Saturday, September 19, 2009

sept 19.08 commentary.

Good afternoon Ladies and Gentlemen:
Gold closed down by only 2.80 as the shiny metal held up pretty good with options expiry on Friday.  Silver closed down by 18 cents to 17.04
Most of the fall in price on both metals occurred after 12:00 o'clock with London safely put to bed.

The open interest on gold comex fell from 478000 top 471000 for a drop of 7000 contracts.  The OI on silver dropped by  928 contracts to 124000
A small drop for a 200,000 day volume at the comex gold.
I will now give you the COT and it is alarming. It was released after the market closed:

The Commitment of Traders report revealed the extent to which THE GOLD CARTEL (aka the commercials) are intervening to prevent the prices of gold and silver from going to where they want to go…


*The large specs increased longs by 6,310 contracts and increased shorts by 609.

*The commercials decreased longs by 1,252 contracts and increased shorts by 4,273.

*The small specs increased longs by 7,868 contracts and increased shorts by 4,975.


*The large specs increased longs by 11,621 contracts and increased shorts by 650.

*The commercials reduced longs by 3,460 contracts and increased shorts by 10,404.

*The small specs increased longs  by 7,868 contracts and increased shorts by 4,975.

You will note that the large and small specs bought both metals with the commercials supplying (shorting) the needed paper.
Ted Butler revealed yesterday afternoon that in gold the commercials control 100% of the shorts and over 82% of the silver.
What is more alarming, is the SLV in which Butler has determined that based on the amount of shares outstanding the silver level should be at
310 million oz. Instead the inventory is 280 million where it has been stagnant for the past 3 weeks.
Butler states that it is impossible to find any more silver so the new managers of the SLV,Blackrock are resorting to the illegal shorting of shares, which goes contra to the prospectus.  In other words, the new investor thinks that the managers are
buying the silver.  They are not.  We also feel that the GLD and SLV have very little metal behind them.
For those of you are commenting that scrap gold and silver are making up the shortfall, please read this:

Scrap gold sales dip despite higher price

Dilip Kumar Jha / Mumbai September 18, 2009, 0:56 IST

"The sales of used gold, known as scrap gold in commodity parlance, have declined by almost 50 per cent despite prices of the yellow metal hitting a record high in the local market.

"Normally, jewellery retailers collect 25-30 gm of used gold against the sale of every 100 gm. However, the recovery of scrap intensifies in case the prices of the precious metal head north. But this time, in spite of gold hitting a record high, scrap recovery by jewellers has declined to 12-15 gm. This indicates that consumers are holding on to the precious metal in anticipation of much more higher prices in the future," said Ashok Minawala, an industry veteran."……



Here are some numbers from yesterday's trading:

The yield on the 10 yr T note is 3.47%.

The dollar rose .23 to 76.44.

Crude oil dropped 43 cents per barrel to $72.04.

The CRB rose 1.94 to 259.99.

More Gold Goodies:

Thursday, September 17, 2009

MarketVane’s Bullish Consensus for gold dropped a point to 87%, but the HGNSI and the GLD ETF showed no change at 39.5% and 1,086.47888 tonnes respectively.



Note:  the last entry no change in the LGD  (also no change in SLV). Also note that the 10 yr and the 30 yr increased in yield.

In other words, the 30 day decreased in yield and the long end increased in yield.  Very strange events!!


There was two bank failures yesterday, the Irwin Union Banks of Kentucky and Indiana.  The loss to the FDIC is a rather large 800 million dollars.

Sheila Bair has now petitioned the Treasury  for extra funding:

Friday, September 18, 2009

Taxpayer Bailout of the FDIC on Deck...

"The Federal Deposit Insurance Corp. is considering tapping a Treasury Department line of credit as the agency examines ways to replenish a reserve fund depleted by 92 bank failures this year, Chairman Sheila Bair said." Here's the link: Open Up Your Checkbook, People

Some things to consider: Anyone find it strange that every week only 3 or 4 banks are closed? I know for a fact that the Government has the manpower to shut down only 3 or 4 per week, although hundreds need to be closed down. When a bank is closed, you need manpower FOR EACH BANK BRANCH to clear out all employees, secure the vault, secure the books, secure the cash and guard the door, plus all the beancounters to go over the books.

But it's not only lack of manpower, the FDIC is dragging its feet on closures to conserve cash, presumably praying for some kind of economic miracle. But the fact of the matter is that 100's possibly 1000's of banks need to be closed down or rescued and this going to be a multi-trillion dollar exercise. At some point, we may actually face a bank holiday in order to prevent an inevitable run on the banks. My advice would be to keep minimal cash balances at your local bank - your bank could be next - and move as much money as possible into gold and silver.


