Saturday, September 26, 2009

Sept 26.09 commentary

Gold closed down by 7.20 to 990.20.  Silver fell by 23 cents to 16.04.
 
The gold comex OI rose by 620 contracts to 467285.  This is rather strange because on Thursday we had a pretty rough sell-off in gold and for that matter
in silver as well.  The cartel had to be hoping for a bigger liquidation of longs by the speculators. They groaned with disappointment!
 
Silver saw the same reaction, it has its OI rise by 187 contracts to 128193, 
In looks to me like we have a determined buyer coming in contact with a determined seller.
 
The COT released after the market closed showed more deterioration in the gold and silver markets.
The speculators are going more long and the commercials are supplying more paper.
The commercial net long positions in gold is 100% and silver within spitting distance of 100%,  showing total manipulation.
 
In news yesterday, the Bundesbank announced that it would not sell more than 6 tonnes for the next year of gold sales (WAG III)
commencing today Sept 26.09 ending Sept 26.10.  Here is the report:
 

Reuters
German Bundesbank to keep lid on gold sales this year
09.25.09, 9:10 AM ET

Germany - * German Bundesbank to keep lid on gold sales

* Bundesbank to pass on other sales options


FRANKFURT, Sept 25 (Reuters) - Germany's Bundesbank will refrain from big gold sales in the first year ofa new central bank gold sales agreement, it said on Friday.

The Bundesbank is the world's second-biggest holder of gold, currently holding 3,408 tonnes -- worth just over $100 billion at today's prices . In response to a query from Reuters, the Bundesbank said it had again decided to limit its sales over the next 12-month period to 6.5 tonnes to the German Finance Ministry.

"The Bundesbank will not make further use of its option to sell to which it is entitled in the first year of the new Gold Agreement," the central bank said in a statement.

"The remaining selling rights will be offered to the other central banks participating in the Gold Agreement in exchange for future selling rights, or to the IMF (International Monetary Fund)."

The Bundesbank is the first central bank to declare its sales plans under the new central bank gold pact, which aims to keep a floor under prices by preventing a flood of the previous metal onto the market.

Gold fell to a two-week low shortly after the announcement, as the euro dipped against the dollar on weaker than expected U.S. economic data. [ID:nLP609040]

Spot gold fell as low as $984.70 an ounce, its lowest since Sept. 10.

European central banks agreed last month to renew their gold sales pact for another five-year period, starting Sept. 27. [ID:nL798799] 

The overall sales cap will reduce from 500 tonnes a year to 400 tonnes, allowing room for the IMF to also sell gold from its reserves. If the Bundesbank passes its sales rights to the IMF rather than another central bank, it will not receive future sales options in exchange. 

The IMF plans to sell 403.3 tonnes from its gold reserves.

-END-

 

 

The House started its hearings on Ron Paul's audit the Fed Hill HR 1207.  It looks like this is going to pass in the pass.  We will have to see

what transpires in the senate:

 

It is only a matter of a short period of time before The Gold Cartel become DEAD DUCKS…Key House Democrat Frank backs calls to audit Federal Reserve
9/25/2009 9:29:55 AM-END-

 

Here are some numbers for trading yesterday:

The yield on the 10 yr T note has tanked to 3.32%.

The dollar FELL .12 to 76.77. So much for the dollar/gold relationship. The euro rose .0021 to 76.77. The pound was little changed at 1.5932, but the yen SURGED to 89.79…December yen
http://futures.tradingcharts.com/chart/JY/C9Crude oil rose 13 cents per barrel to $66.02.

The CRB fell .75 to 250.50.

The Dow fell by 54 points.

 

This is strange:  the gold ETF on Wednesday shed 7 tonnes of gold with gold rising close to 1020:

MarketVane’s Bullish Consensus for gold dropped 2 points to 85%. The GLD ETF shed 7.62764 tonnes to 1,094.10697 tonnes. The HGNSI was unchanged.

end

Here are some economic news yesterday:

 

The most important development was the replacement of the G8 with the G20.  It looks like the creditor nations want to assert

their authority in place of the spenders.

 

Also we heard from the durable numbers in the usa and it was not good:

 

Euro dips vs dollar on surprise U.S. durable goods decline 

NEW YORK, Sept 25 (Reuters) - The euro edged lower against the dollar on Friday after data showed orders for U.S. durable goods such as computers and appliances fell 2.4 percent in August, confounding expectations for a modest increase.

The data added to lingering concern about the health of the U.S. economy and caused investors to pare back positions in currencies such as the euro, seen are more reliant on strong global growth.

The euro dipped to $1.4636 from around $1.4665 before the data. It was down about 0.2 percent on the day.

-END-

 

 

However the Michigan consumer sentiment was pretty good:

 

09:55 Sep final Univ. of Michigan 73.5 vs. consensus 70.5
Preliminary Sep reading was 70.2. 
* * * * *

US Sept consumer sentiment highest since Jan 2008 

NEW YORK, Sept 25 (Reuters) - U.S. consumer sentiment rose in late September to the highest since January 2008 as expectations of an economic rebound continued to grow, a survey showed on Friday. 

The Reuters/University of Michigan Surveys of Consumers said its final index of sentiment for September rose to 73.5 from 65.7 in August. This was above economists' median expectation for a reading of 70.3, according to a Reuters poll. 

The index of consumer expectations rose to 73.5, its highest in two years, from 65.0 in August. 

"The same pace of gains in confidence continued in late September as the economic news reaching consumers grew even more positive," the Reuters/University of Michigan Surveys of Consumers said in a statement. "Consumers reported that the economy had already begun to improve and anticipated further gains in the year ahead." 

The index of current conditions rose to 73.4 in late September from 66.6 in August.

-END-

 

The release of the new home sales on the surface looked good and in reality was pretty bad as the price received

for the homes was sharply down:

 

10:00 Aug New Home Sales 429K vs. consensus 440K
Jul reading revised to 426K from 433K. 
* * * * * 
U.S. new home sales rise 0.7 pct in August
 

WASHINGTON, Sept 25 (Reuters) - Sales of newly built U.S. single-family homes rose to their highest level in nearly a year in August, according to government data on Friday that indicated the housing market was gradually recovering from a three-year slump. 

New home sales have risen for five straight months. 

