banks have been withholding foreclosed homes on their books (REO, real estate owned) from the market in an attempt to reduce supply and hold up prices. We also know, as reported yesterday, that the percentage of properties in foreclosure or delinquency hit a record high of 13.2% of all single-family mortgages. What makes this metric even more severe in terms of housing market economics is the large jump in foreclosures in prime mortgages and FHA-insured mortgages. 

Up to this point, the lower priced homes, typically bought by first-timers and distressed investors, have been by far the highest component of existing homes sales. With the impending tsunami of prime mortgage foreclosures will be a flood of much higher priced homes, which will ultimately put a lot of pressure on the lower end of the market. Of course eventually these banks will have to put a lot of their foreclosure inventory on the market, which will exacerbate the problem.

Ultimately this brief "bounce" in home sales will run into the problems discussed above and, because the Fed and the Government tried to put a floor under the market, the ensuing next leg down will be even worse than what we went through over the past 18 months. It will be interesting to see if the Government decides to spend some of the trillions of dollars it's printing to become a home buyer of last resort (I say this only half-facetiously because I bet it's been discussed). Let's not forget that the taxpayer now owns outright or de facto General Motors, Fannie Mae, Freddie Mac, Citibank and AIG. So in a way I, via FNM and FRE, the taxpayer is already monetizing the housing market.

***

 

end.

 

Philadelphia is going to cut services to its 1.5 million inhabitants:

 

Philly mayor unveils worst service cuts since 1951 

PHILADELPHIA, Aug 20 (Reuters) - Mayor Michael Nutter detailed on Thursday what he said will be the deepest cuts in public services for more than half a century, needed to balance the fiscal 2010 budget and the city's financial plan for the next five years. 

"This plan would be the most radical, painful and unprecedented dismantling of City government since the Home Rule Charter created City government in 1951," Nutter said in a statement. 

The revised budget, triggered by state lawmakers' refusal so far to approve budget-balancing measures, would, if implemented, reduce the work force by about 3,000 positions, close libraries, parks and recreation centers, and shutter some city departments. 

Philadelphia, the most populous city in Pennsylvania with about 1.5 million inhabitants, has been hit hard by the recession, which has sent revenue tumbling as welfare costs rise. The pain that Philadelphia is facing is part of the 
recession's fallout on major U.S. cities, as well as on counties and most state governments. 

The cuts, previously announced in outline but now described in more detail, include the elimination of positions for 929 police officers, 120 firefighters, 520 recreation 
department jobs, 490 library staff members, and 112 health workers. The actual number of layoffs won't be known until the city evaluates which of its approximately 23,000 positions are filled. 

Layoff notices are scheduled to be issued on Sept. 18, and layoffs would be complete by Oct. 2, said Luke Butler, a spokesman for Mayor Nutter…

-END-

Gata lawyers have filed another Freedom of Information. I urge you to read the complaint.

 

http://www.gata.org/files/GATAFedAppealLetter-08-20-2009.pdf

 

See you on Monday

Harvey

Thursday, August 20, 2009

August 20.09 commentary.

Good evening Ladies and Gentlemen:
 
Pay no attention to trading on the NYSE and Nasdaq as it was all options related.
The fun will begin on Monday.
 
Gold closed down by 2.80 and silver was unchanged.
The OI for gold comex closed up by 400 contracts which is par for yesterdays performance.  Silver's Oi continues to contract a bit
by 1000 contracts.  The OI remains above 102,000 even though silver's price has fallen $1.00
 
Yesterday, there was a big physical buyer for godl at the London PM fix.  It looks like the buyers showed up in both silver and gold today.
 
The big news today is from Russia.  They have decided to buy physical gold in quantity to match their geographical rival China.
Russia bought 20 tonnes of gold last month. In the last year they have bought over 200 tonnes of gold which is huge.
 
China has been accumulating around 18 tonnes of gold per month so together this is highly significant.   Here is the story:
 

I have been tracking the Russian central bank gold holdings since October of 2006 when they stood at 12.5 million ounces. Russia just reported their gold holdings as part of their Official reserve assets. See link below.http://www.cbr.ru/eng/statistics/credit_stat
istics/print.asp?file=liquidity_e.htm
On the 20th of each month, Russia reports its gold holdings for the prior month. As of Aug 20, the Russian gold reserves now stand at 18.3 million ounces for July of 2009. This is an increase of 600,000 ounces of gold during the month of July 2009. Russia is now also showing their gold holdings for June 2009 on the link above.

The July 2009 increase of 600,000 ounces is the biggest one month increase in their gold holdings since I have kept records. The largest one month increase in gold holdings prior to today's report was a 400,000 ounce increase in Oct. 2008, August 2008, and Sept. 2007.