Then we got this from a cafe member: (I have highlighted these mortgages to you in the past)

"Option" mortgages to explode, officials warn. The federal government and states are girding themselves for the next foreclosure crisis in the country's housing downturn: payment option adjustable rate mortgages that are beginning to reset. "Payment option ARMs are about to explode," Iowa Attorney General Tom Miller said after a Thursday meeting with members of President Barack Obama's administration to discuss ways to combat mortgage scams. "That's the next round of potential foreclosures in our country," he said. Option-ARMs are now considered among the riskiest offered during the recent housing boom and have left many borrowers owing more than their homes are worth. These "underwater" mortgages have been a driving force behind rising defaults and mounting foreclosures. In Arizona, 128,000 of those mortgages will reset over the the next year and many have started to adjust this month, the state's attorney general, Terry Goddard, told Reuters after the meeting…


but more important: this commentary about Wells Fargo's impending demise:


Exclusive – Wells Fargo’s Commercial Portfolio is a ticking time bomb. In order to sort through the disaster that is Wells Fargo’s (WFC) commercial loan portfolio, the bank has hired help from outside experts to pour over the books… and they are shocked with what they are seeing. Not only do the bank’s outstanding commercial loans collectively exceed the property values to which they are attached, but derivative trades leftover from its acquisition of Wachovia are creating another set of problems for the already beleaguered San Francisco-based megabank. Wachovia, which Wells purchased last fall as it teetered on the brink of collapse, was so desperate to increase revenue in the last few years of its existence that it underwrote loans with extremely shoddy standards and paid traders to take them off their books. According to sources currently working out these loans at Wells Fargo, when selling tranches of commercial mortgage-backed securities below the super senior tranche, Wachovia promised to pay the buyer’s risk premium by writing credit default swap contracts against these subordinate bonds. Dan Alpert of Westwood Capital says these were practices that he saw going on in the market at large. Keep in mind, should the junior tranches eventually default, then the bank is on the hook. Alpert says in reference to how he saw CMBS trades get done, "These guys would say ‘We’ll just take back that silly credit risk you’re worried about.’ Of course that was a nice increase to earnings when they got the security sold. The bank made money at the time." When asked if Wells Fargo was prepared to pay out those credit default swaps if these securities default, a spokeswoman told," In keeping with our strong risk discipline, we continually monitor all of our outstanding derivative positions. We have provided extensive transparent disclosures on our derivatives in our 2008 annual report beginning on page 132." The real question is, however, was enough disclosed to investors about this practice when Wells purchased Wachovia?…




Note the huge purchases of credit default swaps by Wells Fargo.  These have been verified on the filings with the SEC.  I would also like to point out that Wells Fargo is the usa's largest holders of home improvement loans.  In Canada we refer to these as Second Mortgages.  They have also  the highest ratio of level 3 assets to total assets on the planet.

These guys will not survive this quarter.

This next passage is a conundrum that I cannot answer.  Yesterday, the 30 day interest rate notes plummeted from .17% to almost zero.  Generally this means a flight to quality and the only other time that 30 day notes fell to zero was the Lehman Brothers collapse and Bear Stearns  Monday.

However yesterday was strange, the Dow rose by 36 points.  Someone is right and someone is wrong here.

Anyway here is Dave Krenzler's interpretation of this:

Friday, September 18, 2009

What Is The Message of the Market?

Is some kind of economic/financial disaster brewing? Since no one in the media is commenting on what is going on in the chart below, I'm assuming that no one is paying attention to the rate on 30-day Treasury money, which has collapsed almost to zero:

(click to enlarge)

Why is money flooding into the relative "safety" of 30-day Treasuries (perhaps part of this money is flowing from the 10's of billions of dollars in stock being sold by corporate insiders the past six months). Why is gold holding and consolidating it gains above $1000? Inquiring minds would like to know andI'm sure we'll find out very soon if the correct message is coming from the stock market or the bond some gold?





Thursday, Jobless figure had Labour day included which skewed the numbers around.