The Commerce Department said sales rose 0.7 percent to a 429,000 annual pace, the highest since September last year, from a downwardly revised 426,000 in July. 

However, the increase was below market expectations for a 440,000 unit rate. July's sales pace was previously reported at 433,000 units. 

Compared to August last year, total new homes sales fell 3.4 percent. 

The median home sales price in August fell percent 11.7 percent from a year earlier to $195,200, the lowest since October 2003, the department said. In July, the median home price was $215,600. 

The inventory of new homes available for sale at the end of August fell 3.0 percent to 262,000 units, the lowest since November 1992.August's sales pace left the supply of new homes available for sale at 7.3 months' worth, the lowest since January 2007.

-END-

 

Wall Street responded negatively to the following news stories:

Friday, September 25, 2009

US large-loan bank losses triple to $53 billion

U.S. regulators said total losses from large loans at banks and other financial institutions nearly tripled to $53 billion in 2009, due to a deteriorating economic environment and continued weak underwriting standards. According to an annual report released by the four federal bank-regulatory agencies on Thursday, credit quality deteriorated to record levels this year.

Here's the question to ask: are these big banks still paying out massive bonuses and paychecks because they avoided taking $100 billon losses (and eventually losses will be in the trillions - trust me on that) OR are they paying massive bonuses because they were smart enough to convince the Government to keep them going with trillions in taxpayer money?

***

US May Face 'Armageddon' If China, Japan Don't Buy Debt

Published: Thursday, 24 Sep 2009 | 5:22 PM ET 

By: JeeYeon Park
News Associate

The US is too dependent on Japan and China buying up the country's debt and could face severe economic problems if that stops, Tiger Management founder and chairman Julian Robertson told CNBC.

"It's almost Armageddon if the Japanese and Chinese don't buy our debt, "Robertson said in an interview. "I don't know where we could get the money. I think we've let ourselves get in a terrible situation and Ithink we ought to try and get out of it."

Robertson said inflation is a big risk if foreign countries were to stop buying bonds. 

"If the Chinese and Japanese stop buying our bonds, we could easily see [inflation] go to 15 to 20 percent," he said. "It's not a question ofthe economy. It's a question of who will lend us the money if they don't. Imagine us getting ourselves in a situation where we're totally dependent on those two countries. It's crazy." 

Robertson said while he doesn’t think the Chinese will stop buying US bonds, the Japanese may eventually be forced to sell some of their long-term bonds. 

"That's much worse than not buying," he said. "The other thing is, they're buying almost exclusively short-term debt. And that's what we are offering, because we can't sell the long-term debt. And you know, the history has been that people who borrow short term really get burned." 

The only way to avoid the problem, he said, is to "grow and save our way out of it."

"The U.S. has to quit spending, cut back, start saving, and scale backward," Robertson said. "Until that happens, I don't think we're anywhere near out of the woods." 

Robertson is not very optimistic about the short-term.-END-

 

I would like to add that China and Japan have totally stopped bond purchases.( see my previous commentaries)

 

Here is a youtube interview by Congressman Alan Grayson with the solicitor for the Fed, Mr Alvarez.

You will enjoy this:

Does the Fed Manipulate the Stock Market? Where's the Gold? Rep. Alan Grayson SLAMS Alvarez

http://www.youtube.com/watch?v=7VPJHfmP3g4-END-

Here is the exchange in written format:

Amazing Exchange on who owns the Federal Reserve gold

Hi Bill - 
Alan Grayson made great strides today in getting the Federal Reserve to admit that there is a problem with the ownership of Fed gold and has gotten the General Council to agree to a GAO audit..of sorts. 

Here is the exchange and you can tell that Mr. Alverez is dancing around the gold audit trying to steer the line of questioning towards the physical presence of the gold and NOT any ownership issues related to loans, swaps or derivatives. 

http://www.youtube.com/watch?v=7VPJHfmP3g4 

Here is the exchange: 

Grayson: "Does the Federal Reserve actually possess all the gold that's listed on their balance sheet?" 

Alverez: "Yes" 

Grayson: "Has that been audited by the GAO?" 

Alverez: "Aaa..I believe that's within the GAO's authority to audit. It's certainly something our..aaa...independant accountant is able to verify and does." 

Grayson: "So if I go ahead and ask for a GAO audit you won't oppose it, right?" 

Alverez: 
"To auditing the presence of gold on the facility...I...I don't see any reason to object to that" 

Then Grayson goes on to make further accusations...which are all very damning in their own right. 

The key to the gold exchange is that Alverez is specifically talking about allowing an audit of "
the presence of gold on the facility" and not the ownership or claims against that gold. 

This exchange is an historic event in our battle against the gold cabal as the passing of the Audit the Fed bill will open the door to the gold manipulation mechanics. 

We are on the doorstep of our FREEDOM once again in America. 

Watch the battles closely! 
Bix

I thought you might find this interesting:  Larry Levin is a trader at the comex :

Larry Levin's Nightly Newsletter & Trading Signals

FOMC Statement

Dear Mark, 
The market was once again trading in a very tight range this morning...and it was VERY choppy. A few hours before the FOMC announcement, however, the
S&P was very quiet - waiting in anticipation. 

In a nutshell, the FOMC said "We're gonna keep interest rates at zero, giving mega-banks free money, so that they can more easily rape the public to earn massive interest and fees. After all, the mega-banks are still in big trouble even though we're not going to tell you all the details. These fees and free/zero interest for the mega-banks are bringing them back to life, and even though your 401k's are now 201k's - we don't care. The mega-banks are more important than everything else under the sun."

"Speaking of the importance of the mega-banks, we will continue to monetize US debt without admitting it of course. How we do it is through the primary dealers: Government Sachs and the boys buy up all the IOUs and then we, the Fed, buy it a few days later. Since there is a middle-man holding this new debt for a few days, we can deny monetizing it and the dolts in Congress leave us alone."

"Oh, oh - and the massive $18-trillion of loans and guarantees that we have made will not be stopped any time soon. That would lift the curtain on the bank asset sheet problems and we can't have that. And according to our records and those of the Wall Street Journal, about 50% of the current bank profits are coming from their trading desks. Since we are guaranteeing everything under the sun there is no fear of loss and the banks can jam the market as high as they like. Oh yeah, and the high frequency trading scandal that is currently being discussed, we're gonna stop that. Allowing the mega-banks to cheat and steal billions of dollars from their best
suckers...clients...is OK with us at the Fed so we're gonna put and end to a few Congressional outcry's of manipulation. So what if they're right; themega-banks need the money. 

