Saturday, October 10, 2009

Oct 10.09 commentary....very important.

Good morning to you all:
 
Gold closed down by 7.60 to 1048.90.  Silver fell by 13 cents to 17.67.
 
The open interest on gold comex basis Thursday climbed by an astronomical 17500 contracts to 500,187 which is by far a record.  The previous high was around 509000 but that included
huge calender spreads.   The spreaders have almost vacated the arena so the 500,187 OI is real and is indicitive of the strength in gold.
 
The silver Oi rose by a rather large 1696 contracts to rest at 133113.  The previous high was around 150,000 contracts but that too that considerable calender spreads. The spreaders have also almost vacated the silver arena as well.
 
There are several big news events that I would like to bring to your attention.  The first is the gold COT report which is basis last Tuesday.  Remember that on Monday we saw the release of
Robert Fisk's article on the DEMISE of the DOLLAR which caused the gold price to skyrocket and the dollar to swoon badly.  Robert Fisk  writes for the Indepedent News Organization in the UK and he is a highly regarded newpaper correspondent.  He reports that Russia, Asia, China are planning to abandon the pricing of oil in dollars, replacing it with SDR's.  This action alone would cause a huge surplus of dollars on the market as the usa would finally have a pay for something as the world shuns it as a reserve currency.
 
Here is the COT report which shows the commercials covering in a rising gold market.  It looks like the cartel members saw the whites of the enemy's eyes and ran:
 
The gold COT report came in about as expected except for the small trader category...

*The large specs increased their longs by 16,885 contracts and increased shorts by 8,603.

*The commercials decreased longs by 3,345 contracts and increased shorts by 3,285. *NEVER seen this before. The small specs increased longs by an astonishing 14,710 contracts. Yet, in perhaps one of the more BULLISH stats I can ever recall, they increased shorts by a humongous 16,362. That is truly MINDBOGGLING. No wonder bullish sentiment is so mute.

end.

 

Please note the huge increase on the comex by the large specs  (our bet the large specs are the Chinese).   However the large commercials only increased their shorts by 3200 contracts

as the smaller commercials bailed.  These lesser commercials have been covering their silver shorts for the past month and we are now witnessing the gold comex commercials

doing the same.  However, they are leaving the bulk of the supplying of the paper to JPMorgan and HSBC.  All others are seeking refuge!

 

Here are yesterdays trading numbers. Please note the huge increase in yield on the 10 yr treasury bond:

 

The yield on the 10 yr T note took off to 3.39%, still very low.

The dollar rose .57 to .7647. The dollar was strong across the board. The euro lost .0063 to 1.4710. The pound fell .0215 to 1.5831. The yen lost 1.06 to 89.81.

Crude oil advanced 8 cents to $71.77 per barrel.

The CRB lost 1.42 to 262.49.

The Muppets on CNBC seemed surprised the DOW put in a healthy, positive day while the dollar rose. Clearly they failed to take the market intervention into consideration. The DOW ended the day up 78 to 9864. The DOG rose 10 to 2134.

The volume on the gold  comex was around 240000 at 10:40 when they stopped reporting their estimated numbers.  I have now no confidence in the comex reported numbers.

 

OK lets go to economic news of the day:

 

First off we have the trade figures and it showed a decrease in the deficit.  However the  oil price used in the report was low and imports  were down which means the consumer was not

spending as I have indicated to you on many previous commentaries. Here is the report:

 

U.S. economic news:

08:30 Aug Trade Balance reported ($30.7B) vs. consensus ($33.0B)
Jul revised slightly to ($31.9B) from ($32.0B). 
* * * * *

US trade gaps narrows unexpectedly in August 

WASHINGTON, Oct 9 (Reuters) - The U.S. trade gap narrowed unexpectedly in August as services trade pushed exports slightly higher and imports fell by a fractionally larger amount, a U.S. Commerce Department report showed on Friday. 

The monthly deficit was $30.7 billion, down 3.6 percent from a revised estimate of $31.9 billion for July. That reflected a 0.2 percent increase in exports to the highest since December and a 0.6 percent decline for imports. 

Analysts surveyed before the report had expected imports to get more of a boost from a combination of higher oil prices and U.S. businesses rebuilding their inventories, and increase the August trade gap to around $33 billion.