Monty High has now given another version on his earlier release of the jobs figures:

Jobless Claims, Digging Deeper

Unadjusted Year Over Year: Labor Department Initial Jobless Claims Caveat

Yesteday I reported that year-over-year initial jobless claims were much better than the previous week (click here).I now see that this is a one-time statistical fluke. Here's why:

  • This year, this week included Labor. You can't file for unemployment on Labor day. The loss of labor day is 20% of the week.
  • Last year's comparable week did not include labor day.
  • Either by switching to last year's labor day week (subtracting 50K from the last year comparable) or adding 20% (adding 80K to the this year number) more to this week to accommodate labor day you see the data line up with earlier weeks.

So, I expect that next week initial jobless claims will go back to looking quite dismal with something like a 30% year-over-year increase.

I apologize for not catching this yesterday,MontyHigh,


This may be the reason for the fall in yield on 30 day paper...the complete removal of all federal aid commencing at the close of trading Sept 18.09:


Hi Bill - 
I find it very interesting that the US Treasury today removed their Money Market Fund Guarantee on the brink of another banking collapse. 

It's about to get VERY UGLY! 

Treasury Announces Expiration of Guarantee Program for Money Market Funds

September 18, 2009

Treasury Announces Expiration of 
Guarantee Program for Money Market Funds

Program Winds Down as anticipated, Generates $1.2 billion in participation fees for U.S. Taxpayers

The U.S. Department of the Treasury today announced that the Guarantee Program for Money Market Funds (the "Program") will expire today. The Program was initially established for a three-month period that could be extended up through September 18, 2009. Since inception, Treasury has had no losses under the Program and earned approximately $1.2 billion in participation fees.

"As the risk of catastrophic failure of the financial system has receded, the need for some of the emergency programs put in place during the most acute phase of the crisis has receded as well," said Treasury Secretary Tim Geithner. "The Guarantee Program for Money Market Funds served its purpose of adding stability to the money market mutual fund industry during market disruptions last fall and ultimately delivered a healthy return to taxpayers."

Treasury designed the Program to stabilize markets after a large money market fund's announcement that its net asset value had fallen below $1 per share ("broke the buck") in the wake of the failure of Lehman Brothers in September of 2008. Maintaining confidence in the money market mutual fund industry was critical to protecting the integrity and stability of the global financial system.


Jim Willie wrote a paper on Barrick and its apparent non closing of its hedge book.

Willie's conclusions are identical to mine:


Friend Jim Willie put out the following yesterday on Barrick Gold…

Barrick Gold Ripe for Bear Raid

by Jim Willie, CB. Editor, Hat Trick Letter | September 17, 2009

Burn, Baby, Burn !!! Could it be that one response to the Chinese shot across the bow of the corrupted and leaky USS Derivative ship at sea is the announcement that Barrick Gold to cover their entire hedge book… again? Maybe! They covered them all in 2007, didn’t they? They said they did! This is turning out to be an event every two years. Maybe in 2011 they will announce cover and closure of their entire hedge book again. Last time, the key words in the fine print were closure of all hedged gold positions from operating mines. That meant they were willing to lose billion$ in shareholder equity on all mines not yet open, but with ongoing gold price exposure. No wonder they installed a new CEO recently. They have burned through over 20 years of profit in this hedge book strategy, useful for the USGovt but disastrous for shareholders. The ongoing dilution of their stock will continue for a few years more. The next big question is where will Barrick purchase the gold to fulfill the contracts and retire them with metal delivery. It looks like the open market. Maybe the source will be IMF gold bullion. Maybe they own a raft of StreetTracks GLD shares passed under the table from hedge funds. Their operations suffer greatly, from capital drained for balance sheet repair rather than mine development. They boast being a giant among miners, but their production given their equity is pathetically low. They remain a finance firm masquerading as a mining organization, and have finally been caught with their pants at their ankles.

Why the Barrick Gold (symbol: ABX) stock is not cut in half promptly is a mystery to me. They implicitly admit a grand lie from two years ago, with remaining grand hedge book exposure. Perhaps because it remains somewhat a sickly darling among institutions, which are probably either dumb as fence posts or bribed by simple lavish lunches and government back scratches. The Barrick news should be considered as a link in a chain of events likely to unfold in the next several months..



Jason Hamlin has given 4 important developments as to why gold will skyrocket shortly:


Jason Hamlin, founder of GoldStockBull, has put forward four major developments which he thinks all gold-believers should be aware of.

(1) China (today everything seems to depend on China) is encouraging its citizens to buy (accumulate) gold and repatriate any gold held in London. As recently as 2002, the possession of gold in private hands was prohibited in China -- now we're seeing a dramatic reversal of policy. "It's glorious to buy and hold gold" is the official stance in China.