"To hell with 'what's right' and legal; we're the Fed and you can't stop us."

Trade well and follow the trend, not the so-called "experts."

 

           end.

 

 

           Yesterday, we saw one bank fail, the 8th largest so far this year, Georgian Bank in Georgia. The net loss to the FDIC will be 890 million dollars

           This is the 95th bank to fail this year, and the 44th bank to fail since the June 30.09 quarter of the FDIC.  From my calculations, the FDIChas now exceeded

           their 10.4 billion dollars of funds.  This may be the reason for only 1 bank being closed even though over 400 banks are on the troubled list.

 

           end

 

           I  would like to comment on the low USA interest rates and how that is affecting all trading.  As I pointed out to you on previous occasions, it looks

           that the usa dollar is now the new carry trade replacing the Yen.

 

           In 1990, with the implosion of Japan, traders borrowed yen at zero interest rate to buy usa assets namely bonds to yield a positive 5% per annum.

           They knew that the Japanese banks were bust and  the Japanese authorities would keep the yen low to promote exports with the likes of Sony, Tobisha, Mitshubishi etc.

 

           It worked pretty well.  Japan got their exports booming, and the West got free money to make all of their profits which they rewarded to the banker employees.

 

           The second carry trade was the gold carry trade whereby gold was borrowed for 2% per annum and the same usa  assets as above were purchased for 5%.

           The traders knew that central authorities would be providing continual supply of gold on the market, so they were safe to borrow huge quantities of gold.

 

            Last year, the Yen carry trade evaporated with the mass default on subprime and other usa assets.  The trades were unwound and the yen started to

            appreciate where it is now 90 to the dollar instead of 120 to the dollar when the carry trade commenced.

 

           Now we have a new carry trade in full swing:  the shorting or borrowing of usa dollars and the purchasing of good usa assets.  The traders are confident in the shorting of the dollar,

            knowing full well that the banks are bust and that the dollar is heading south pretty fast. 

 

           However, the question is what assets are they buying?  Certainly we are seeing massive purchases of Wall Street stocks. They cannot buy bonds because of their low yield

           and the threat of default on many of them. There is no question that the Dow rise is due in some part to the carry trade.  I also reported to you on Wednesday, that the POMO and

           TOMO repo pools of money also find their way into the mass purchases of Dow stocks.

 

           However, I  strongly believe that many of the usa carry traders  are now also  buying gold and leveraging this on the comex.  It costs them nothing as the interest rate is zero.

           You can also verify this by the 3 month libor which fell yesterday to .28% per annum.  The demand for dollars is at an all time low. Gold is the antithesis of the usa dollar!

           So if they are shorting the dollar, you can bet the farm that many are buying gold.

 

           If we add a sovereign nation, like China,  to the mix as a purchaser of gold and silver, this could lead to an explosive and decisive

          conclusion to our paper manipulators. The only difference here, will be China taking possession of the physical metal.  The others are only interested in paper profits.

 

           I reported to you that all swaps most be unwound by Sept 30.09.  Somehow, there has been an extension and it must be done by the end of the first

           week of Oct. The USA would be loathe to announce an extension to the swaps as this would signify global currency problems.  Also remember that Sept 30.09 is the year end of fiscal

           2009 and Oct 1 starts the new year 2010.  Expect a lot of hidden debts and loans to come out of the woodwork and onto their balance sheets as they must square their books for the

           auditors.

          Also FASB is demanding banks to put all off -balance sheet derivatives on its balance sheet by Sept 30.09.

 

          should be an interesting week.

 

           As I pointed out to you on Thursday, I will not give a commentary on Monday. Please watch the fort for me.

 

           To all our Jewish friends, please have an easy fast.

 

             Harvey.

         

 

 

 

        

 

Thursday, September 24, 2009

Sept 24.09 commentary.

Good evening Ladies and Gentlemen:
 
I will be brief tonight as I got in late from a pharmaceutical meeting.
 
Gold closed down by 15.60 and silver fell by 59 cents.
 
All of the selling damage occurred after the second London fix.  Gold and silver tried to rally but ran into stiff selling by cartel members.  I would estimate that 150000-180,000 contracts on the gold comex were supplied by the crooked cartel.  The regulators again were out of town on a bridge tournament.
 
The open interest on both gold and silver rose marginally from yesterdays figures.
 
In a nutshell, the reason for the gold and silver whack was options expiry this afternoon at 12  pm.  For the past 15 years on expiry gold and silver are hit criminally by these thugs and the regulators have totally vacated their positions:
 
Here are some of the stories on this front:
 
The first story says it all and the reason for the raid today:
 
Bill,
There are 4332 CALL option at strike $1000 and the options expire today. I predicted that the criminally manipulative Commercials would try to take them out and here we are! I think they are playing with fire. They have failed twice this week to get gold down. Even if they manage to get a close below $1000 I don’t see them getting much traction. 
Cheers
Adrian
 
and then this commentary:

What an outrage!

Let’s see, options of gold futures expire Thursday at 1:30 pm. It is Thursday at 8am and gold is trading well over $1,000 meaning the Cartel is under water on its written positions.

So…….time to have the government announce they are lightening up on the financial support programs and QE.

Flash breaking news all across CNBC that the FED is going to start withdrawing stimulus and bingo, presto gold trades below $1,000 again.

As a good friend emailed me, THIS IS A CRIME.

I want to see Goldman Sachs’ prop desk positions. I want to see the phone logs. Unless this nonsense stops Karl Denninger is right, the system is doomed.

Not a moment too soon in my opinion

L.
 
 
 
Even UBS talks about the obvious manipulation and why todays events occurred as they did:
 

UBS, in a timely comment observed early today:"October options expiry on Comex will take place at 2000 GMT today, and the greatest nearby open interest for October gold is at the $1000/oz strike... $950 and $1050 strikes also have very large open interest - and that open interest between $950 and $1000 is larger than that between $1000 and $1050. We believe this is a consequence of the recent quick move higher in gold from $950/oz rather than options traders explicitly expressing a preference for the downside. Given the large open interest at the $1000/oz strike, we would not be surprised if gold remains close to this level today, barring a sharp move in EURUSD. To the extent that long October-expiration positioning in the market may have been constraining the range, however, the rolling off of October options should free gold to make larger moves."

end.