-END-

 

President Obama received news that he won the Nobel Peace Prize.  He did not like the following news story  where there is trouble at the Federal Housing Administration:

 

 

 

U.S. Mortgage Backer May Need Bailout, Experts SayBy DAVID STREITFELD and LOUISE STORY

A year after Fannie Mae and Freddie Mac teetered, industry executives and Washington policy makers are worrying that another government mortgage giant could be the next housing domino. Problems at the Federal Housing Administration, which guarantees mortgages with low down payments, are becoming so acute that some experts warn the agency might need a federal bailout. Running questions about the F.H.A.’s future — underscored by interviews with policy makers, analysts and home buyers — came to the fore on Thursday on Capitol Hill. In testimony before a House subcommittee, the F.H.A. commissioner, David H. Stevens, assured lawmakers that his agency would not need a bailout and that it was managing its risks. But he acknowledged that some 20 percent of F.H.A. loans insured last year — and as many as 24 percent of those from 2007 — faced serious problems including foreclosure, offering a preview of a forthcoming audit of the agency’s finances…

 

 

end.

 

The Chinese are taking over from  Mumbai in physical purchases of gold.  Here is a story by Chris Powell on a Reuters article written by David Stanway and Alfred Cang:

 

China is a large part of the gold demand scene (and The Gold Cartel’s worst nightmare). This story is well worth the full read…

China's gold investors undeterred by high prices

Submitted by cpowell on 09:10PM ET Thursday, October 8, 2009. Section: Daily Dispatches

By David Stanway and Alfred Cang
Reuters
Wednesday, October 7, 2009

http://www.reuters.com/article/reutersEdge/idUSTRE5960LI20091007

Gold might be a luxury most can live without when times are hard, but for cautious investors in China, the world's top producer and consumer of bullion, it has become a matter of necessity.

Jewelry sales might take a hit in China after prices hit a record high of $1,043.45 an ounce on Tuesday, but amid ongoing economic uncertainty, many in the financial community still prefer bullion to bonds, analysts said in comments made before the record was struck.

The government itself -- also looking for a safe haven for its foreign currency reserves -- is also likely to increase its gold holdings, which now officially stand at 1,054 metric tons.

"Consumption in China is expected to rise, as it is supported by expectations of inflation, and I also believe the government will increase its reserves," Yao Haiqiao, president of Longgold Asset Management, said.

Only around 1.6 percent of China's forex reserves is held in gold, and that figure is expected to rise, Sun Zhaoxue, chairman of the China Gold Association, said earlier this year.

World gold prices have broken the $1,020 per ounce barrier for the first time since March 2008 as investors seek a safe haven from uncertainty about the world economy and the dollar. While some have warned the price might not be sustainable, Chinese buyers are still expected to remain active.

"Consumers are sensitive about the prices, so rising gold prices will definitely hit purchases in India and China. We have seen a rapid drop in India's jewelry consumption in the first half so a similar story could be happening in China," said Zoe Wang, analyst with Shanghai CIFCO Futures.

"But in terms of investment, purchases are rising, as more people are using gold as a hedging tool. Such purchases will obviously increase in China."

China is already the world's biggest gold producer, and in the first half of this year, consumption of the precious metal also became the highest in the world, overtaking India.

Albert Cheng, Far East managing director at the World Gold Council, said Chinese gold purchases for investment reached a record high of 70 metric tons in 2008.

With jewelry sales expected to fall -- even in the biggest market of China, the only one to show any growth in 2008 -- it is investment purchases that continue to drive up prices.

"The Chinese buy more gold bars in banks while Indians buy more jewelry," said said Longgold's Yao.

While investors abroad warn $1,000 per ounce might not be sustainable, many in China are more confident.

"Just because the price is high they will not suddenly start selling," said China Gold Association vice-chairman Hou Huimin. "There haven't been any big changes in behavior in China."

With demand still considerably higher than supply, there is room for more price increases, said Ellison Chu with Standard Bank in Hong Kong.

"We will see how this price level will affect the market but I think it can go higher. If the market gets used to this price level, I think it has the potential to move higher."

Longgold's Yao said China's gold investors had already climbed on the bandwagon and, in the absence of attractive alternatives, were reluctant to jump off.

"The herd mentality plays a big role in the Chinese investment market," said Longgold's Yao. "I don't worry about rising gold prices hurting people because Chinese people pursue products whose prices are rising."

Further price support was likely to come from the Chinese government, which is expected to increase its gold reserves in the near future, Yao added.

Chinese investors have fought hard for the right to trade in new financial instruments and they are not likely to panic-sell their gold as a result of the price surge, Chu said.

"If you look at the stock market in the last few months, there has been volatility and rumors, and people are looking for something more stable. They can expect continuous growth in gold. I think it is a good way for them to invest."