(2) Barrick Gold Corp. has decided to begin closing its huge gold hedge book. This will entail Barrick buying millions of ounces of gold which they have shorted. Barrick is preparing for a higher gold price. The word I hear is that Barrick has bought 2 million ounces of gold and is expected to buy another 3 million ounces. This is supposed to cut its hedge book by half. Russell Comment -- What, only half?

(3) COMEX Commercial traders have taken the largest net short position ever against gold and silver. Normally this huge addition to supply would knock the precious metals down. But this has not happened, at least, so far. Evidently, buying in gold and silver has been powerful enough to pressure the commercial shorts. They will have to put out more shorts (a dangerous move) or be forced to cover (note:the commercials are usually the gold mining companies).

(4) Gold and silver have slipped into backwardation. This occurs when the price of a commodity for immediate (spot) delivery is higher than its price for future delivery. One interpretation is that people who control the supply of the metals can't be persuaded to part with their supply, and this suggests that there is more demand for immediate physical delivery than there is an immediate supply of metals.

With the news that China and Russia are scrambling to build up their supply of gold, this could mean that the demand for gold is intense.

Adding to the above, the central banks have now turned into net buyers of gold rather than sellers. 

All in all, the precious metals situation is now fascinating, and the anti-gold interests (those who create fiat currency, i.e., the central banks and the inflationists) may, at last, be facing an inglorious defeat….-END-



I have to go now.  Again, I wish all our Jewish friends a very healthy and prosperous new year.


I will report on Monday unless something urgent  happens



Thursday, September 17, 2009

Sept 17.09 commentary.

Good evening Ladies and Gentlemen:
First of all I forgot to tell everyone that Friday is options expiry and thus as in all previous option expiry days, the gold market
will be  hit as well as  gold shares .  Please forgive me for not reminding you of this.
Today, gold closed down by only $6.30 to 1012.00  Silver fell by 16 cents to 17.22.
The entire loss occurred after 10 o'clock.  The first morning fix were 15% of the physical gold trades hands came in at 1020.10.
The afternoon fix at 10 o'clock came in at 1018.00.  Always remember that 85% of the physical purchases occur at the afternoon fix.
From that point on, the cartel members hit gold and silver.  To give you an idea of the massive trading volume, by 9 oclock 55000 contracts traded.
By 11:00 over 110,000 traded and by 1:30 over 140,000 traded hands.  These numbers are estimates and are always on the low side.
On a slow day, the estimated volume is off by 15%.  On a big trading day, the estimated volume is always short by 30-40%.
My guess today is the comex traded close to 200,000 and they needed that volume to knock gold and silver down a bit.
Without a shadow of doubt we have a sovereign nation standing behind the long purchases in gold and silver.
This news item was trumpeted throughout "au-land" today on gold-eagle and other sites:
RUMOR: China May Ban Gold/Silver Exports.
and is derived from this story:

China to world: No more shiny metals for you

Posted by Tracy Alloway on Sep 17 08:35.

Wowzers. Here's one for the gold bugs — rumours on Thursday that China may ban the export of silver and gold.

The excerpt below is from a Commodity Online piece written by Erik Bethel of SinoLatin Capital — a Shanghai-based merchant bank exclusively focused, as the name might suggest, on transactions between Latin America and China. In practice that means stuff like helping Chinese companies acquire LatAm goldmines, so the company clearly has an interest in promoting China's apparent gold lust worldwide. Nevertheless, here's the thrust of the piece:




Everyone got excited about this except me.  As far as gold is concerned, China does not export any gold whatsoever. It mines around 280 tonnes per

year.  The demand for gold in China is now around 400 tonnes per year so they are importing 120 tonnes per year.

As far as silver is concerned,  China refines 70-80% of the world's production of silver.  I have been told that I might be a little light.  It maybe now a little higher than 80%.  However last

official reports by GFMS has silver refining at 70-80%.


Since they are the dominant players in the silver refining process, the ban on silver exports would certainly not make sense.  The report stated that china has 300 tonnes of silver.

I doubt that.  It is our belief that they supplied the silver to the London Bullion Exchange in the leasing process.  By suppressing the silver price on the left hand, they purchased the physical gold with the right hand.


Would China ban foreigners from purchasing gold or silver jewellry while visiting Beijing? I do not think so. Would they halt jewellry sales from Hong Kong?  absolutely not! Hong Kong is a premier place to buy jewellry for your significant partner.

However, I thought I should bring you the story anyway!


Ok lets go on:

First of all I would like to report on the open interest in gold.