 

Today, the press is beginning to wonder about the stock market rally.  The Moonraker Mutual Fund had this to say today:

 

Here’s the Moonraker press release:
September 24, 2009 - Moonraker Fund Management, the independent investment boutique, is concerned that banks may have been using their bailout money to buy equities, helping to fuel a rally that is vulnerable to a major correction if they consequently sell in thinly traded markets.

end.

This commentary was written by Tracy Alloway on the Moonraker announcement:

 

This bank-engineered equity rally

Posted by Tracy Alloway on Sep 24 10:05.The creatively-named Moonraker Fund Management is, we think, one of the first firms to say the below relatively explicitly.The boutique investment house is "concerned" that banks may have been using their bailout money — and no doubt some of their quantitative easing-gained liquidity — to buy equities, thereby fuelling the summer rally. The danger, they say, is that this is a relatively "thin" rally — and one which is vulnerable if banks suddenly decide to pull out and crystallise their gains.

 

OK lets start with economic news for today.

 

First the jobless numbers and they were slightly better than last week:

U.S. jobless claims slide in latest week 

WASHINGTON (Reuters) - The number of U.S. workers filing new claims for jobless benefits unexpectedly fell 21,000 last week, government data showed on Thursday, and a less volatile unemployment claims gauge dipped to an eight-month low. 

Initial claims for state unemployment insurance declined to a seasonally adjusted 530,000 in the week ending September 19 from a revised 551,000 in the previous week. Analysts polled by Reuters were expecting claims to rise to 550,000 from a previously reported 545,000. 

The four-week moving average of new claims dipped to 553,500, the lowest since 547,000 in the week ending January 24. 

The week's decline was affected by seasonal factors, a Labor Department analyst said. Seasonal adjustments anticipate a rise in claims in the week after the Labor Day federal holiday, and an unadjusted increase in claims fell short of the expected increase, the official said. 

Continued claims of workers still on jobless aid after an initial week of benefits fell by a bigger-than-expected 123,000 to 6.138 million in the week ending September 12. Analysts were expecting claims to dip to 6.19 million.

-END-

 

 

But Wall Street threw a tantrum with this release:

 

U.S. existing home sales unexpectedly drop in Aug 

WASHINGTON (Reuters) - Sales of previously owned U.S. homes unexpectedly fell in August, a survey showed on Thursday, a minor setback for the housing market's recovery from a three-year slump. 

The National Association of Realtors said sales fell 2.7 percent to an annual rate of 5.10 million units, from 5.24 million units in July. That compared to market expectations for a 5.35 million unit pace. 

NAR Chief Economist Lawrence Yun described the decline as a "mild retreat" after a strong gain in July, adding that the August pace was the second-highest in 23 months. Compared to August last year, sales were up 3.4 percent. 

 

end.

 

But this took the stuffing out of the usa..the release of the results of the 7 yr bond auction.

And Wall Street groaned with utter dispair with this announcement:

13:03 7-yr auction yields 3.01% with 30.22% allotted at the high
Bid/cover 2.79 vs. average of the past 7 auctions 2.48 
Indirect participation 61.7% vs. average of the past 7 auctions 46.23% 
In reaction: 
2-yr 1/32 to 0.82% 
10-yr 13/32 to 3.37% 
Dow 9699.13 (49.42) 

 

It seems everyone is catching on the indirect participation: 61.7% foreign participation.

In plain English:  the Fed bought the whole ball of wax...the whole enchillada...the whole gonzin megilla..

whatever you would like to call it...they bought the entire bond issue for themselves with freshly minted usa federal paper bills.

 

To make matters worse, the Treasury made this announcement and again Wall Street groaned:

 

U.S. Treasury says financial system still fragile 

WASHINGTON, Sept 24 (Reuters) - The U.S. financial system remains fragile a year after a bank bailout program was initiated and the government needs to be ready to step in to help more if necessary, a senior U.S. Treasury department official said on Thursday. 

"The recovery has just begun, the financial system remains fragile, and the credit markets are not fully functioning," Herb Allison, assistant Treasury secretary for financial stability, told the U.S. Senate Banking Committee. 

Allison said the Troubled Assets Relief Program, or TARP, had helped stabilize an economy that was in freefall when the Obama administration took office in January. 

"We still have a long way to go before true recovery takes hold, but we are now pointed in the right direction," he said. 

Allison said TARP was intended as "an emergency response to a major financial crisis" and Treasury will exit from its bank investments as soon as it can. 

Treasury has received over $70 billion in principal payments from banks that received taxpayer bailouts and almost $23 billion in proceeds from the repurchase of warrants by banks that have already repaid the principal investment. 

"For those banks that have elected not to repurchase their warrants, Treasury intends to begin auctioning those warrants later this year," Allison said. 

He noted that "significant parts of the financial system remain impaired" and noted falling commercial real estate prices may additionally pressure banks' balance sheets. 

"In this context, it is prudent to maintain capacity to address new developments." Allison said, a possible sign that Treasury may want to keep the TARP funds available for use if needed for some time.

-END-

 

And with a fragile financial system they announce that they might curtail the liquidity????

Yesterday, they announce the continuation of QE and then this?

10:02 Fed to scale back 2 of its emergency lending programs citing improvement in the financial markets 
28-day term auction facility will be reduced to $25B from $75B. The Fed will also assess whether the TAF should be made permanent. The 84-day TAF will be reduced and then eliminated early next year. 
* * * * *

Fed's exit strategy may use money market funds-FT 

LONDON, Sept 24 (Reuters) - The U.S. Federal Reserve is studying the idea of borrowing from money market mutual funds as part of eventual steps to withdraw stimulus, the Financial Times reported on Thursday. 

The Fed would borrow from the funds via reverse repurchase agreements involving some of the huge portfolio of mortgage-backed securities and U.S. Treasuries that it acquired as it fought the financial crisis, the newspaper reported, without citing any sources. 

This would drain liquidity from the financial system, helping to avoid a burst of inflation as the economy recovered. 

The FT said Fed officials had in recent days held discussions with market participants on how it might implement such a scheme. 