Russia tends to increase their gold holdings every month. The only question is, how much they will increase their gold holdings this month? Russian purchases tend to be heavy in the August, September, October time period based on past history. If an average gold price is used of $930/oz for July, the 600,000 ounce purchase represents $558,000,000. Not exactly chump change.

It is going to get real expensive for the banks to keep the gold price under $1,000/oz. 

 

end.

 

18.3 million oz of gold translates to 600 tonnes of gold.  The increase of 600,000 oz of gold last month translates to 20 tonnes of gold.

Both of these nations are announcing to the world that they are purchasing physical gold.  I repeat physical gold and not paper gold.

Banking cartel members were not happy with this announcement.

 

On top of this we got this announcement from Austria and Switzerland:

 

Within one week we learn Austria and Switzerland are not going to sell any gold in the near future. Now this news emanating from Russia. I can't stress enough how important these developments are for the future of the gold price. Central bankers are sheeples that go with the flow and the flow right now is not to be a gold seller. If anything it is to be a gold buyer. The statements from Austria and Switzerland will be duly noted by other central bankers. They are like "smoke signals."

 

end.

 

It is now becoming clear that no European nation wishes to sell any gold whatsoever.  This is evidenced by the ECB announcement of zero sells for the past few weeks.

It is now clear that the only entity selling or leasing any gold is the usa and they do not have any approval from congress to do so.

We also have the Chinese waiting patiently for the 402 tonnes of IMF  gold.  I am not sure that they have any gold to sell.

Lets see how this plays out.  However it is clear, it is either the Chinese get this gold or else they dump all their usa money onto the market at once.

Here are some numbers for today:

 

The yield on the 10 yr T note is 3.45%. The dollar fell .05 to 78.37. The euro rose .0007 to 1.4256. The pound finsihed at 1.6506 and the yen fell .023 to 94.13.

Crude oil rose 12 cents per barrel to $72.54.

The CRB fell 3.01 to 256.93.

 

OK lets go to the big newstories of the day:

The jobless claims rose again and this development is certainly not causing joy in Obama land:

08:30 Jobless claims for w/e 15-Aug 576K vs. consensus 550K
Prior week revised to 561K from 558K. Continuing claims for w/e 8-Aug 6.241M vs. consensus 6.215M. Prior week revised to 6.239M from 6.202M. 
* * * * * 

New US jobless claims unexpectedly rise last week 

WASHINGTON, Aug 20 (Reuters) - The number of U.S. workers filing new claims for jobless benefits unexpectedly rose last week, a government report showed on Thursday, as companies continued to cut payrolls amid uncertainty over the economic outlook. 

Initial claims for state unemployment insurance benefits rose 15,000 to a seasonally adjusted 576,000 in the week ended Aug. 15 from 561,000 the prior week, the Labor Department said. 

Analysts polled by Reuters had forecast new claims slipping to 550,000 last week from a previously reported 558,000. A Labor Department official said there were no special factors influencing the report. 

The number of people collecting long-term unemployment benefits edged up 2,000 to 6.24 million in the week ended Aug. 8, the latest week for which the data is available. However, the four-week moving average declined 2,500 to 6.27 million. 

The insured unemployment rate, which measures the percentage of the insured labor force who are jobless, was unchanged at 4.7 percent. 

The four-week moving average for new claims climbed 4,250 to 570,000 last week. The four-week moving average is considered a better gauge of underlying trends as it irons out week-to-week volatility.

 

end.

 

And gold fell on this news..go figure!!

 

Here is the real scoop on those jobless claims:

 

Unadjusted Year Over Year: Labor Department Initial Jobless Claims Up 32%

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

  • Associated Press Headline And Lead: "U.S. jobless claims unexpectedly rise... The number of U.S. workers filing new claims for jobless benefits unexpectedly rose last week, a government report showed on Thursday, fanning worries of an anemic recovery from the worst recession in 70 years."
  • Labor Department News Release: click here.
  • Key Numbers: "The advance number of actual initial claims under state programs, unadjusted, totaled 454,216 in the week ending Aug. 15, a decrease of 28,406 from the previous week. There were 343,169 initial claims in the comparable week in 2008."
  • My Spreadsheet (click Download 20090813yoy).

Here's my uneducated interpretation - Things remain bad with initial jobless claims still way over the roughly 330K value which historically has represented a bottoming of the economy and stock market. I think, based on this data, the outlook is for continued economic contraction and increasing unemployment.

As far as AP spin is concerned, I see the usual unsupported assumption that a recover is inevitable (and has already started).