Here is the story:

The gold open interest rose another 3764 contracts to 478,172. The silver open interest went up 155 contracts to 125,306.

As I pointed out to you yesterday, the huge rise in both OI's is totally unsustainable. Today cartel members gave a feeble attempt to knock out some longs.

I doubt if any left.  I will report to you tomorrow on their success on both fronts: silver and gold.


OK here are some other numbers for today:


The yield on the 10 yr T note is 3.39%.

The dollar was unchanged at 76.25. The euro ROSE .0029 to 1.4735. The pound fell .0040 to 1.6436 and the yen closed slightly lower at 91.16.

Crude oil lost just 4 cents to $72.47 per barrel.

The CRB fell .98 to 261.93.

The Dow fell by 8 points.


With mints around the world reporting record sales on gold coins (including my pharmacist cohorts , Van and Anne. who bought gold coins on their own) I find this astonishing:

How on earth can these guys buy 7.6 tonnes in a day, stock pile and insure. And they did this with nobody watching.  Totally magical! Here is the story:


MarketVane's Bullish Consensus for gold added 2 points to 88%, the highest this year and a level not seen since March '08. The HGNSI was unchanged at 38.5%. The GLD ETF added 7.62832 tonnes to 1,086.47888 tonnes – 0.7%.

This from UBS:

"Demand seen by UBS for coins and small bars has... picked up sharply over the past three days, the first time we have seen such an increase since the first quarter of the year. If this is sustained, it may suggest that the recent rally in gold has more broad-based support than was apparent at the start of the week. We remain tactically negative precious metals, but the short-term bear case is becoming less clear-cut".





OK lets go for some economic news:

U.S economic news:

08:30 Jobless claims for w/e 12-Sep 545K vs. consensus 557K
Prior week revised to 557K from 550K. Continuing claims for w/e 5-Sep 6.230M vs. consensus 6.100M. Prior week revised to 6.101M from 6.088M. 
* * * * * 

Our inside source confirms that the economy is getting a little traction:

Unadjusted Year Over Year: Labor Department Initial Jobless Claims Up 6.7%

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

  • Associated Press Headline And Lead: "New jobless claims drop unexpectedly to 545K... The number of newly laid-off workers seeking unemployment benefits fell last week to the lowest level since early July, evidence that job cuts are slowing."
  • Labor Department News Release: click here.
  • Key Numbers: "The advance number of actual initial claims under state programs, unadjusted, totaled 407,869 in the week ending Sept. 12, a decrease of 58,429 from the previous week. There were 382,249 initial claims in the comparable week in 2008."

    Here's my uneducated interpretation - The year-over-year initial jobless claims made a really big shift this week (for the better), at least twice as big as any prior shift I've witnessed since following this closely. We'll have to see if this sticks. In the previous recession, unadjusted year over year initial jobless claims first went negative in January of 2002 while the market bottom was nine months later in September 2002. At +6%, this economy does not have that far to go before year-over-year goes negative. I'm changing my position and I expect that with the recent other bullish news (industrial production, retail sales) that Q3 GDP will print a positive number when it comes out about a month from now. I don't know how long positive GDP can be sustained and I don't know when unemployment will top, but for now positive GDP of some sort seems to be in place.

    The chart show just how big a shift this week's number was. As you can see, the year-over-year shift was based both on a big increase week-over-week a year ago and on a big reduction week-over-week this year. 

    * * * * * 




Three areas in which the economy seems to be improving:

1. the Philadelphia Mfg report

2.Commercial paper

3. Increase  in housing starts and permits:


Here are all 3 reports which indicate that the economy is starting to rise:

08:31 Aug Housing Starts 598K vs. consensus 598K; Building Permits 579K vs. consensus 583K
Jul Housing Starts revised to 589K from 581K; Building Permits revised to 564K from 560K. 
* * * * * 


U.S. housing starts, permits rise in August 

WASHINGTON (Reuters) - New U.S. housing starts and permits rose in August to their highest level since November, lifted by a rebound in multifamily homes, a government report showed on Thursday. 

The Commerce Department said housing starts rose 1.5 percent to a seasonally adjusted annual rate of 598,000 units, just shy of market expectations for 600,000 units. July's housing starts were revised upwards to 589,000 units from the previously reported 581,000 units. 

Groundbreaking for single-family homes, however, fell 3 percent in August to an annual rate of 479,000 units, after five straight monthly increases. Starts for the volatile multifamily segment jumped 25.3 percent to a 119,000 annual pace, reversing the previous month's slump. 