The Fed is considering whether to conduct a pilot scheme, but worries such a test might be seen as a signal that the central bank was about to drain liquidity on a large scale, the newspaper said. In the near term, a big drain remains unlikely, it added…

-END-

Mild mannered Peter Schiff came out today with this:

 

Peter Schiff: U.S. Rally Is Doomed, Gold Will Hit $5000

Posted Sep 24, 2009 09:25am EDT by Aaron Task in Investing, NewsmakersRelated: ^DJI, GLD, EPHCX, FXI, EEM, GDX, ^GSPCUnlike the "legitimate bull markets" of many foreign markets, Peter Schiff believes the U.S. is merely experiencing a "rally in a bear market," and is lagging the rest of the world "for a reason."

The worst is not over, according to Euro Pacific Capital's Schiff, who predicts the Dow will fall another 90% from current levels when measured against gold.A longtime dollar bear and gold bull, he foresees gold hitting $5000 per ounce "in the next couple of years," and predicts the Dow and gold will trade on a one-to-one ratio vs. the current level of around 9.7-to-1…

-END-

Bill Holter was on the warpath today with the gold and silver raid:

Bill H:

Ambush

To all; SELL, SELL, SELL! NOT. The Dollar has popped a whopping .12 ticks (.16%) and Gold which was up $6 earlier is now down $12. One of the commentators on CNBC described Gold as "collapsing". I for one am totally "beside myself" and haven't been this scared since I was 5 years old and had the boogeyman living under my bed! This was the 3rd or 4th try at $1,020 and I'm sure we will soon be hearing "triple top", "outside day", $700 Gold, etc.etc.. Scary, scary!

I'm sure the Chinese and Russians are extremely impressed with the tremendous strength in the Dollar and will probably do an immediate about face and call Tim Geithner requesting more Treasury and Dollar supply. Our delegation to the G-20 must be strutting around like peacocks and crowing in the streets of Pittsburgh at how muscular the Dollar is. I can hear it now, "you'd better buy your Dollars and Teasuries now before they go up and are still available, a few months from now there may even be a shortage!".

OK, here's my point. The cartel is obviously losing control of their rig. This "Wag the dog" action was necessary to repel Gold at $1,020 and to save whatever face is left (if any) at the G-20 meeting. Can you imagine a $50 spike in Gold during a world economic summit held on U.S. turf? Today is the equivalent of a completely "gassed" heavyweight boxer that has been steadily peppered for 9 rounds (years) and throws an overhand right "haymaker". This is so obvious, so blatant, and least important to the powers that be, CRIMINAL!

Don't get me wrong, I am not even slightly irritated because days like today have been common for over 10 years, what has not been common is how short these "bludgeonings" have become and how quickly the recoveries now are.The problem for the cabal is that they are no longer fighting us underfunded, tin foil hat wearing, Gold bugs (truthseekers). They are fighting the Chinese, Russians, Indians, and the rest of the world that now know the game is rigged. The next week or so will be very interesting to see how quickly today's ambush is in the rear view mirror. The Chinese, Russians, and Indians are physical buyers, they do not play in the COMEX sandbox only to roll their contracts over or settle in cash. They buy and then demand physical, you know, the bright and shiny stuff that doesn't rust, corrode, burn, or be created at the keystroke of a computer.

If you are not fully loaded with PM's and shares, the cabal has put out the welcome mat for what may be the last time. Regards, Bill H.

end.

 

Tomorrow gold and silver will resume its northbound  attack on the 1020 price  level for gold and 17.50 for silver.

I am tired and got to get up early tomorrow,  so I will bid you adieu.

 

I will give a more comprehensive review on Saturday.

 

all the best

Harvey.

 

Wednesday, September 23, 2009

Sept 23.09 commentary.

Good evening Ladies and Gentlemen:
 
I am going straight to the important news event of the day, the release of the FOMC meeting.
Here is Bloomberg's announcement at 2:20 pm this afternoon:
 
Fed Slows Mortgage Purchases, Sees Stronger Economy (Update3) 
Share | Email | Print | A A A

By Craig Torres

Sept. 23 (Bloomberg) -- The Federal Reserve will slow its purchases of mortgage securities, seeking to avoid disrupting the housing market as an economic recovery takes hold.

“The Committee will gradually slow the pace of these purchases in order to promote a smooth transition in markets and anticipates that they will be executed by the end of the first quarter of 2010,” the Federal Open Market Committee said in a statement today after meeting in Washington. The $1.45 trillion program was scheduled to cease by the end of this year.

Chairman Ben S. Bernanke and his fellow policy makers indicated for the first time since August 2008 that the economy is accelerating, even as they recommitted to keep their benchmark interest-rate “exceptionally low” for an “extended period.” Today’s statement signals the Fed will maintain its stimulus measures to secure a recovery and reduce unemployment.

“The mortgage market has gotten a reprieve, and mortgage rates may stay low going into the spring of next year,” said Christopher Rupkey, chief financial economist at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York. The FOMC indicated it will exit its emergency programs “only when the economy’s troubles have passed,” he said.

Bernanke is trying to revive lending and cut the 9.7 percent unemploymentrate while preventing a surge in inflation from the $1 trillion expansion of the Fed’s balance sheet.

Stock Rally

The central bank’s purchases and the Obama administration’s homebuyers’ tax credit helped stabilize housing and push the Standard and Poor’s Supercomposite Homebuilding Index up more than 30 percent this year.

Fed officials signaled a stronger commitment to support housing markets, saying they would buy “a total of” $1.25 trillion in mortgage-backed securities. Last month, they said they could buy “up to” that total.

Stocks retreated after initially extending gains. The Standard & Poor’s 500 Index was down 1 percent to 1,060.87 at 4:30 p.m. in New York following an increase of as much as 0.8 percent. Treasury notes gained.

Officials left the target rate for overnight loans between banks at a record low of between zero and 0.25 percent. Today’s decision was unanimous.

“Economic activity has picked up following its severe downturn,” the committee said today. “Conditions in financial markets have improved further, and activity in the housing sector has increased,” the Fed said.

“Household spending seems to be stabilizing, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit.”

Economic Slack

The FOMC said monetary and fiscal stimulus combined with stabilizing financial conditions “will support a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability.”

Policy makers gathered a week after Bernanke told a conference in Washington that the worst recession since the 1930s “is very likely over.” Forecasters anticipate the expansion will be “moderate” because of “ongoing headwinds,” including cuts in lending by banks, he said in response to questions at the Brookings Institution.

