Saturday, October 31, 2009

Oct 31.09 commentary...important

Subject: Oct 31.09 commentary

Good morning to you all:
 
 
First of all I would like to list for you the bank failures for last night.  As usual there is no press release on any bank.
 
Here is the list: The total for last night is 9 banks. I have no idea of the size of the failures but we should get them on Monday
 


Bank Name

City

State

CERT #

Closing Date

Updated Date

Park National Bank Chicago IL 11677 October 30, 2009 October 30, 2009
California National Bank Los Angeles CA 34659 October 30, 2009 October 30, 2009
Community Bank of Lemont Lemont IL 35291 October 30, 2009 October 30, 2009
Madisonville State Bank Madisonville TX 33782 October 30, 2009 October 30, 2009
Bank USA, N.A. Phoenix AZ 32218 October 30, 2009 October 30, 2009
San Diego National Bank San Diego CA 23594 October 30, 2009 October 30, 2009
Pacific National Bank San Francisco CA 30006 October 30, 2009 October 30, 2009
North Houston Bank Houston TX 18776 October 30, 2009 October 30, 2009
Citizens National Bank Teague TX 25222 October 30, 2009 October 30, 2009
OK lets go to regular stuff.
 
Gold closed in the regular session down by $  6.30 even though in the thin access market, it basically got back to par
as the Dow tumbled by 249 points.
 
Silver closed down by 41 cents.
 
I pointed out to you on Thursday that the OI reporting by the CFTC is faulty. Reuters reported on Thursday that the Wednesday OI
has declined to 488000.  My calculations by adding all the months OI came to a figure of 501000.  The difference is huge and one can
draw different conclusions as to liquidations or increase short selling.
 
It now seems that my calculations were correct and the CFTC reporting on their web site is invalid.
These errors have now been going on for the past 3 weeks including the volume of trades.
 
I issue a formal complaint on the issue last night.
 
Here are the various commentaries on this subject:
 

Dear CME- 
According to the "Expanded Table" on your website, the final data for the 11/28/09 Gold Session was:

Volume 164,172 lots

Open Interest 501,234 lots – up 3,755 from the previous day.

The data distributed to for instance Reuters, however, showed

Volume 164,172 lots

Open Interest 488,722 lots – down 8,757 lots.

This very serious difference profoundly effects how one analyses the day’s trade.

Could you not at least issue a statement as to which is right? 
JB

 

From the trusted John Brimelow:

 

Curried Bear on Menu?

In its worst foul-up yet, the CME circulated data today indicating that Wednesday’s volume was 161,006 lots (as shown on the web site) but that open interest slumped 8,757 lots (27.23 tonnes) to 488,722 lots. The web site’s final total was 501,234, up 3,755 lots (11.68 tonnes).

This makes a serious difference to how one interprets Wednesday’s down $4.90 day. The former would suggest serious liquidation, the latter significant short selling. Today’s action suggests the latter was the case.Anyone wanting to complain to the CME about their deploying false lightships could emailinfo@cmegroup.com. There has so far been no evidence there is a human at the other end. The Exchange should at least indicate which source is right.

 

 

end.

 

The Chicago Mercantile Exchange responded to my complaint.  Their response and my complaint are highlighted here:

 

Your question has been received. You should expect a response from us within 24 hours.



[===> Please enter your reply below this line <===]

[===> Please enter your reply above this line <===]

If your issue remains unresolved, please update this question here.


 Discussion Thread
 Customer (Harvey Organ) 10/30/2009 04:40 PM
Dear Sirs:

I do not like what I see. You are reporting to Reuters figures on the open
interest on gold and silver which are different if you add all the months
OI.

On Thursday, I calculated and posted on my website the gold comex Oi had
reached 501,000 and yet you report to Reuters, 488000 (and change).

Data is critical for us. We always get the data 24 hours after the fact and
you still cannot report the data accurately.

You can say the same for silver.

The only explanation that I can see is that the CME wishes to engage to
total obvious devious reporting in order to disguise the sheer size of the
open interest.

In light of the other investigations going on with respect to the CFTC I
urge you to stop this false practice immediately and report the data
accurately.

I also urge you with the technology on hand, you have the tools to report
the OI at the end of the trading day and not 24 hours later.

Respectfully,

Harvey B Organ BScPhm MBA-
 

 

 

It is for this reason that I cannot report on the open interest until I know for sure if it is correct.  It is very important in the analysis]

and I do not want to give a false impression as to what is transpiring.

 

We got the COT report for gold and silver.

 

Here is a summary for gold:

 

The gold Commitment of Traders report showed…

*The large specs reduced their longs by 13,918 contracts and reduced their shorts by 5,588.

*The commercials increased their longs by 3,081 contracts and reduced shorts by 10,933.

*The surprise was in the small spec category. They increased longs by 605 contracts and increased shorts by a substantial 6,289.

 

 

end.

 

If you look closely you will see some liquidation by the specs of 13918 contracts as the raid on Monday and Tuesday of this week caused some of

the weaker longs to vacate.  However you will notice that the shorts covered in two categories:

 

1. the long specs

2. and the commercials who covered by a huge 10933 contracts.