Compared to August last year, housing starts declined 29.6 percent. The housing market, the main trigger of the worst U.S. recession in seven decades, is showing steady signs of healing and analysts expect activity in the sector to contribute to gross domestic product growth this quarter. 

A survey on Wednesday showed confidence among U.S. home builders reached its highest level in 16 months in September, which bodes well for future home construction. 

New building permits, which give a sense of future home construction, climbed 2.7 percent to 579,000 units in August. That compared to analysts' forecasts for 580,000 units. Compared to the same period a year-ago, building permits fell 32.4 percent. 

The inventory of total houses under construction fell to a record low 595,000 units in August, the department said, while the total number of permits authorized but not yet started also hit an all-time trough of 99,000 units.


10:00 Sep Philadelphia Fed index 14.1 vs. consensus 8.0
Aug reading was 4.2. 
* * * * *

Philadelphia Fed factory activity jumps in September 

NEW YORK, Sept 17 (Reuters) - Factory activity in the U.S. Mid-Atlantic region rose in September to the highest level sinceJune 2007, a survey showed on Thursday. 

The Philadelphia Federal Reserve Bank said its business activity index was at 14.1 in September versus 4.2 in August. 

Economists polled by Reuters had forecast a reading of 8.0. 

Any reading above zero indicates expansion in the region's manufacturing sector. 

The survey covers factories in a region encompassing eastern Pennsylvania, southern New Jersey and Delaware.








However, I must give you an unbiased report.  The auto sales for September are dreadful.

And American Express has reported a huge downturn for September.

Here is this report: (from Dave Krenzler)

Dave from Denver…

Tursday, September 17, 2009

Banana Ben Bernanke Is Either A Complete Idiot Or A Pathological Liar

A couple days ago Fed Chairman Bernanke proudly proclaimed that the recession in this country is most likely over. This was a few weeks after he arrogantly took credit for saving the world from global financial disaster. 

Let's look at a couple datapoints to see validity of Bernanke's boast:

1) Yesterday, the CEO of Chrysler and Fiat said that auto industry sales are off 19% so far in September after the cash for clunkers program ended: 
Auto sales

2) Fed Ex reported today that their revenues were down 20% in the most recent quarter vs. the same quarter a year ago. Fed Ex is considered a key indicator of economic activity.

So the question remains, is Bernanke a complete idiot, an ivory tower geek who is blind to the facts or just completely corrupt? Clearly, if you watch the video footage of his past statements about the economy from an earlier post 
Link, it's hard believe ANYTHING that comes out of Banana Ben's mouth. It brings to mind an old rhetorical riddle about traders from my Wall Street days: "Question: how do you know when Bernanke is lying? Answer: when his lips are moving."

"The last duty of a central banker is to tell the public the truth." Alan Blinder, Former Vice Chairman of the Federal Reserve




This next passage is probably the most important piece.  I reported on this yesterday and it is now confirmed by Garic.

Please pay special attention to what he says:


Review the table and focus on line 30:
$612B inflow in 07, 
$675B inflow in 08,
Previous 3 months -54.6B, -57B, -56.8B 
last month: -97.5B.Capital is exiting at an accelerating rate. This clearly is shouting for the Fed to raise rates. Obviously, Helicopter Ben disagrees. Next week's Fed meeting may end up being important historically. Quant easing (monetization of Treasuries) is winding down and must be terminated or renewed. GSE mortgage and agency monetization still has a few months to go. Clearly, the capital flows into this country reversed when the Fed started monetizing. All markets are discounting and need continued Fed printing. Eliminating monetization could lead to all asset markets reversing their gains. Extending monetization could lead to a currency crisis. The Fed historically has used a greater risk decision model. This would lead me to believe they will continue to support the markets through the printing press and risk the value of the currency, since Bernanke has clearly stated exiting early was a mistake from the Depression he will not repeat. Volatility is only going to increase going forward.




when you press on :


go to line 30 and you will see the progression of cash from inflows in 2007 and 2008 to outflows during the past 3 months. It is very hard for the bankers to fudge the TIC report and

therefore I pay special attention to it. Basically the world is shying away from usa dollars as the clowns continue to QE every bond in sight.




As everyone knows, my two favourite stats which gives a huge picture of the economy is

1. TIC report

2. Baltic Dry Index.


The Baltic Dry Index is a measure  of a cost to ship dry commodities (not oil).  Last month the index was down 25% and it is still retreating.