Currency devaluations, dramatic cuts in interest rates and the threat of inflation have made gold one of the few attractions left in China, where investors have fewer options.

"I think as long as investment tools in China are fewer than in the western world, people will want to hold on to something."

* * *

end.

 

Many are seeing the demise of the usa dollar. The fiat money system is faltering.  Here are 6 major points to consider if you are thinking of buying

usa dollars  or investing in companies denominated in usa dollars:

 

The huge pillars that support the fiat money system and banking cabal are being removed as we speak...and have been removed!

Some of those can be seen and some not. Here are a few:

1) China stated they will default on derivatives. That alone will end the fraudulent derivative game the cabal uses to control gold, silver and interest rates.

2) The leak that Russia, China and Saudi Arabia are going to remove the dollar from pricing oil is the truth. That would add 2T+ US dollars to the US M2 money supply that won't be needed any longer for oil transactions. 

3) The beginning of trade wars between the US and China has begun and will grow. This will continue to escalate ultimately ending Globalization when China stops selling goods to the US and Nationalizes all manufacturing owned by the Corporations who rely on cheap labor.

4) China and India have begun to promote SILVER as an investment to their citizens! That alone can end the cabal.

5) The FDIC is out of money and the banks are losing billions on residential/commercial loans and defaults. That realization will soon cause bank runs in the US and around the world.

6) The FED audit bill has enough votes to pass even though Bernanke has told congress that an audit would destroy the US Dollar. Barney Frank has stated that it will be voted on in Congress.

end.

 

I want to spend the last part on my commentary on the Kirby report just released.  Here is the report for you in its entirety and I will add my 2 cents worth.  Here is his commentary:

 

Central Banking: A Blight On Humanity

Rob Kirby

Impeccably reliable sources have informed me that as recently as Sept. 30, 2009 – the last possible day of trade in the Sept. 09 gold futures – a number of well-heeled market participants “bought” substantial tonnage worth of gold futures on the London Bullion Market [LBMA] and immediately told their counterparties they wanted to take instantaneous delivery of the underlying physical bullion.

The unexpected immediate demand for substantial tonnage of gold bullion created utter panic in at least two banks who were counterparties to this trade – J.P. Morgan Chase and Deutsche Bank – because they simply did not posses the gold bullion which they had sold short [an illegal act which in trading parlance is referred to as a “naked short”].

Because these banks did not have the bullion to honor their contracted commitments, one or both of them approached the counterparties and asked if there was any way they could settle this embarrassing matter quietly on a “cash basis” to absolve the banks from fulfilling their physical bullion delivery obligations. The purchasers were not interested in a ‘cash settlement’ and demanded delivery of physical bullion giving these banks 5 business days to resolve the situation. A premium of as much as spot plus 25 % [that would be 1,250 – 1,300 per ounce of gold] was offered to settle this matter in fiat money instead of the embarrassment of a very public “failure to deliver” on the part of the London Bullion Market Association.

Earlier this week, no less than two Central Banks became involved in effecting the physical settlement of this situation. One of these Central Banks was British [that would be the Bank of England] – and reportedly, even they were only capable of providing less than pure, non-compliant gold bars that did not meet good delivery standards stipulated by the LBMA. Like it or not, this is a testament to lack of physical gold available, folks.

To summarize: Banks like J.P. Morgan Chase and Deutsche Bk. - who sold endless amounts of gold futures at prices of 950 – 1025 and then tried to make “side deals” with the folks they sold the futures to – offering them spot + 25 % [let’s say 1,275 per ounce] to settle in fiat – only after their counter parties demanded substantial tonnage of physical gold bullion.

Stunningly, if accurate [and there is absolutely no doubt in my mind that this is not accurate], this means that gold is already in SEVERE backwardation and this fact is being hidden from the public.

Then, to protect the “integrity” of the futures market as a ‘price discovery mechanism’ – Central Banks – aiding and abetting - plunder the sovereign assets of their respective countries to bail out their agents / friends in an attempt to ‘sweep the whole bloody mess under the carpet’.

To think that anyone wonders why our financial system and fiat money will soon to beTOAST?

What a disgraceful insult to humanity.

end
 
We have 5 or 6 confirmations on the above caper.  The venue was the LBMA which is the centre of all physical gold and silver trading in the world.  The LBMA volume is 400% of that on the comex!
 
There is now no question that the counterparty purchasing the gold was the Chinese.  Please note the day that they bought the gold. It was the last day of Sept and the last day that a contract for Oct can trade.  (Although Kirby did not state the exact amt of gold,  other sources
revealed that it was 20 tonnes of gold).  What happened here is shear genius.  The Chinese disguised themselves as if they were going to roll ie. pretrend that they were going to  roll to  December contracts.
 