 

However, note that the new paper did not come from the commercials but from the small specs to the tune of 6289 contracts.

 

Somehow the commercials are realizing that the steam room is getting to too  hot and that they had better lighten up on their shorts.

 

OK lets go to the days story.

 

Today, we saw a massive liquidation in stocks as investors were worried about earnings and the CIT bankruptcy and what effect

it would have on Main Street.   (the report on the pending CIT bankruptcy is reported on in this commentary) 

 

The huge drop on the Dow caused collateral damage to gold and silver shares, it caused a drop in yield on the bonds

and a huge drop in the CRB.

Here are some numbers for you to peruse:

 

The yield on the 10 yr T note fell to 3.39%.

The yen rose 1.52 to 90.

Crude oil fell $2.87 per barrel to $77.

The CRB lost 5.78 to 270.38.

The big dump I keep looking for in the DOW might be underway. It was hit hard, losing 250 to 9713. The DOG lost 44 to 2053.

OK lets start with the days big stories to cause such a massive sell-off in the Dow.

 

Here is the first story and it is a doozy!!

Citigroup shares slide after report on Q4 writedown

By: AFX | 30 Oct 2009 | 02:02 PM ET

NEW YORK, Oct 30 (Reuters) - Shares of Citigroup Inc tumbled on Friday after CNBC television reported Calyon's bank analyst Mike Mayo said the bank was likely to have a $10 billion fourth-quarter writedown of deferred tax assets. Shares last traded down 5.6 percent at $4.07.

-END-

 

 

 

John Williams expanded his alert issued on Thursday and late Friday on the state of the economy:

 

JOHN WILLIAMS’ SHADOW GOVERNMENT STATISTICS

COMMENTARY NUMBER 254
Updated Economic Outlook, GDP, Durable Goods, Home Sales

October 29, 2009

__________

Recession Is Not Over

Quarterly GDP Growth Is Not Sustainable
With 92% of Growth in Nonrecurring Factors

Annual GDP Down 2.3% (5.7% SGS)

4th-Quarter GDP Should Resume 
Quarter-to-Quarter Decline

Durable Goods Orders at 1997 Level

Help-Wanted Advertisng at New 58-Year Low

__________

 

 

end.

 

Note:  quarterly GDP growth is not sustainable as 92% of the growth is in non recurring factors.

He stated that the real GDP using government's own figures is really down by 2.3% and not up by 3.4%.

He states that 4th quarter GDP should resume its descent.

Look at what he states for durable goods...it is at a level equal to 1997. Help wanted ads are non existant.

 

This report is a continuation of Thursday's report which showed a big increase in the Fed balance sheet and a huge

slowdown in M3.  We also reported to you on this with the article from Ambrose Pritchard Evans.

 

This is JOhn William's conclusion:  (he normally charges for his services but he thought that this was so important

he let it out for the public to see)

 

Economic Outlook Update: Economy Remains in Severe Recession. The general outlook for the U.S. economy continues to be for severe contraction, with the worst still ahead. The downturn will remain generally unresponsive to traditional stimuli, other than as seen in occasional blips from government giveaway gimmicks. The business contraction is structural in nature, tied to a lack of real growth in consumer income and liquidity constraints from contracting consumer credit. As a hyperinflation unfolds, the current circumstance will evolve into a hyperinflationary Great Depression. The Consumer Liquidity and the Depression special reports of September 14th of August 1st, respectively, hold and are included here by reference (available atwww.shadowstats.com).

 

 

end.

 

OK lets see how personal spending effected the markets.  At 8 30 am, this very important statistic showed in September that the consumer

stopped spending altogether.  It dropped a huge .5% .  (On an annual basis this would be 6%). The cash for clunkers had ended but we still have the $8000 first

time home buyers grant.  Here is the report:

 

08:30 Sep Personal Income 0.0% vs. consensus 0.0%; Spending (0.5%) vs. consensus (0.5%)
Sep PCE Deflator (y/y) (0.5%) vs. consensus (0.5%). Sep PCE Core 0.1% vs. consensus 0.2%. Aug Personal Income revised to 0.1% from 0.2%; Spending revised to 1.4% from 1.3%. 
* * * * *

U.S. personal spending falls 0.5 pct in September

WASHINGTON, Oct 30 (Reuters) - U.S. consumer spending fell in September for the first time in five months as the boost from a government auto incentive faded, data showed on Friday, adding to fears that consumers may be pulling back as they head into the last quarter of the year.

The Commerce Department said spending fell 0.5 percent, the largest decline since December, after an upwardly revised 1.4 percent increase in August. Consumer spending in August was previously reported to have advanced 1.3 percent. September's decline was in line with market expectations.

Consumer spending, which normally accounts for over two-thirds of U.S. economic activity, in August was bolstered by the popular "cash for clunkers" program that gave discounts on some new motor vehicle purchases.

The program, which ended in August, contributed to a jump in consumer spending in the third quarter and helped to pull the economy out of its worst recession since the 1930s…

 

 

 

end.

 

Please remember that the consumer is 70% of GDP.  The market had a sour taste in their mouth when this report was released.