Here is why:

This one has been making the rounds…

Hi Bill. This article reveals what the Baltic Dry Index shows. This is some scarry stuff.

Revealed: The ghost fleet of the recession 
Read more: 

The biggest and most secretive gathering of ships in maritime history lies at anchor east of Singapore. Never before photographed, it is bigger than the U.S. and British navies combined but has no crew, no cargo and no destination - and is why your Christmas stocking may be on the light side this year. 

Some experts believe the ratio of container ships sitting idle could rise to 25 per cent within two years in an extraordinary downturn that shipping giant Maersk has called a 'crisis of historic dimensions'. Last month the company reported its first half-year loss in its 105-year history. 

Martin Stopford, managing director of Clarksons, London's biggest ship broker, says container shipping has been hit particularly hard: 'In 2006 and 2007 trade was growing at 11 per cent. In 2008 it slowed down by 4.7 per cent. This year we think it might go down by as much as eight per cent. If it costs £7,000 a day to put the ship to sea and if you only get £6,000 a day, than you have got a decision to make. 

'Yet at the same time, the supply of container ships is growing. This year, supply could be up by around 12 per cent and demand is down by eight per cent. Twenty per cent spare is a lot of spare of anything - and it's come out of nowhere.' 

These empty ships should be carrying Christmas over to the West. All retailers will have already ordered their stock for the festive season long ago. With more than 92 per cent of all goods coming into the UK by sea, much of it should be on its way here if it is going to make it to the shelves before Christmas.



I urge you to press on the dailymail link and you will see all of those empty ships at harbour!!!


Bill Holter commented today on the Iranian situation.

I had heard that Israel is getting pretty worried about Iran and may not wait much longer:


Bill H:'Iran Rocket Threat Downgraded'...To all; President Obama has apparently scrapped plans to install the "3rd" missile defense site to be located in Poland and Czechoslovakia. I won't get into whether he is right, wrong, showing strength or weakness. I believe the timing of this event is very curious as have been several other recent events.

What are the possible reasons for this about face? Do we really possess "better technology" and can we still implement a defense shield "cheaper"? Maybe the U.S. decided they cannot afford this program (fat chance, they spend whatever they can whenever they can)? Maybe President Obama is having a "dovish" moment? Maybe the "rest of the world" TOLD us we cannot afford it! Maybe the ROW told us they will not "fund" this?

I have lots and lots of questions and few concrete answers. Why did Mr. Netanyahu "secretly" visit Mr. Putin last week? Is this the course of U.S. policy? An about face? What of Iraq and Afghanistan? Is the "Iranian threat" really downgraded because they are backing down or something? Do the litany of Dollar bearish statements issued by major foreign governments have anything to do with this? What about the timing? Does the fiscal year end or G-20 enter into this? What sort of "deals" were cut and with whom?

I really don't have the answers here. I can only speculate at this point but the timing is very curious. If I had to guess, possibly the U.S. has been informed that our "credit line" has been cut off and as a condition of not "foreclosing" immediately the missile plan had to be scrapped? History has shown us that business, finance, wars, backroom deals etc. have all been intertwined, I don't think this is any different.

With the Dollar hanging on by a thread at this point, international and political events carry much more weight because it has become clear that the U.S. is no longer "calling the shots" unilaterally". I believe that this is the beginning of the U.S. being dictated to because of our debtor status. We have put ourselves in a horrible position where in order to survive we must oblige our creditors. Please do not get angry and think of me as un patriotic. I have written and spoken of our need to get our financial house in order so the current situation would not arrive. I am afraid that it has. I am afraid that we have frittered away our Constitution by apathy.

If the current U.S. administration's actions are linked to our financial position, there is precious little time to convert Dollars into precious metals. If the ship is truly hitting the sand, many things we take for granted today will either change drastically or cease to exist. If the world is calling their Gold back (which has probably already been leased out and sold many times over) and severing our credit lifeline, game over has begun. We will know very soon! I feel terrible today and it has nothing to do with a broken back, I fear we have given away everything that was worked for over 200 years. Shame on us! Regards, Bill H.


Tye Burt, chairman of Kinross reports declining reserves of gold at gold mining companies. Where on earth will the cartel get its gold?

Kinross Says Gold Industry Faces Reserve Crisis

By Rob Delaney
Bloomberg News
Wednesday, September 16, 2009

TORONTO -- Kinross Gold Corp., Canada's third-largest producer of the precious metal, said the gold industry is facing a crisis of declining reserves as investor demand outpaces supply.