So they took the  rollers Oct contracts and tendered to a surprised LBMA.  The LBMA  did not have 20 tonnes of physical  gold.  The Chinese knew this as they were shut out at the window for their small normal purchases of gold
during regular business hours at the two London fixes.  The Chinese have been quite angry  lately due these events:
 
1, the oil problem last year where they purchased huge number of contracts of oil at prices well above $130.00 per barrel. The Chinese wealth funds have indicated that they are going to renege on those contracts.
2.the huge number of bonds rated AAA that are basically junk and not marketable
3.they have not got their gold from the IMF yet.
4.they wished the USA to remove Ben Bernanke and that was not done.
5.the usa is purchasing all of their debt with freshly minted dollars much to the chagrin of the Chinese (quantitative easing)
6.the usa money supply is rapidly increasing with the Federal debt now at 11.9 trillion dollars.  China is also alarmed that future obligations due to usa citizens as they age is approximately 60 trillion usa dollars.
7.the usa engaged in a trade war with the chinese with respect to tires and the Chinese reciprocated on many fronts of their own.
 
The cartel members immediately made a phone call upstairs to the head offices of the major central bankers  ie. the Bank of England, the Euro Central Bank and the Fed.  These bankers tried to offer a huge premium of 25%
to get the Chinese to take dollars instead of gold but to no avail.  They were given an extention of 5 days.  It seems that the Bank of England found some .9000 gold (not good delivery bars) in the hope that the Chinese would be satisfied.  We did not know if they were completely satisfied in total.
 
The big question is this: how did the Bank of England get .900 gold?  The only official gold that is .9000 gold and nopt .999  is gold held at Fort Knox.  Did the Fed ship gold from  Fort Knox over to England?
Or did the Fed ship .900 gold first to the Bank of NY to satisfy the French (in 1968).  Maybe this gold was eventually shipped from NY over to the Bank of England which then put that gold on deposit for the Bank of France.
Please remember this:  England is one of two major banks as a foreign depository.  However in England you must put your gold on deposit and the English can do whatever they like with the gold.  However it is an obligation of the Bank of England.  If they cannot deliver gold back to a depositor they then default in much the same manner as a depositor comes for his printed dollars. (the other foreign depository is the Federal Bank of NY.  The foreign held gold however is earmarked gold and the usa cannot touch this gold)
 
Is it possible that the Bank of France decided to bail out the Americans one more time?
 
I will leave these unanswered questions for you to decide. However the following point is clear:  USA citizens gold somehow has been shipped overseas and has been sold to satisfy a foreign countries demand for settlement of a claim. This gold is not Government's gold as set by the usa constitution.  They need an act of Congress to sell gold.
 
Have a wonderful weekend.
 
 
 

Thursday, October 8, 2009

Oct 8.09 commentary.

Good evening Ladies and Gentlemen:
 
The gold price rose again for the 4th day in a row rising by 15.70 to 1059.00.  The closing price of gold and silver occur at 1:30 est.
Silver rose by 33 cents to close at 17.81.
 
The open interest on the gold comex fell by a very small margin  1,300 contracts to 482700.  This is in response to the huge gain in gold on Wednesday.
The silver OI actually rose a fraction to 131417 from 131000.
 
In the case of gold, the speculators continue to pile into the metal and the major commercials supply the paper.  The minor commercials have already announced
to their president that they are vacating the short side of the two precious metals, gold and silver.
 
With the case of silver, the speculators piled into silver and again JPMorgan supplied the paper.  All other commercials are leaving the sinking ship.
 
OK.  Lets go to some important news events of the day:
 
First of all the chief  European Central Banker Trichet had this to say today:
 
08:57 ECB's Trichet says excess FX volatility bad for economic, financial stability; will cooperate as appropriate -- wires
ECB's Trichet says US support of strong dollar extremely important. Headlines - SA London 
* * * * * 
 
end.
 
The usa dollar started to swoon early today starting the day at 76.10 and falling early to 75.98 where this announcement by Trichet seemed to stop the dollars fall and cause the Gold
price to fall from its perch of 1059 to around 1045.  The dollar rebounded to around 76.15 and then the avalanche of sales started on the dollar.  The usa dollar ended the day at
75.93 and gold finished at its high 1059 and silver at 17.81. This is close to another outside day reversal, with gold negating a negative perception that central banks are going to cushion the usa dollar's fall.!
 