 

Ok lets go to the next reports from government.  We got releases on

 

1.employment cost index

2. Chicago Purchasing Managers Index

3.Michigan Confidence number.

 

Here are the reports:

 

08:30 Q3 Employment Cost Index 0.4% vs. consensus 0.4%
Q2 reading was 0.4%. 
* * * * * 

09:45 Oct Chicago Purchasing Manager's index 54.2 vs. consensus 49.0
Sep reading was 46.1. 
* * * * * 

US Midwest business index expands to 54.2 in Oct 

NEW YORK, Oct 30 (Reuters) - Business activity in the U.S. Midwest expanded in October to the highest level since September 2008, a report showed on Friday. 

The National Association of Purchasing Management-Chicago business barometer rose to 54.2 from 46.1 in September, versus analysts' expectations for 49.0. 

A reading above 50 indicates expansion. 

The employment component of the index fell to 38.3 from 38.8 in September. Prices paid fell to 48.6 from 51.3 and new orders rose to 61.4 from 46.3.

-END-

09:55 Oct Univ of Michigan Confidence final 70.6 vs. consensus 70.0
Oct preliminary reading was 69.4. 
* * * * * 

end.

 

The employment cost index rising by .4% is getting a little inflationary. The Chicago Managers index is good as it indicates activity is picking up

in the midwest. However the employment component of the index fell which generally means if a recovery is on, it will be a jobless recovery.  This is not good.

The Michigan Confidence number rose slightly in the month..nothing to get excited about.

 

However at 10 o'clock they released the national sentiment and instead of rising in fell badly:

 

U.S. consumer sentiment slips in October - survey 

NEW YORK, Oct 30 (Reuters) - U.S. consumer sentiment slipped this month as Americans worried about their personal finances and focused on paying down debts, though confidence in a national recovery remained high, a survey showed on Friday. 

The Reuters/University of Michigan Surveys of Consumers said its final index of sentiment for October slipped to 70.6, from 73.5 in September. 

Overall consumer confidence remained at its highest level since September 2008, when it stood at 75. It collapsed to 57.3 in October 2008. This month's reading was also a touch above the median expectation of 70.0, according to a Reuters poll. 

But while their view of the national economy improved, "consumers continued to voice very dismal assessments of their personal financial situation," the report said. 

"These grim financial evaluations, coupled with intentions to increase savings and decrease their indebtedness, will limit any rebound in consumer spending." 

The index of consumer expectations fell to 68.6 from 73.5, while the current conditions index edged up to 73.7 from 73.4.

-END-

 

The last manufacturing area to report is the Milwaukee area and lets see how they did:

 

10:00 Oct NAPM-Milwaukee 50.0 vs. consensus 57.0
Sep reading was 58.0. 
* * * * *

 

This number is really bad.  Manufacturing stopped all of sudden like one gigantic thud!!

 

Here is our report on our inflation outlook for commodities for next year:

U.S. Inflation to Appear Next in Food and Agriculture

While most mainstream economists such as Nouriel Roubini are warning of deflationary threats to the U.S. economy, it is our belief that massive price inflation has already begun. The Federal Reserve's policy of massive monetary inflation in 2009 has caused the Dow Jones to bounce over 50% from its low, oil to rise 100% from its low, and gold to surge to a new all time nominal high. One NIA co-founder just saw his health insurance premium rise 16% over a year ago; and the average tuition for a four-year public college increased this year by 6.5%.

Prices are rising all around us, yet agricultural commodities have for the most part been left behind and remain at historically depressed levels. Fundamentals for agriculture are improving on a daily basis. A worldwide shortage of farmers combined with food inventories falling to record lows is setting up the perfect storm for an explosion in agriculture prices. There is a huge opportunity today to invest at the ground-floor into what will likely be one of the biggest boom industries of the next several decades.

Wheat is currently down 60% from its all time nominal high set in 2008 and 80% from its inflation adjusted high set in the 1970s. Corn is currently down 50% from its all time nominal high set in 2008 and 75% from its inflation adjusted high set in the 1970s. Wheat and corn have only bounced 13% and 26% from their 52-week lows this year respectively. While sugar has faired much better and is now at a 28-year nominal high, sugar is still down 70% from its inflation adjusted high set in the 1970s.

With crude oil back above $80 per barrel, we will soon see a renewed interest in alternative energy. This will create increased demand for wheat, corn and sugar which are used to make ethanol and other biofuels. A massive rise in agriculture prices is just around the corner.

We receive countless emails on a weekly basis asking about if Real Estate is now a good investment and if rents will likely climb during hyperinflation. While rents will increase nominally during hyperinflation, they will plummet compared to agriculture. No longer will Americans eat more than most other countries, yet spend less of their income on food. When Americans are forced to pay more for food, it will take away from what they can spend on rent.

The average American consumer today spends approximately 30% of their income on housing and only 10% of their income on food. We expect these numbers to reverse in the years ahead as the U.S. dollar loses its purchasing power. In Germany during hyperinflation, rents fell from 30% to less than 1% of the average households' expenditures while food rose from 30% to a high of over 91%.