FedEx Corp., the second-largest U.S. package-shipping company, reported Sept. 17 the smallest drop in international shipments in a year. United Technologies Corp., the maker of Otis elevators and Carrier air conditioners, can return to profit growth next year as it benefits from cost cuts and a revival in some markets, Chief Financial Officer Greg Hayes told a JPMorgan Chase & Co. conference broadcast on the Internet.

‘Key Message’

“The key message here is we see tough markets; some signs of improvement on the short cycle; confident in 2009 and confident that we are going to resume earnings growth in 2010,” Hayes said. Hartford, Connecticut-based United Technologies, which also owns Pratt & Whitney jet engines, is eliminating at least 18,000 jobs to reduce costs and boost margins once the economy improves.

The Fed has bought about $862 billion of its $1.25 trillion agency mortgage-backed securities program, and $129.2 billion of a $200 billion program of U.S. agency bonds. Demand is returning to housing after the industry shaved an average of 1 percentage point from gross domestic product each quarter since the start of 2006.

Home prices rose 0.3 percent in July from the previous month, the third straight monthly gain, according to a Federal Housing Finance Agency index. Existing home sales rose 7.2 percent in July from the prior month to the highest level in almost two years, according to the National Association of Realtors.

‘Primary Goal’

The Fed’s “primary goal is to avoid a shock to the market by suddenly shutting the programs down all at once,” said Christopher Low, chief economist at FTN Financial in New York. As the Fed eases out of purchases, “they’re hoping other buyers will step in to avoid a sudden increase in mortgage rates,” he said.

Mortgage rates for 30-year fixed home loans averaged 5.04 percent in the week ended Sept. 17, down from 5.07 percent the previous week, according to McLean, Virginia-based Freddie Mac, a government-controlled mortgage-finance company.

A sudden end to the Fed’s purchases might push up mortgage rates by a half to one percentage point, according to Peter Hooper, chief economist at Deutsche Bank Securities Inc. in New York.

Slower Pace

Tapering off -- by reducing weekly purchases and stretching them beyond the end of the year -- would have a more muted effect, pushing rates up by at least a quarter of a percentage point, Hooper said before the decision. Officials in August slowed the pace of their Treasury note-buying and considered doing the same with their mortgage-backed security and agency bond purchases, according to the minutes of the meeting.

Some economists said it will be hard for the Fed to withdraw its stimulus. Keeping it in place for too long, meanwhile, could lead to faster inflation. The U.S. monetary base, the stock of money in the banking system, doubled to $1.70 trillion in August from $842 billion a year earlier.

The FOMC’s statement said “substantial resource slack” and stable long-term inflation expectations mean that “the Committee expects that inflation will remain subdued for some time.”

Fed officials forecast in June that the personal consumption expenditures price index will rise 1.2 to 1.8 percent next year, within their long-term preference range of 1.7 to 2 percent. Economists say the inflation concerns are more about the risks that the Fed doesn’t shrink the balance sheet in time, or can’t do so because of further job losses.

Inflation Outlook

“Inflation is going to stay low for a while; the real concern about inflation is a long-run issue” Mickey Levy, chief economist at Bank of America Corp. in New York, said before the announcement. “The issue is will the Fed be able to drain and offset the huge increase in the monetary base before it reignites excess demand or inflationary expectations.”

Economists project an annualized growth rate of 2.9 percent in the third quarter, followed by an expansion of 2.2 percent in the final three months of the year, according to the median estimate in a Bloomberg News survey.

Manufacturing is expanding, and rising stock prices and real-estate values boosted household wealth by $2 trillion in the second quarter, the Fed said last week. Gains in household wealth helped support a 2.7 increase in retail sales last month, the most in three years.

“It’s one thing to have a resumption of growth, but it’s another thing to get back all the lost opportunities and all the jobs that have been lost,” said Robert Eisenbeis, chief monetary economist at Cumberland Advisors Inc. in Vineland, New Jersey. “That’s going to take a long time.”

To contact the reporter on this story: Craig Torres in Washington atctorres3@bloomberg.net

end
 
I want to highlight the most important paragraph and that is the opening paragraphs where the Fed is going to continue quantitative easing for another 3 months.  Officially they have bought about 862 billion out of l.25 trillion in agency mortgage paper and about 130 billion in a 200 billion program of agency bonds.  I would like to emphasize that these purchases are not the treasury bonds that we have talked about yesterday.  These are agency bonds  i.e. bonds of Fanny Mae or Freddie Mac.
 
As I indicated to you yesterday, officially the Fed has bought 50% of all treasury bonds issued.  Unofficially they have bought another 50% through swaps.
Please note that many commentators are very concerned that the Fed cannot withdraw the trillions of dollars of liquidity without hurting the economy.  They are certainly correct on that point.
 
I would like to comment on this latest salvo by the press as to a possible method of withdrawing the liquidity:

Fed Said to Start Talks With Dealers on Using Reverse Repos

Sept. 22 (Bloomberg) -- The Federal Reserve has started talks with bond dealers about withdrawing the unprecedented amount of cash injected into the financial system the last two years, according to people with knowledge of the discussions.

Central bank officials are discussing plans to use so- called reverse repurchase agreements to drain some of the $1 trillion they pumped into the economy, said the people, who declined to be identified because the talks are private. That’s where the Fed sells securities to its 18 primary dealers for a specific period, temporarily decreasing the amount of money available in the banking system…….

***

A reverse repo [called "reverses"] is the SALE of gov’t debt by the FED. Who is the FED going to sell bonds to?????? Themselves??????

What a three ring circus our capital market have become.

What a freaking joke!
Best,
Rob Kirby


http://www.bloomberg.com/apps/news?pid=20601087&sid=ax.FBWNLB5_o

 

end.

 

As many of you know, I have telling you that the key method used by the Fed of purchasing bonds unofficially  is by the POMO or TOMO  or repo pool method.

POMO stands for Permanent Open Market Operations.  TOMO is temporary open market operations.

For the past 10 years or so, the Fed has given brokers money through either temporary funds or permanent funds.

In the temporary funding, the Fed buys securities of the dealers and loans them the money.  These broker dealers then use the cash to drive up equities etc.