Here is the LeMetropolecafe.com comment on the trading of the dollar, gold and silver today:
 
The dollar suddenly began to rally, while gold and silver were nailed. It was only a matter of time before The Gold Cartel launched a counterattack and here it is. It began with Plan A, or stopping a flying gold price when their traders reported for work this morning in London. Gold was checked at $1058. Key two was the usual go after silver first drill. Its price rallied 40 cents last night with gold at $1050. It was stopped cold there and began to downtick noticeably this morning, even as gold was well above $1050. These guys have no shame. They are so obvious.
 
Then:
 

The AM Fix was way up there at $1054.75, giving The Gold Cartel fits. After the cabal forces went to work, the PM Fix fell to $1045.

A technical plus: The gaps left this morning in gold and silver were both filled following the cabal's assault.

What a day to have to write up our markets early. After going to unchanged levels and the euro falling .0010, the precious metals stormed right back, with silver leading the way. The euro did the same thing rallying from the 1.47 area to challenge 1.48 again. The Gold Cartel got stuffed.

end.
 
Then we had this announcement from Trichet at around 9;30 today:
 
09:20 ECB's Trichet says unemployment likely to rise; sees 'bumpy road' ahead for economy -- wires
Per the wires 
rate decision was unanimous 
when asked on FX intervention, says will never have any comment from me on intervention; we say on both sides we cooperate as appropriate 
on extension of longer-term refinancing, says will see when time comes 
Says have not discussed Latvia issue 
calls on banks to actively avoid credit supply constraints 
says recent rise in oil price a risk to inflation and economy 
says no decision on possible spread at 12-month refi tender 
* * * **
 
 
end.
 
There is no doubt that Euroland is trying to stop the dollars fall as it hurts exports.
I will discuss the Latvian situation later in my commentary.
 
 
 
There are press releases from Asia stating that these far eastern countries are also
trying to stem to rapid fall of the dollar:
 
 

Asian central bank intervene to slow dollar's fall

Submitted by cpowell on 06:44AM ET Thursday, October 8, 2009. Section: Daily DispatchesBy David Roman
The Wall Street Journal
Thursday, October 8, 2009

SINGAPORE -- The U.S. dollar continued to tumble against most Asian currencies Thursday, prompting a wave of foreign-exchange intervention by central banks in South Korea, Taiwan, the Philippines, and Thailand seeking to limit damage to their export industries.

Traders said the dollar selloff is unlikely to fade soon, given the prospect for a long period of low U.S. interest rates to support a sluggish U.S. economy and increasing signs central banks in Asia will begin tightening monetary policies in the months ahead…http://online.wsj.com/article/SB125498941145272887.html-END-

 

The following is very important and we have had two confirmations on the default by the comex on 20 tonnes of gold as reported by Rob Kirby.

I reported to you yesterday that they have been given an extention but we do not know the time limit authorized.

 

Here is Rob Kirby's report on the matter to us today:

 

More and more talk continues to circulate about problems in the physical market arenas regarding gold and silver. … re same paper claims on the precious metals, deliveries, etc. There is a great deal of smoke on this issue, which is billowing at the moment. Rob Kirby.

 

end

Rob Kirby is very reliable and seldom does he go off on a tangent.

And this from an independent source:

 

Bill;
Regarding my bird on a wire source re: difficulties settling physical gold bullion demanded Sept. 30;

I have been told that no less than two Central Banks have become involuntarily involved in this settlement process – one of them being British [BoE] involving sub-standard [by LBMA good delivery standards] bars that require further refining to meet delivery / contract standards.

This whole process "continues to REEK" of malfeasance at the VERY highest levels and my 'bird on a wire' source tells me this all portends for a gold price dramatically higher in short order.
R.

 

end

 

Looks to me like the comex has some serious trouble.   They have offered a 5% cash premium to the gold price today and this was rejected.

The Dow finished the day up by 61 points after being up by 100 points or so early in the session.  Many are beginning to realize that the entire gain in the dow from March 09  is

fueled with funny money.

I find the following surprising:  GLD added gold for the 5th consecutive day.  Today they "bought" 8 tonnes of  physical gold.  The other days it has been either one or two tonnes.

Here is there announcement;

Consistently, the GLD ETF added 8.80067 tonnes to 1,109.31419 tonnes, a fifth consecutive day of change, which may be a record for this instrument. 

 

end.

 

I find it amazing that it takes Central Fund of Canada 6 months to locate 4 tonnes of gold and these guys get 8 tonnes at the drop of a hat.  Go figure!!