The U.S. is currently the world's largest exporter of wheat and corn and the fifth largest exporter of sugar. When American consumers purchase food at their local supermarket, they are competing against consumers from all around the globe. As the Federal Reserve prints trillions of dollars out of thin air and causes our currency to lose its purchasing power, Americans won't be able to afford to eat as much and farmers will be forced to increase their exports to countries with stronger currencies.

When it comes to an apartment in the U.S. that a landlord is trying to rent to a tenant, there is no global market to drive rent prices up. The rents landlords receive depend on the strength of the local U.S. economy. With unemployment continuing to surge and a huge glut of homes on the market, it is only a matter of time before real rent prices decline and become a smaller monthly expense than food.

While Americans will eat less in the years ahead, Chinese citizens will be able to afford to eat more. Despite China's rapidly growing economy, there are major food shortages in China. Chinese agriculture companies have a chance of becoming the market's biggest gainers of the next decade. Our last China agriculture stock suggestion gained over 83% after our profile in a little more than six months. We will be announcing our new China agriculture stock suggestion on Tuesday.

Please spread the word about NIA and have your friends subscribe for free at 
http://inflation.us

 

 

end.

 

Many commented to me on the story that all the gold ever mined from the beginning of time until now will fit into 2 Olympic swimming pools.

That is true.

 

Here is the scientific proof of that:

 

fact check correct: all gold fits into 2.5 Olympic Pools

Quick fact check to prove, "Will all the gold in the world fill 2 Olympic sized swimming 
pools?"

http://en.wikipedia.org/wiki/Gold


19.30 g·cm-3

http://en.wikipedia.org/wiki/Kilogram_per_cubic_metre

1 g/cm3 equals 1000 kg/m3

thus:

19,300 kilos per cubic meter for gold

http://www.google.com/#hl=en&source=hp&
q=troy+ounce+per+kilogram&aq=0&aqi=g1&oq=troy+
ounce+per+kilo&fp=8ec9ea851cee2c5b

1 kilogram = 32.1507466 troy ounce

620,509 troy oz. per cubic meter

1 tonne = 32 150.7466 troy ounce

19.3 tonnes per cubic meter, acts to check and prove the per oz. math is correct, as

19,300 kilos = 19.3 metric tonnes per cubic meter.

155,000 tonnes of gold mined in all of human history divided by 19.3 tonnes per cubic meter, equals 8031 cubic meters

Volume of an Olympic Swimming Pool?
http://hypertextbook.com/facts/2005/JeffreyGilbert.shtml

25 meters by 50 meters by 2-3 meters deep= 25 x 50 x 2.5 = 3125 cubic meters

8031 cubic meters / 3125 cubic meters = 2.57 pools

Thus, all the gold in all the world, ever mined in all of human history, will fill 2.57 

Olympic Sized swimming pools.

Since the depth of an Olympic Swimming pool can be deeper, and since the 2-3 meter depth is a minimum, all the gold in all the world would actually fit into one slightly 
deeper than normal, Olympic Sized Swimming pool.

Sincerely,
Jason Hommel
jhmint.com

Wednesday, October 28, 2009 7:11 

 

 

 

end.

 

Wilbur Ross, the huge billionaire investor came out with this today.  Wilbur Ross was selected by Obama to help purchase

the huge toxic assets on the balance sheet of the banks. It looks like Wilbur is not happy what he is seeing!!!:

 

Wilbur Ross Sees ‘Huge’ Commercial Real Estate Crash (Update3) 
By John Gittelsohn and Thomas R. Keene

Oct. 30 (Bloomberg) — Billionaire investor Wilbur L. Ross Jr., said today the U.S. is in the beginning of a “huge crash in commercial real estate.”

“All of the components of real estate value are going in the wrong direction simultaneously,” said Ross, one of nine money managers participating in a government program to remove toxic assets from bank balance sheets. “Occupancy rates are going down. Rent rates are going down and the capitalization rate — the return that investors are demanding to buy a property — are going up.”

U.S. commercial property sales are forecast to fall to the lowest in almost two decades as the industry endures its worst slump since the savings and loan crisis of the early 1990s, according to property research firm Real Capital Analytics Inc. The Moody’s/REAL Commercial Property Price Indices already have fallen almost 41 percent since October 2007, Moody’s Investors Service said Oct. 19.

Billionaire George Soros, speaking today at a lecture organized by the Central European University in Budapest, said a “bloodletting” may be coming for leveraged buyouts and commercial real estate.

“The American consumer will no longer be able to serve as the motor for the world economy,” said Soros, 79.

More…


We are now getting confirmation that the CIT bankruptcy will be announced on Sunday.  The real question mark was whether

CIT will resume factoring to Main Street as a zombie financier or would it be put out of its misery!.

 

It looks like it will be an orderly bankruptcy but it will hurt Main Street big time.  Here are the big stories on  this issue:

 

Mr. Icahn will simply execute his normal business plan. Middle America is about to experience a total collapse.