A coupon pass is the Fed not asking for interest on the loaning of money.  If they wish to drain the market they do not ask for a pass and thus the dealers must pay interest or dollars leaves the

economy or as the TV pundits call, a drain.

For the past several years most of the injections is the temporary route.  If the loan is for 38 days, then the dealers give back the securities in 38 days and another injection is initiated for  say 41 days.

This  process continues and is non ending as the brokers get continual funding.  It is this funding that is driving up Wall Street and probably represents 70% of all trades.

The Permanent injection never gets back to the Fed.  It is a permanent gift.

 

Rob Kirby noticed a few months ago, that these doorknobs (the dealers) under the POMO route, are given securities and then these securities (newly purchased bonds) have been sold right back to the Fed.

Thus all the "unofficial sales" of bonds have been done by this route.  The other route is when the Fed has purchased bonds  from the "foreign bank" route.  Here, we have "foreign banks" purchase the bonds and then storing the bonds at the Fed.  In reality it is the Fed which buys the bonds through swaps arranged 6 months ago. The dollars used in the purchase is the swap money.

That is why you do not trust any data released from usa sources!!

 

 

Today for example we got word of a disaster bond auction:'

 

13:03 5-yr auction yields 2.47% with 39.81% allotted at the high
Bid/cover 2.4 
Indirect participation 44.8% 
In reaction: 
2-yr flat flat at 0.91% 
10-yr (3/32) to 3.47% 
Dow 9844.76, +14.89 
* * * * * 

Bonds weaken as auction results disappoint

NEW YORK, Sept 23 (Reuters) - U.S. Treasury debt prices fell on Wednesday after an auction of $40 billion in new five-year notes was met with some reservation among investors.

Overall demand was solid, but only after a steep price discount that left the high yield above market expectations. Benchmark 10-year notes lost 10/32 for a yield of 3.49 percent, up four basis points on the day.

-END-

 

Actually, the results probably shook our cartel boys up pretty good.  You will notice that the bid/cover is 2.4 to one.  Since all 17 primary dealers must submit a bid, you are automatically at 1:1

To get complete coverage you need at least 2: 1.  However please note the huge indirect bid at 44.8%.  The indirect bid is the foreign bid and it is through here that "foreign" sources purchase the bonds.

It also elevates the bid/cover bid as it is not a primary dealer bid.  As a rule of thumb anything less than a bid/cover ratio of 2.7 is a lousy participation.

Also note that the yield went up 4 basis points  to entice some poor sucker into buying this junk.

 

Rob Kirby is correct on his assessment that  a reverse REPO in order to contract liquidity is totally insane!

The reverse REPO means a sale and the dollars or security is returned to the Fed.  To whom is the Fed now going to sell these debt instruments?

How can  they withdraw trillions of dollars of liquidity that is 100% of the GDP?  Your economy will fall into a vortex and spiral into a complete standstill

 

OK lets go to other events of today:

 

Gold closed the regular session at 1013.10 down only by 90 cents.  Silver fell by 21 cents to 16.88.

Today, the cartel spent a lot of ammunition to keep gold and silver down because they knew already that

QE was still the order of the day. Also tomorrow is the start of the big G20 meeting, so gold and silver must

be kept in check.

 

The OI on comex gold fell by 3000 contracts with gold's advance on Tuesday.  Probably some minor commercials liquidated.

Silver had its OI fall by a tiny 400 contracts and it is this that has the cartel bothered.   Physical silver is disappearing and OI will not contract as speculators seems to

wish to take on our commercials in a death to the finish battle.

I would rather wish to view this as a spectator.  However it is getting pretty exciting!.

 

Here are other important economic news of the day:

Moodys reports on record credit card delinquencies:

 

US credit card defaults rise to record - Moody's

* Moody's sees chargeoffs peaking at 12-13 percent

* Moody's says bad loans will peak in mid-2010

NEW YORK, Sept 23 (Reuters) - The U.S. credit card charge-off rate rose to a record high in August, as more Americans lost their jobs, Moody's Investors Service said on Wednesday, in another sign consumers remain under stress.

The Moody's credit card charge-off index -- which measures credit card loans that banks do not expect to be repaid -- rose to 11.49 percent in August from 10.52 percent in July.

The index resumed an upward trend after declining in July for the first time in almost a year, vanishing hopes of stabilization in the industry after record high credit losses.

"We continue to call for a recovery of the credit card sector to begin once industry average charge-offs peak in mid-2010 between 12 percent and 13 percent," Moody's said in a report.

Credit card losses usually follow the trend of unemployment, which rose in August to 9.7 percent, the highest level in 26 years. Moody's estimated unemployment will peak next year at 10 percent to 10.5 percent.

The Moody's index showed credit card delinquencies -- payments more than 30 days late -- rose to 5.80 percent in August from 5.73 percent in July.

"Even early-stage delinquencies rose, ending a trend of four consecutive months of improvement," Moody's said in a report.

Data released by companies earlier this month based on the performance of credit card loans that were securitized showed defaults rose to record highs at Bank of America Corp and Citigroup Inc , among some of the biggest card issuers.

Both Citigroup and Bank of America hold the highest exposure to riskier credit card borrowers.

-END-

 

Many ask me is I am seeing "green" shoots  indicating a recovery .  I politely say that I see no confimation of  a recovery.

Yes, I see commercial paper rise, but then I look at the Baltic Dry Index and it is falling which means the ships are empty devoid of goods.

Yes, I see the leading indicators rise, but then I see credit card delinquencies rise to record levels.  I then see house mortgage delinquencies

at record levels and it is these that are collateral to our banks.  I then see the Fed with record levels of reserves as banks still fail to lend.

This is confirmed by Libor which is now down to .285%.  The dollar has low demand because nobody is lending to anybody.  There is no economic

burst to allow funding.  It is for this reason that I cannot say that the recession is anywhere close to ending.

 

Now if the economy was improving, we would be seeing an improved labour market.  Get a load of this:

 

U.S. Aug mass layoffs rise, manufacturing worst hit 

WASHINGTON (Reuters) - The number of mass layoffs by U.S. employers rose by 533 in August from July, with the manufacturing sector the hardest hit, Labor Department data showed on Wednesday. 

The number of mass layoff actions -- defined as job cuts involving at least 50 people from a single employer -- rose to 2,690 last month, affecting 259,307 workers. That brought the total of mass layoffs so far this year to 21,184. 