Here is the trade orchestrated by Dennis Gartman.  He wrote calls on all of his gold.  His net cost is now 1069.00

I am having great difficulty in understanding this buffoon!  No wonder CNBC invites this gold guru on TV all the time. Here is the story:

An options-literate friend points out that, given the premiums The Gartman Letter would have been paid for writing gold calls yesterday, the effective sales price established could be as high as $1,069. This makes more sense, but will still hearten some of gold's friends.

TGL today amplifies its fears of excessive gold enthusiasm, but expresses an intention to buy "toward $1,000-$1,020"

David Einhorn of Greenlight Capital gave a speech in Dallas yesterday.  Remember this gentleman sold all of his GLD and converted it to physical gold. It took 6 months for the company to get

its 400 tonnes.  Here are the salient points on his presentation:

 

David Einhorn – Greenlight Capital  spoke in Dallas, and his macro thoughts are delivered below:

§ Obama's September speech on financial reform had many good points….he should have relayed them to his policy team.

§ Making these institutions (banks) and products "safer" is like making safer asbestos.

o (extremely negative on existence of the banks in their current form, government's weakness to banking lobby, the pervasive moral hazard our policies have created, and the institutionalization of "too big to fail".)

§ Banks are earning oligopolistic profits on mortgage spreads.

§ Romer and others in the administration seem intent on maintaining the fiscal stimulus and cite 1937 as their basis…. But GDP created by fiscal stimulus is artificial.

§ Deficit accounting is on a cash basis, if done on a future basis our deficit is in the ~5 trillion range and future obligations are $60 trillion (already committed).

§ US fiscal scenario mirrors countries that have defaulted on sovereign debt (citing data from American Enterprise Institute).

§ Japan is well on its way to hyperinflation/default.

§ Rating agencies continue to lag crisis and they don't rate sovereign debt any better than they do corporate.

§ How to manage risk:

o Long gold, gold related.

§ Does well when monetary policy is poor/vice versa.

***

end.

 

Lets go for economic news of the day:

 

First the jobless report:

08:30 Jobless claims for w/e 3-Oct 521K vs. consensus 540K
Prior week revised to 554K from 551K. Continuing claims for w/e 26-Sep 6.040M vs. consensus 6.105M. Prior week revised to 6.112M from 6.090M. 
* * * * *

New U.S. jobless claims fall more than expected 

WASHINGTON, Oct 8 (Reuters) - The number of U.S. workers filing new claims for jobless insurance fell more-than-expected to a nine-month low last week, according to a government report on Thursday that suggested the labor market was healing despite a setback in September. 

Initial claims for state unemployment benefits dropped 33,000 to a seasonally adjusted 521,000 in the week ended Oct.3, the lowest level since early January, the Labor 
Department said. 

Analysts polled by Reuters had forecast new claims slipping to 540,000 last week from a previously reported 551,000. A Labor Department official said seasonal factors expected a decline in new claims at the end of a quarter and a rise at the start of a new quarter. 

The four-week moving average for new claims fell 9,000 to 539,750 last week, declining for a fifth straight week. The four-week moving average is considered a better gauge of underlying trends as it irons out week-to-week volatility. 

The number of people collecting long-term unemployment benefits fell 72,000 to 6.04 million in the week ended Sept. 26, the latest week for which the data is available. That was the lowest level since late March and was below market expectations for 6.1 million. This measure has trended lower for three consecutive weeks. However, the decline could also indicate many jobless workers have exhausted their benefits. 

The four-week moving average of continuing claims dropped 15,750 to 6.1 million. The insured unemployment rate, which measures the percentage of the insured labor force that is jobless, eased to 4.5 percent, the lowest since early April, from 4.6 percent in the week ended Sept. 19.

-END-

 

The results look good until you realize that the fall in unemployment benefits of 72000 is due to many jobless workers having exhausted their benefits.

Do not get excited that this is a green shoot.

 

Lets see another economic report on inventories and they are falling badly.  Owners of stores are not replenishing their goods:

 

U.S. wholesale inventories fall for 12th month 

WASHINGTON, Oct 8 (Reuters) - U.S. wholesalers pared their stocks in August, with inventories falling for the 12th consecutive month and sales posting their largest rise in more than a year, Commerce Department data showed on Thursday. 

Wholesale inventories fell 1.3 percent in August, after dropping a revised 1.6 percent in July, which was originally reported as a 1.4 percent decline. Sales rose 1 percent in August, following a 0.6 percent increase the prior month, which was previously reported as up 0.5 percent. 