Report: CIT to File Bankruptcy on Sunday 
by CalculatedRisk on 10/30/2009 02:08:00 PM

From the WSJ: CIT, Icahn Reach Tentative Deal Over Lender’s Restructuring

As part of further discussions with CIT, Mr. Icahn has agreed to back down while the company restructures in bankruptcy court. …

The company plans to file for bankruptcy in New York as soon as Sunday night or early Monday, said people familiar with the matter. CIT is poised to enter bankruptcy with enough creditor support to approve its reorganization plan and shorten its stay in Chapter 11 …

… CIT asked bondholders to vote on a prepackaged bankruptcy plan, which would give most bondholders new debt it values at 70 cents on the dollar, and all the equity in a restructured company.

This debt-for-equity swap makes the most sense and would allow CIT to continue to operate.

More…

 

and this:'

 

CIT's Swoon Hits Taxpayers

Bankruptcy Filing Expected in Days; Government Infusion of $2.3 Billion at Risk

The $2.3 billion in taxpayer money spent to save CIT Group Inc. is likely to be wiped out, as the lender prepares to file for bankruptcy protection in a high-stakes restructuring plan aimed at keeping the firm in business.

People familiar with the plan said CIT, a major lender to small businesses, intends to file for bankruptcy-court protection in New York within days, perhaps as early as Sunday or Monday. Financial firms such as CIT have historically been sold off or wound down after a Chapter 11 filing, for fear that customers will draw down lending lines and cause a ... (paid subscription) 

 

 

 

end.

 

If developments occur throughout the weekend, I will bring a report out on Sunday.

If nothing earth shattering occurs, I will report on Monday.

Have a wonderful weekend

all the best

Harvey.

 

 

Thursday, October 29, 2009

Oct 29.09 commentary..important

Good evening to you all:
 
Today was a better day for gold and silver.  The price of gold rose by 16.50 to 1046.40. Silver rose by 41 cents to 16.64.
 
The open interest disclosure by the CFTC is really bothersome to me.  On the website, the CFTC announced that the
 
gold OI fell by 8000 contracts to 488,000.
 
However, at 1:30 I totalled every month's OI and totalled 501000. I totalled it again just now and got exactly the same 501000
 
The silver OI on their website fell by 2536 contracts to 130,070.
 
However, when I totalled each and every month, I got 132389 which represented a small increase in OI of 200 contracts.
 
I believe my calculations are correct and OI actually rose which probably explained why silver and gold rose so much today.
 
 
Today, the CEO of Newmont gold was on CNBC and commented that all the worlds gold ever mined from the beginning of time
until today can fill two olympic sized swimming pools.
 
I like to use a tennis court cubed.
 
Here is the commentary on that:
 
 
As a side not, the CEO of Newmont was on CNBC and said "all the Gold ever mined can fit into 2 Olympic sized swimming pools" as WE know to be true. The hosts of CNBC were shocked and could not imagine such scarcity! Dennis Kneale questioned the CEO and acted like this fact was fiction. The "physical" word is beginning to seep into the minds of many, imagine only 2 swimming pools worth of Gold. Dennis probably took a break and called his broker to "buy me some of that Gold ETF, I gotta get me some of that scarce stuff". It's only a matter of time now! Regards, Bill
 
 
 
 
 
The famed investor Paul Tudor Jones came out today and said that everyone should be buying gold:
 
 

PAUL TUDOR JONES…

'Due to this easy money approach he is becoming heavily invested in gold and other precious metals as he expects metals to win the "great liquidity race":

"precious metals exposure has been increasing and is currently the largest commodity exposure. As a result we have included, for this quarter, a separate discussion on gold as an appendix. I have never been a gold bug. It is just an asset that, like everything else in life, has its time and place. And now is that time."'

http://www.businessinsider.com/paul-tudor-jones-why-gold-will-soar-2009-10

-END-

 
 
Here are some numbers for today:
 
 
The yield on the 10 yr T note is 3.5%.

The dollar fell .50 to 75.97. The euro rose .0110 to 1.4827. The pound gained .0161 to 1.6535. The yen lost .89 to 91.50.

Crude oil rose $2.47 per barrel to $79.87.

The CRB gained 5.77 to 276.16.

 

 

 

end

 

Please note the big increase in the yield for the 10 yr bond to 3.5% from 3.4%.  The 10 yr bond fell in price by 1/2 a point and the 30 yr bond fell by 1.2 full points to 118.6

 

end.

This is the big story of the day, the release of the 7 yr bond auction:

 

 

END-

13:03 7-yr note auction yields 3.14%, with 46.79% allotted at the high
Bid/cover 2.65 vs. average of the past 8 auctions 2.52 
Indirect participation 59.3% vs. average of the past 8 auctions 48.16% 
In reaction: 
2-yr (3/32) to 0.88% 
10-yr (26/32) to 3.51% 

 
 


end.

 

Please note the huge indirect particpation of 59.3%.  This is the clear signal that nobody participated in the auction other than the primary

dealers.  These primary dealers are rushing to sell this junk back to the Fed.  The Fed as I reported to you yesterday is seeing its balance

sheet balloon higher than the 2.2 trillion dollar mark.

 

OK the real news of the day which our camp hardly believes is the real growth in GDP of 3.5% for the quarter.  This is the first

estimation of the 3rd quarter which ended Sept 30.09.