"We may be in the midst of a perfect storm in terms of price and industry dynamics," Tye Burt, chief executive officer of the Toronto-based company, said at a conference in Denver today. "Globally production has been in decline since the peak of 81 million ounces in 2001 to 77 million ounces last year, and we see that decline continuing long term."…


This from Jim Sinclair.  It looks like Paul Voelker is sounding alarm bells:

Damn, Volcker said it if you have ears to hear.

OTC derivatives sap capital from those that would build and capitalize those that would destroy enterprise.

OTC derivatives have not one iota of social redemption. This engenders a total financial society culture that abhors builders and rewards destroyers.

This culture is at the heart of the naked and raid short sellers.

Former Fed Chair Launches Bombshell on Wall Street and Washington 
By Larry Doyle|Sep 17, 2009, 11:13 AM

clip_image002While the insiders on Wall Street and Washington pander about real financial regulatory reform, former Fed chair Paul Volcker yesterday hit ground zero on this hotly debated topic.

The heart of financial regulatory reform is centered on the implementation of leverage by our largest financial institutions. The leverage is exercised in a wide array of activities, both on and off-balance sheet. The capital utilized by the banks in these activities is credit that has not and will not flow directly through to the economy. Why? The banks believe that they will generate a greater return on the capital via proprietary activities rather than facilitating client business and addressing customer needs.

These proprietary activities, housed in balance sheet trading books and also in off-balance sheet SIV's (structured investment vehicles), provided many nails in our economic coffin. While the Fed has provided the liquidity to refloat the markets (and to a lesser extent the economy), Wall Street banks are fighting hard to maintain as much of their proprietary activities as possible. Washington is largely dancing around the edges of the banks' balance sheets in proposing financial regulatory reform. Until now. Paul Volcker hits Wall Street hard in promoting the end of the banks' hedge fund like activities. The Wall Street Journal details Volcker's bombshell in writing, Volcker Calls for Restricting Banks' Risk, Trading Activity:

Former Federal Reserve Chairman Paul Volcker on Wednesday said banks should operate in a much less risky fashion, including not making trading bets with their own capital, comments that could provoke intensified debates over the future of financial regulation.

Mr. Volcker, who currently is chairman of the White House's Economic Recovery Advisory Board, suggested banks should be restricted to trading on their client's behalf instead of making bets with their own money through internal units that often act like hedge funds.


PS. We met Paul Voelker in Argentina a few years ago.  This man is in his 80's and he is 6'8 inches tall. It looks like he is being shoved to the outside by Obama and company. Press "more" to get the complete story!!



I leave you this from the auto industry:  (and these clowns are running the country?):

It is here that we must remember that we are all shareholders in the US Auto Industry.

From a senior level Chrysler person:

Monday morning I attended a breakfast meeting where the speaker/guest was David E. Cole, Chairman of the Center for Automotive Research (CAR), an Engineer with 40+ years automotive experience, full Professor at the Univ. Of Michigan.  You have all likely heard CAR quoted, or referred to in the auto industry news lately.

Mr. Cole told many stories of the difficulty of working with the folks that the Obama administration has sent to save the auto industry.  There have been many meetings where this very experienced automotive expert has had to listen to a newcomer to the industry;   someone with zero manufacturing experience, zero auto industry experience, zero business experience, zero finance experience, zero engineering experience, and apparently zero brains tell them how to run their business.

Mr. Cole's favorite story is as follows: There was a team of Obama people speaking to Mr. Cole.  They were explaining to Mr. Cole that the auto companies needed to make a car that was electric and liquid natural gas (LNG) with enough combined fuel to go 500 miles, so we wouldn't "need" so many gas stations (A whole other topic)..  They were quoting BTU's of LNG and battery life they had looked up on some website.  Mr. Cole explained that to do this you would need a trunk FULL of batteries, and a LNG tank as big as a car,  and that there were problems related to the laws of physics that prevented them from...

The Obama person interrupted and said (and I am quoting here), "These laws of physics?  Whose rules are those?  We need to change that (while others wrote down the name of the law so they could look it up).  We have the Congress, and the administration.  We can repeal that law, amend it, or use an executive order to get rid of that problem.  That's why we are here, to fix these sort of issues."

My friends...we are screwed

Faith, mighty Faith
The Promise Sees
and looks at that alone;
Laughs at impossibilities and cries



I must leave you now.

To all our Jewish friends out there, I wish you a very happy and healthy New Year.

I will report on Saturday but it will be late in the afternoon.


see you then


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