Analysts polled by Reuters had anticipated inventories would drop by a smaller 1 percent and sales would rise by a much slimmer 0.7 percent. 

Stocks at wholesalers are now at $381.2 billion, their lowest level since July 2006. 

That shrank the inventory-to-sales ratio, or how long it would take to sell stocks at the current pace, to 1.20 months' worth from 1.23 months in July. 

The large decline in inventories was led by autos, metals and minerals, excluding petroleum, according to the Commerce Department. Autos and parts also helped boost sales, as they rose 7.7 percent, their largest gain since February 1999.

 

Next we have commercial paper and it is rising by a tiny fraction.  The gain in commercial paper is really the Fed's money.  No real green shoots here :

 

US commercial paper outstanding grows for 8th wk-Fed 

NEW YORK, Oct 8 (Reuters) - The U.S. commercial paper market expanded for an eighth straight week, adding to evidence of a likely upturn in economic activity, Federal Reserve data showed on Thursday.

For the week ended Oct. 7, the size of the U.S. commercial paper market, a vital source of short-term funding for routine operations at many companies, rose by $67.6 billion to $1.299 trillion outstanding, up from $1.232 trillion outstanding the previous week.

-END-

'

 

For improvement in the economy we must see a big break in foreclosures.  We are seeing the opposite:  a big rise as foreclosures occur in the usa every 13 seconds:

 

Foreclosures mark pace of enduring US housing crisis

* No end in sight to spate of U.S. mortgage foreclosures 

* Unemployment adds to problem as delinquencies rise 

* Full housing recovery may take 20 years in some markets 

MIAMI, Oct 8 (Reuters) - Every 13 seconds in America, there is another foreclosure filing. 

That's the rhythm of a crisis that threatens to choke off hopes for a recovery in the U.S. housing market as it destroys hundreds of billions of dollars in property values a year. 

There are more than 6,600 home foreclosure filings per day, according to the Center for Responsible Lending, a nonpartisan watchdog group based in Durham, North Carolina. With nearly two million already this year, the flood of foreclosures shows no sign of abating any time soon. 

If anything, the country's worst housing downturn since record-keeping began in the late 19th century may only get worse since foreclosures, which started with subprime 
borrowers, have now moved on to the much bigger prime loan market on the back of mounting unemployment. 

In congressional testimony last month Michael Barr, the Treasury Department's assistant secretary for financial institutions, said more than 6 million families could face foreclosure over the next three years. 

"The recent crisis in the housing sector has devastated families and communities across the country and is at the center of our financial crisis and economic downturn," Barr said. 

A September report by a foreclosure task force appointed by Florida's Supreme Court pointed to a shift in the root cause of foreclosures: "People are no longer defaulting simply because of a change in the payment structure of their loan. They are defaulting because of lost jobs or reduced hours or pay." 

Florida had the nation's highest rate of homes -- 23 percent -- that were either in foreclosure or delinquent on mortgage payments in the second quarter, and the report said "the latest news for Florida is horrifying." 

A recent pickup in sales and home prices in some regions has been heralded as a sign that the crisis in residential real estate may be close to bottoming out, after the steepest price decline since at least 1890. 

But nearly half of recent sales have been attributed to foreclosures or "short sales" at bargain-basement prices.

-END-

NIGHTMARE…

 

The CBO has come out with their official deficit for 2009 and it was 1.4 trillion dollars.  If you remember our calculations from yesterday, the real deficit is 1.8 trillion as we took

the federal debt limit at Oct 1.08 and the limit at Sept 30.09 and the resultant gain was 1.8 trillion.  This is the true deficit.  Here is their official release for completeness:

CBO: Budget deficit hit record $1.4T in 2009
By ANDREW TAYLOR, Associated Press Writer Andrew Taylor, Associated Press Writer Wed Oct 7, 7:02 pm ET 

WASHINGTON – The federal budget deficit tripled to a record $1.4 trillion for the 2009 fiscal year that ended last week, congressional analysts said Wednesday.

The Congressional Budget Office estimate, while expected, is bad news for the White House and its allies in Congress as they press ahead with health care overhaul legislation that could cost $900 billion over the next decade.

The unprecedented flood of red ink flows from several factors, including a big drop in tax revenues due to the recession, $245 billion in emergency spending on the Wall Street bailout and the takeover of mortgage giants Fannie Mae and Freddie Mac. Then there is almost $200 billion in costs from President Barack Obama's economic stimulus bill, as well as increases in programs such as unemployment benefits and food stamps.

The previous record deficit was $459 billion and was set just last year.