 

Here is the official story released by the government:

 

08:30 Q3 GDP (1st read) 3.5% vs. consensus 3.2%
Q3 Personal Consumption 3.4% vs. consensus 3.1%. Q3 GDP Price Index 0.8% vs. consensus 1.4%; core PCE 1.4% vs. consensus 1.4%. Q2 actual GDP was (0.7%).
* * * * *

US economy grows in Q3, unofficially ends recession 

WASHINGTON, Oct 29 (Reuters) - The U.S. economy grew in the third quarter for the first time in a year as consumer spending and investment in new home-building rebounded, data showed on Thursday, unofficially ending the worst recession in 70 years. 

The Commerce Department, in its first estimate of third-quarter gross domestic product, said the economy grew at a 3.5 percent annual rate, the fastest pace since the third quarter of 2007, after contracting 0.7 percent in the April-June period. 

The growth pace in GDP, which measures total goods and services output within U.S. borders, was above market expectations for a 3.3 percent rate. The economy last grew in the second quarter of 2008. 

Recessions in the United States are dated by the National Bureau of Economic Research and the private-sector group often takes months to make determinations. The economy slipped into recession at the end of 2007 and has been in the worst downturn since the Great Depression of the 1930s. 

The third-quarter recovery was generally broad-based, with solid gains in consumer spending, exports and investment in home-construction…

 

 

 

end.

 

 

The government also released statistics on the growth in commercial paper up by 11 billion dollars.  This number is small if the GDP grew by 3.2% in  the 3rd quarter.

Here is the release:

 

US commercial paper market expands for 11th week-Fed 

NEW YORK, Oct 29 (Reuters) - The U.S. commercial paper market expanded for an 11th straight week, underscoring the recovery trend in the market as the economy started to rebound from a long recession, Federal Reserve data showed on 
Thursday. 

For the week ended Oct. 28, the size of the U.S. commercial paper market, a vital source of short-term funding for daily operations at many companies, rose by $10.6 billion to $1.377 trillion outstanding from $1.366 trillion outstanding the 
previous week. 

Separately, a report released on Thursday showed that U.S. gross domestic product expanded by 3.5 percent in the third quarter, ending the long running recession.

 

 

 

end.

 

This is a must read as Bill Holter comments on the GDP numbers:

 

The recession is over!!!

To all; HOORAY the recession is over! Just turn on CNBC and this is all you will hear all day long. All I can say is "how stupid do they think we are?". The Treasury is broke, bankrupt, kaput, whatever you want to call it and yet the cheerleaders are singing "happy days are here again". What do you suppose the economy (and markets) will do when (not if) the Treasury has a failed auction? Will Larry Kudlow tell us "we don't need no stinkin' Treasury as long as the Dow goes up"?

My question is once the inventory rebuild and artificial stimulus is finished, then what? The consumer is tapped out so where is the sustainable demand? The housing market has a huge bank owned inventory overhang that will be exacerbated by a flood of new foreclosures due to rate adjustments so how does the housing industry turn?

Commercial real estate has just now in the last 6 months started to implode so might this be a future drag on the economy? Unemployment sets it's sights on depression era levels but of course the white wash is that it's a "lagging" number so don't worry be happy!

But really, the government is broke so where does THAT leave us? It means that on ANY given day we can find out that "the doors shut". The banks are protected by FDIC so no worries here except for the minor fact that FDIC has a negative cash balance, how comforting! Foreclosures are set to explode again but no problem here either because the mortgage lenders got so fat and sloppy during the good years that they didn't even bother to keep the paperwork. So while some foreclosures may not happen and the debt is "forgiven", somebody LOST and that would now be the lenders. But no problem, TARP 4 can make these idiots whole again!

But again, no worries mate! We always have the Federal Reserve that can crank out unlimited and very valuable Dollars so when the going gets tough the Fed starts printing. We also won't have to worry about getting sick because the government wants to give us all healthcare at no cost to those who can't afford it (don't all raise your hands at the same time). I guess they feel they can do this as a function of the "extra" valuable Dollars the Fed will create and has no current use for.

OK, enough tongue in cheek. As common sense reveals, the government has spent and wasted it's way into insolvency and bankruptcy. Our currency, the Dollar, is freely created and has no backing unless you consider "more Dollars" as backing. The current fiscal position is in deficit to the tune of a $trillion or two per year but who's counting (the Chinese maybe?). What more do you need to know other than "we are all saved because the recession is over"! Regards, Bill H.

 

 

end.

 

Please note his comments: 

 

1. the treasury is broke

2. commercial real estate in now collapsing

3, unemployment is still sky-high.

4. the dollar collapsing.

 

end.

 

 

This next commentary by Axel Weber caused many to stop and ponder the economic situation:

 

07:21 ECB's Weber says bank must prepare for slow withdrawal of ECB liquidity: Weber signals ECB may not offer 12-month bank loans next year -- Bloomberg 
European Central Bank council member Axel Weber signaled the bank may start to withdraw its emergency stimulus measures next year by scaling back its very long-term loans to banks. - SA London 
* * * * *

 

Last night Ambrose Pritchard-Evans released a commentary that basically states that Europe is now in deflation as its M3 has now contracted by .3% in Sept. or contracting at an annual rate

of 3.6%.  What is more startling is his calculations that the USA M3 has contracted at an annual rate of 6.5% during this time period..a pace of contraction not seen since the 1930's/

It is the speed of the contraction that is catching everyone off-guard.  I will deliver to you the entire article and I will comment on it at its conclusion.