MontyHigh, http://www.worldofwallstreet.us/

This news provided the lift for the Dow as it rose by 70 points. 

 

0:00 Jul Leading Indicators 0.6% vs. consensus 0.7%
Jun figure revised to 0.8% from 0.7%. 
* * * * *

US leading index rises for fourth month in July 

WASHINGTON, Aug 20 (Reuters) - An index gauging the U.S. economy's prospects rose for a fourth straight month in July, indicating the recession was leveling out, a private research firm said on Thursday. 

The index of leading economic indicators, which is supposed to forecast economic trends six to nine months ahead, rose 0.6 percent to 101.6 after a revised 0.8 percent gain in June. 

Wall Street economists had forecast a rise of 0.7 percent after an initially reported 0.7 percent increase in June. 

"The indicators suggest that the recession is bottoming out and that the economic activity will likely begin recovering soon," said the Conference Board's economist Ken Goldstein.

-END-

10:00 Aug Philadelphia Fed 4.2 vs consensus (2.0)
Jul figure was (7.5). 
* * * * *

 

end.

 

The fact that the manufacturing sector in the Philly area and the leading index rose provided enough justification for the Dow to rise.

The problem is that we are not seeing any employment growth which should accompany  a rise in manufacturing and a rise in the leading index.

 

We got an increase in commercial paper which is a good sign that economic activity is starting to percolate:

 

Commercial paper rise hints US economy is growing 

NEW YORK, Aug 20 (Reuters) - The U.S. commercial paper market expanded in the latest week, suggesting the economy may be growing again after the longest recession in decades as the two-year-old global credit crisis slowly eases, analysts said. 

It was only the second time since April that the overall size of the market had expanded on a weekly basis; the first time being earlier this month. 

For the week ended Aug. 19, the size of the U.S. commercial paper market, a vital source of short-term funding for routine operations at many companies, rose by $35.8 billion, the biggest jump in at least four months, to $1.111 trillion outstanding, from $1.075 trillion the previous week, Federal Reserve data showed on Thursday. 

In two years of credit market turmoil, the market's size has halved, from about $2.2 trillion outstanding in August 2007 when the crisis first erupted. 

Now, however, "it appears that the freefall we saw in commercial paper may be ending," said Ray Stone, an economist with Stone & McCarthy Research Associates in Princeton, New Jersey. 

The commercial paper market, a main conduit of short-term borrowing for companies and banks, froze up from summer 2007 as fears that counterparties might not repay what they owed fueled the gathering global financial crisis.

 

end.

 

However on the downside we got this horrible news:

 

US foreclosures dip slightly in Q2, delinquencies climb 

NEW YORK, Aug 20 (Reuters) - U.S. mortgage delinquency rates continued to climb in the second quarter, while the percentage of loans that entered the foreclosure process dipped slightly, the Mortgage Bankers Association said on Thursday. 

The percentage of loans on which foreclosure actions were started fell to 1.36 percent in the second quarter, down from an all-time high of 1.37 percent in the first quarter. 

The modest fall, however, was driven by a major drop in foreclosures on subprime adjustable-rate mortgage loans, while foreclosure rates on the other types of loans rose sharply, particularly on prime fixed-rate loans. 

Higher U.S. unemployment should propel more mortgage delinquencies and foreclosures over the coming year. 

The delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a seasonally adjusted rate of 9.24 percent of all loans outstanding as of the end of the second quarter of 2009, up 12 basis points from the first 
quarter of 2009, and up 283 basis points from one year ago, the MBA said in its National Delinquency Survey. 
The delinguency rate breaks the record set last quarter. The records are based on MBA data dating back to 1972.

end.

However, I feel this is the big story of the day:  the FDIC is needing to fund all of its bank closures:

Here is the story and then I will comment:

FDIC May Add to Special Fees as Mounting Failures Drain Reserve 

Aug. 20 (Bloomberg) -- Colonial BancGroup Inc.'s collapse and the prospect of mounting failures among regional lenders may prompt the Federal Deposit Insurance Corp. to impose a special fee as soon as next month to boost reserves by $5.6 billion. 

The FDIC board might act sooner than expected after the Aug. 14 failure of Alabama-based Colonial cost the agency's insurance fund $2.8 billion, and as banks such as Chicago-based 
Corus Bankshares Inc. report dwindling capital and Guaranty Financial Group Inc. of Austin, Texas, says it may fail. The fund fell to the lowest level since 1992 in the first quarter. 

"With the failure of Colonial Bank and the possible near- term failures of one or two more large banks, the FDIC may be forced to levy a special assessment on the industry sooner than it had planned," said 
Camden Fine, president of the Independent Community Bankers of America, an industry group. 