The Obama health plan would be "paid for" with new revenues and curbs in spending. But the overhaul effort would eat up tax increases and spending cuts that could be used to bring the deficit down.

Obama has attributed the nation's dismal fiscal situation to the financial and economic crises he inherited. White House Budget Director Peter Orzsag is overseeing the administration's efforts to tackle the soaring deficit next year.

"As part of the fiscal 2011 budget, we will be putting forward proposals that return us to a fiscally sustainable path and that have lower deficits in the out-years," Orszag said in a recent Associated Press interview.

The huge deficits have raised worries about the willingness of foreigners to keep purchasing Treasury debt. The administration promises that once the recession is over and the financial system is stabilized, it will move forcefully to get the deficits under control…

-END-

 

In a show of how the economy is behaving, look at vacanies in shopping malls.  They are rising as consumers are not spending.

The economy is contracting, not growing.  Still no green shoots.

Oct. 8 (Bloomberg) -- Vacancies at U.S. shopping centers rose in the third quarter to a 17-year high as unemployment climbed, consumers cut spending and stores closed.

-END-

 

The following is critical. Robert Fisk reveals his sources.  This man has the highest impeccable reputation.  This story is real:

 

 
* * * * *

Robert Fisk reveals truth behind 'dollar demise' report

Posted on October 8, 2009 by dandelionsalad

 

end.

 

The following is interesting. Look what Ron Paul and Alan Grayson are doing on the Hill:

 

Hi Bill. You are going to love this. Hot off the wires. It's Ron Paul's turn to get back at the Fed for stonewalling Freedom of Information requests from the media, namely, Bloomberg News who has taken up the cause for the Truth.

October 7, 2009, 4:49 PM ET Ron Paul Calls for Delay in Bernanke Confirmation

http://blogs.wsj.com/economics/2009/10/07/ron
-paul-calls-for-delay-in-bernanke-confirmation/

In a letter they will send to Senate Banking Committee Chairman Christopher Dodd this afternoon, Reps. Ron Paul (R., Tex.) and Alan Grayson (D., Fla.) will ask that the Senate hold off on Federal Reserve Chairman Ben Bernanke's confirmation hearing until the central bank releases more information about its rescues. ( Read the full letter.)

It is up to the Senate and not the House to confirm the Fed chairman, and the congressmen's letter might not carry much weight in the neighboring chamber. Still, it is a sign of the potentially hostile environment Mr. Bernanke could face when he returns to Congress in the weeks ahead to defend his policies in confirmation hearings. Mr. Paul has won broad support in the House for a bill that would subject the Fed to audits by Congress's Government Accountability Office.

-END-

 

This is perhaps the biggest story of the day where we may have a default in Latvia.  The story originates from its capital Riga.

The government is asking its Swedish bankers for some debt relief on all of those mortgages underwritten in Euros.  Two thirds of all mortgage holders are underwater.

 

It looks like "Riga Mortis" has set in on this Baltic nation.  Here is the story:

 

Latvia threatens foreign banks with huge losses on mortgage loans | Business | guardian.co.uk

Hi Guys, 
This article from The Guardian is well worth reading - Latvia is in serious trouble. A taste of things to come elsewhere?

Best wishes, 
Bobhttp://www.guardian.co.uk/business/2009/oct
/07/latvia-crisis-mortgage-debt

 

Here are some headlines on the big story yesterday concerning Fisk:

links to today's further articles: (hurrah! A UK paper actually saying something relevant… I must be dreaming… )

· Robert Fisk: A financial revolution
with profound political implications

end.

This just in from Jim Sinclair on hotel vacancies, and foreclosures in California.  Next area to see a bust:

 

Hotel defaults, foreclosures rise in California

In the state, defaults and foreclosures are up fivefold since Jan. 1.

The list of troubled properties includes the St. Regis Monarch Beach in Dana Point, the downtown Los Angeles Marriott, the Sheraton Universal and the W hotel in San Diego.

The owners of the renowned Quail Lodge Resort and Golf Club in Carmel, for example, plan to close the hotel Nov. 16.

"I have never seen so many lenders contemplating mothballing properties," said Jim Butler, a hotel lawyer and chairman of the global hospitality group for Jeffer, Mangels, Butler & Marmaro. "It can and it will get worse for the hotel industry."

The problem is not unique to California, but the effect is being felt especially hard here because of tourism's importance to the state.

More…

 
end.
 
 
Tomorrow is the 9th of October and is the day that all swaps must be unwound. That task looks impossible.
 
We will also see another huge volatile day in the trading of gold and silver.  I will report as usual, on Saturday.
Harvey

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