 

Deflation fears as Eurozone and US credit contracts
Bank lending to firms and households in the eurozone has fallen for the first time, raising fears of an economic relapse and a slide into deflation next year.

By Ambrose Evans-Pritchard
Published: 8:26PM GMT 27 Oct 2009
 
Data from the European Central Bank shows that the M3 broad money supply has contracted over the last six months, confounding expectations that ultra-low interest rates would soon boost monetary growth. Loans to the private sector fell 0.3pc from a year earlier, the first such decline since the data started in 1983.
 
The M3 figures include a wide range of bank accounts. They are watched closely by experts for early warnings about the economy a year or so ahead.
 
The picture is even starker in America where
M3 has shrunk at an annual rate of 6.5pc over the last three months, a pace of contraction not seen since the 1930s. US bank loans have plummeted since May.
 
Michael Taylor from Lombard Street Research said the eurozone was "blundering towards deflation". Inflation was minus 0.3pc in September, but unevenly distributed. Prices fell 3pc in Ireland, 1.8pc in Portugal, and 1pc in Spain. "All the ingredients are there for deflation next year. At some stage this may start alarm bells ringing at the ECB," he said.
 
The credit data on both sides of the Atlantic are hard to square with market expectations of a "V-shaped" recovery. Experts at the ECB and the Federal Reserve view the loan contraction as a short-term anomaly caused by the distortions of the crisis, and some have begun to hint that emergency stimuli will be withdrawn soon.
 
However, an ominous pattern is emerging where excess liquidity from low rates and quantitative easing is flooding into the equity (QE) and bond markets without gaining full traction on the underlying economy. This threatens to become a central banker's nightmare.
 
Otmar Issing, the ECB's former chief economist, told an Open Europe forum in London that policymakers are entering treacherous waters. "Nobody can be sure that we have a self-sustaining recovery. The challenges facing the ECB are tremendous," he said.
 
"Money multipliers have collapsed everywhere. What M3 is telling us is that confidence is missing. I don't see any way to stabilise M3 in such circumstances," he said.
 
Professor Tim Congdon from International Monetary Research called on the ECB to buy state bonds in a blitz of QE to insure against a double-dip recession. He said: "2010 is going to be very difficult."
 
However, any move to purchase EMU state debt would erode ECB independence and be viewed in Berlin as a monetary bail-out of Club Med countries. "They would enter a political minefield," said Dr Issing.
 
So far the ECB has confined itself to purchasing €60bn (£54bn) of covered bonds, a pittance compared to the Fed's actions. The assumption is that aggressive QE is not needed because the credit bubble in core Europe was less extreme.
 
However, there is a heated debate over credit conditions in Germany. Mittelstand family firms complain that the window for fresh loans has slammed shut. Savings banks are tightening credit to meet capital rules agreed at the G20 summit.
 
A report by Germany's five institutes said it was a error to push banks into raising capital ratios before the recovery is secure. "Financial conditions are likely to worsen further. Banks are facing large write-offs on toxic debt and a rising toll of company insolvencies. There is a major danger that already tight financing conditions could lead to a credit crunch next year," they said.
 
JP Morgan says European banks may have to raise $78bn (£48bn) in fresh equity over the next six months. BNP Paribas, Unicredit and others have already tapped the market, but some have dragged their feet – even clinging on to Icelandic bank debt at face value. J├╝rgen Fitschen of Deutsche Bank said lenders would face "major challenges" in the first half of 2010. "We are going to see some pain," he said.
 
Germany is competitive and will recover. The bigger danger lies in the South. Italy's public debt will reach 125pc of GDP next year. The country risks a compound interest trap. Nations can endure high debt, or deflation: both together are toxic.



end.

 

 

So it looks like Europe of all a sudden saw a massive drop-off in spending.  The bailouts seem to have very little effect on the economy.

Please pay special attention to the danger of Italy.  Its public debt will reach 125% of GDP by next year.  Any time a country surpasses 100% of GDP you get a debt spiral and

a classic interest rate trap as nobody wishes to invest in your country.

Spain is witnessing a hugh unemployment of 20% and the youth unemployment is 38%.

In Spain you have cities with massive buildings and no tenants.

 

The situation in Ireland is dire indeed as its unemployment skyrockets as it is having trouble coping with the Euro as its currency as does Spain.

These two nations were the leaders in growth a few years back and now they are suffering.  They cannot lower the Euro to stimulate growth as  the HQ is in Frankfurt and

the German bloc wish to be nimble  as they tackle this global mess.

 

end.

 

 

The dollar tanked on this news:

 

BIG NEWS…

Saudis drop WTI oil contract

By Javier Blas
Financial Times, London
Wednesday, October 28, 2009

Saudi Arabia on Wednesday decided to drop the widely used West Texas Intermediate oil contract as the benchmark for pricing its oil, dealing a serious blow to the New York Mercantile Exchange.