A total of 279 mass layoff events were reported in the manufacturing sector in August, the department said. 

While the broader economy appears to be recovering from its deepest and longest recession in 70 years, unemployment continues to rise. There are fears rising joblessness could hamper the recovery. 

The U.S. unemployment rate hit a 26-year high of 9.7 percent in August, and many economists expect it to peak above 10 percent early next year. 

In the 21 months since the start of the recession, the total number of mass layoff events was 44,669, accounting for over 4.56 million jobs, the department said.

end.

 

In other words, the bigger employers are laying off people at greater rates.  I sorry to say that the economy is just not improving.

The last important news event is the release of a letter finally admitting that the Fed has done gold swaps with a foreign nation:

Fed admits hiding gold swap arrangements 

Submitted by cpowell on 07:55PM ET Tuesday, September 22, 2009. Section: Daily Dispatches 
11p Tuesday, September 22, 2009

Dear Friend of GATA and Gold:

The Federal Reserve System has disclosed to GATA that it has gold swap arrangements with foreign banks that it does not want the public to know about. 

The disclosure contradicts denials provided by the Fed to GATA in 2001 and suggests that the Fed is indeed very much involved in the surreptitious international central bank manipulation of the gold price particularly and the currency markets generally.

The Fed's disclosure came this week in a letter to GATA's Washington-area lawyer, William J. Olson of Vienna, Virginia (http://www.lawandfreedom.com/), denying GATA's administrative appeal of a freedom-of-information request to the Fed for information about gold swaps, transactions in which monetary gold is temporarily exchanged between central banks or between central banks and bullion banks. (See the International Monetary Fund's treatise on gold swaps here:http://www.imf.org/external/bopage/pdf/99-10.pd.)

The letter, dated September 17 and written by Federal Reserve Board member Kevin M. Warsh (seehttp://www.federalreserve.gov/aboutthefed/bios/board/warsh.htm), formerly a member of the President's Working Group on Financial Markets, detailed the Fed's position that the gold swap records sought by GATA are exempt from disclosure under the U.S. Freedom of Information Act. 

Warsh wrote in part: "In connection with your appeal, I have confirmed that the information withheld under Exemption 4 consists of confidential commercial or financial information relating to the operations of the Federal Reserve Banks that was obtained within the meaning of Exemption 4. This includes information relating to swap arrangements with foreign banks on behalf of the Federal Reserve System and is not the type of information that is customarily disclosed to the public. This information was properly withheld from you."

When, in 2001, GATA discovered a reference to gold swaps in the minutes of the January 31-February 1, 1995, meeting of the Federal Reserve's Federal Open Market Committee and pressed the Fed, through two U.S. senators, for an explanation, Fed Chairman Alan Greenspan denied that the Fed was involved in gold swaps in any way. Greenspan also produced a memorandum written by the Fed official who had been quoted about gold swaps in the FOMC minutes, FOMC General Counsel J. Virgil Mattingly, in which Mattingly denied making any such comments. (Seehttp://www.gata.org/node/118 .)

The Fed's September 17 letter to GATA confirming that the Fed has gold swap arrangements can be found here:

http://www.gata.org/files/GATAFedResponse-09-17-2009.pdf

While the letter is far from the first official admission of central bank scheming to suppress the price of gold (for documentation of some of these admissions, see http://www.gata.org/node/6242

and http://www.gata.org/node/7096 ),it comes at a sensitive time in the currency and gold markets. The U.S. dollar is showing unprecedented weakness, the gold price is showing unprecedented strength, Western European central banks appear to be withdrawing from gold sales and leasing, and the International Monetary Fund is being pressed to take the lead in the gold price suppression scheme by selling gold from its own supposed reserves in the guise of providing financial support for poor nations.

GATA will seek to bring a lawsuit in federal court to appeal the Fed's denial of our freedom-of-information request. While this will require many thousands of dollars, the Fed's admission that it aims to conceal documentation of its gold swap arrangements establishes that such a lawsuit would have a distinct target and not be just a fishing expedition.

In pursuit of such a lawsuit and its general objective of liberating the precious metals markets and making them fair and transparent, GATA again asks for your financial support and that of all gold and silver mining companies that are not at the mercy of market-manipulating governments and banks. GATA is recognized by the U.S. Internal Revenue Service as a non-profit educational and civil rights organization and contributions to it are federally tax-exempt in the United States. For information on donating to GATA, please visit here:

http://www.gata.org/node/16

You can also help GATA by bringing this dispatch to the attention of financial news organizations and urging them to investigate the Fed's involvement in gold swaps particularly and the gold (and silver) price suppression schemes generally.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * * 

end.

 

I will explain:

 

Basically the Fed on a Freedom of Information has told Chris Powell that they have done a gold swap.  We already know that the usa has done a swap with Germany in the year 2000, as 1700 tonnes of West Point gold was swapped with 1700 tonnes of Bundesbank gold.  The usa sold/leased all of the Bundesbank gold and the Bundesbank took ownership of the gold on usa soil.

We now are aware that the Germans wish their gold back and their request is falling on deaf ears.  We are also aware that the Swiss are asking for their gold back and again that request is denied.

The German gold is at West Point and the Swiss gold is at the Federal Bank of NY.

The Swiss have kept a considerable hoard of gold on USA soil since World War I for safe keeping.

China is also aware that sovereign nations are not getting their gold.  You can just imagine the turmoil if China does not get the IMF gold that they request.

end.

In summary, today we saw the Fed announce continued QE.  This means that mortgage rates will continue to fall as the Fed buys every bond is sight.  However, the dollar is sacrified

as the Chinese are horrified as they see massive printing of paper dollars diluting their hoard.

You will see gold rise but only in the physical market phase ie. from 11 pm tonight to 3: pm and from 8: 30 to 10 pm.  This is when London fixes its two gold prices for physical gold.

My bet will be massive demand in London for whatever little physical gold is offered. Gold should be up dramatically tomorrow. The cartel then does their dirty deeds in the non physical time period.

My commentary tomorrow will be late but I will do a commentary.

I will do a commentary on the weekend but not on Monday..I will be fasting all day and I will not have enough time to do my homework.  Besides, my wife will kill me if I turned on a computer during Yom Kippur.  I do not want to get her angry with me.

see you tomorrow

Harvey.

 

 

 

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