The
 failure of 77 banks this year is draining the fund, prompting the agency in May to set an emergency fee of 5 cents for every $100 of assets, excluding Tier 1 capital, to raise $5.6 billion in the second quarter. The agency has authority to set fees in the third and fourth quarters, if needed, to prevent a decline in the fund from undermining public confidence…

-END-

 

Corus bank and Guaranty are two banks who will definitely fail in the next few weeks, maybe even tomorrow.

The FDIC has already stated that at March 31.09 they had 13 billion in reserves.  They have spent 16 billion dollars on the banks that have failed since March 31.09, leaving a negative 3 billion balance.

It is amazing that the press do not pick up the bank failures.  I looked all day on Saturday and found evidence of only 2 banks failing and I reported them to you.

However in reality it was 5 banks failing with the big Colonial bank taking most of the news.  The total failed banks for this year are 77 banks.  Twenty nine banks failed in 2008.

 

The FDIC are now scared.  Banks in jeopardy are raising funds by offering big CD's rates as these banks are short of funds.  However this raises the cost of failure for the FDIC.

On the 25th of August the FDIC will release its second quarter results and it will not be pretty.  Many suspect that over 500-1000 banks are in jeopardy.

With news that the FDIC is in a negative balance, the treasury is again printing massive dollars to rescue either banks or bank depositors.

If China or Korea or Japan feel the usa is printing too much paper money, they will immediately cash their bonds and hyperinflation will ravage the world.

That will be the key event to watch ie.  foreign entities unloading their dollar bonds onto the usa.

 

end.

 

I would like to report on the cash for clunkers.  The program had a tremendous start and now it is going down the gutter.

It seems that the dealers cannot wait for paper to be processed as millions of dollars is owed to them.  Also there are rumours of fraud in many dealers.

 

Here is the story:

It seems the lauded "Cash for Clunkers" program isn't working as well as the government has claimed. The program has a number of problems. Not enough workers were hired to process claims, so some dealers have stopped participating because they are owed up to $200,000 for cars already sold. Dealers are not allowed to ask for deposits from buyers so if the application is not approved, they are out up to $4,500 per car. Certain models that are incentivized by this deal are sold out. In addition, it's no surprise there may be some fraud involved with this $3 billion handout. It just proves what Chris Powell says, "There are no markets anymore, just interventions." 

http://autos.yahoo.com/articles/autos_content_landing_pa
ges/1050/how-to-avoid-the-cash-for-clunkers-snarl/;_ylc=X3oDMTFsNDYyY3R
xBF9TAzI3MTYxNDkEc2VjA2ZwLXRvZGF5BHNsawNjY
XNoLWNsdW5rZXJzLWF2b2lkLXNuYXJs

end.

Retail sales figures on chains were released today and yesterday and they are not pretty:

Recent 2nd Quarter earnings statements from major retailers:

Sears revenue down 10.3%, same store saled down 8.6%
Dick's sporting sees 2009 same store sales down 5%Barnes and Noble sales sales down 5%, some store sales down 7%
Abercrombie & Fitch sales down 23%, same store sales down 27%
JC Penney sales 7.9% sales decline, same store sales down 9.5%

As retailing analysts know, these are horrific revenue numbers. The consumer is clearly not spending money.

end.

 

Remember this:  the consumer is 70% of GDP.

end

England reported today government receipts and for the first time in over 15 years, July was a negative month.  Usually July is

positive from semi annual tax recepits received from June.

Here is the story:

 

Alistair Darling 'to miss' UK borrowing target after record July deficit as tax take tumbles - Telegraph

The economic news here continues to look bleak as evidenced by the July government borrowing figures published today. It is more a matter of when than if we get a financial meltdown. Government spending is not sustainable and this is a simple fact; raising taxes would send the Labour Party to political oblivion. Here is a link to and an extract from the Telegraph's report on the July figures:

"The public purse is usually in surplus in July, when a large amount of tax payments are received, but the crippling effect of the recession was startling last month as tax receipts plunged. Corporation tax receipts were down by 38pc, compared with a year earlier, while social and benefit spending rose by 9.5pc, figures from the Office of National Statistics (ONS) showed. Last month was the first time a deficit was recorded for July since 1996, a year before Labour was elected, and the worst deficit recorded going back to 1993. Economists had expected a deficit of just £600m. July's £8bn deficit compared with a surplus of £5.2bn in the same month last year."

http://www.telegraph.co.uk/finance/economics/6060520/Alistair-
Darling-to-miss-UK-borrowing-target-after-
record-July-deficit-as-tax-take-tumbles.html

 

I think that is enough for you to digest today.

I will report to you on Saturday.

Harvey.

 

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