The decision by the world's biggest oil exporter could encourage other producers to abandon the benchmark and threatens the dominance of the world's most heavily traded oil futures contract. It is the main contract traded on Nymex.

The move reveals the growing discontent of Riyadh and its US refinery customers with WTI after the price of the price of the benchmark became separated from the global oil market this year.

The surge in oil inventories in Cushing, Oklahoma, where WTI is delivered into America's pipeline system, depressed the value of the WTI against other global benchmarks, throwing the global oil market into disarray.

In January, WTI, which usually trades at a premium of $1-$2 a barrel to Brent, fell sharply, leaving it at a discount of almost $12 -- a record gap. This dislocation in the market continued well into the summer.

From January, Saudi Arabia will base the price of oil for its US customers on a new index developed by Argus, the London-based oil-pricing company.

The Argus Sour Crude Index will track the price in the physical market of a basket of US Gulf Coast crudes, including Mars, Poseidon, and Southern Green Canyon.

Argus said the change in policy reflected the "increased importance of the US Gulf coast sour crude market, in which both production and trading activity was rising sharply."

Paul Horsnell, head of commodities research at Barclays Capital in London, said Saudi Arabia's decision was likely to reflect a "wider discontent" from its customers in the US about WTI performance.

ExxonMobil, Marathon, and Valero are among the US's biggest buyers of Saudi crude oil.

Edward Morse, chief economist at LCM Commodities in New York, said: "It is a recognition by large players that WTI sometimes does not reflect the true value of crude oil in the waterborne market."

Saudi Arabia has priced its oil using WTI since 1994.

The price was based on quotes from the physical market which were compiled by Platt's, a unit of McGraw-Hill.

Oil companies then covered their exposure to WTI using the futures market on Nymex.

Bob Levin, managing director of market research at the CME Group-owned Nymex, said the exchange was ready to move with the market.

"We plan to introduce a cash-settled futures contract tracking the new Argus index," he said.Mike Vinciquerra, equity research analyst at BMO Capital Markets, said the new Argus index would not replace WTI. "It's more a supplement," he said.

* * * 

 

Everywhere we look, all foreign nations wish to get rid of the usa dollar.

By the Saudi's dropping the West Texas Intermediate Reference Price you basically kill the dollar.  It is toast.

And thus, its only use in the dollar carry trade. As the world continues with the massive dollar trade it will be impossible to recall of the liquidity created!

 

end

 

Barrick made the news again and it was not pretty:

 

Barrick Gold posts net loss on $5.7 billion charge

TORONTO, Oct 29 (Reuters) - Barrick Gold Corp (ABX.TO) reported a third-quarter net loss on Thursday as it absorbed a $5.7 billion charge to unwind gold hedges, but the Canadian miner said core earnings rose, helped by higher gold prices…-END-

12:17 ABX Barrick Gold may sell non-core assets to raise acquisition funds - Bloomberg ($36.00+$2.17)
Citing the CEO in an interview. 
* * * * *Now, the question is WHEN and HOW are they going to cover their hedges? Maybe they were in there buying today.

JUST IN, late...

On the Call: Barrick Gold CEO Aaron Regent
By The Associated Press (AP) – 1 hour ago

Barrick Gold Corp. took a $5.7 billion charge in the third quarter stemming from the Toronto-based gold producer's decision to eliminate all its gold hedges.

The hedges are futures contracts that commit Barrick to sell the metal at predetermined prices.

While the contracts guarantee certain cash flows, they often commit Barrick to sell gold at prices lower than the current spot price. Barrick also has said it believes holding the hedges hurt its appeal among investors and weighed on its share price.

Aaron Regent, Barrick's president and chief executive officer, discussed the decision with analysts Thursday during a conference call.

QUESTION: Why didn't you reduce the fixed hedges more so than the floating hedges?

ANSWER: "I think they're two different animals. The floating hedges really are, as you know, just a crystallized liability; it's just money that we owe the banks.

"And so the timing of that just represents the, I guess the best opportunity that we have to pay down the banks ... in the most efficient way, and so that's really just a cash settlement.

"So there are a number of factors that go into our decision ... so that's a separate issue.

"On the fixed book, that really depends on WHEN we go into the market and buy the gold.

"So that's market-sensitive and we want to be opportunistic in the marketplace when we buy the gold back, so that really depends on when we buy the gold, the fixed book, whereas the floating book is strictly just a ... payment obligation that we have options on."

-END-

 

 

 

In the questioning by reporters to Barrick today, it is strange that nobody asked them why they have not covered one oz of gold.

 

Strange indeed.  And Barrick's stock:  it rose by $2.00

 

Agnico Eagle lost 4 dollars today on news that the SEC ordered it to post a loss due to deferred taxes. The deferred taxes was around 20 million dollars.

AEM is having a little trouble ramping up to speed on one mine.  They projected that 2010 will produce 1 million to 1.1 million oz of gold.

 

These guys put 4 mines into production in 2 years. They will bring out the 5th mine in Mexico in late 2010. And how were these non hedgers rewarded?:

 

they whacked their stock down by 4 dollars.

 

AEM will recover and trade in the 100's shortly.

 

end.

 

 

The talk around the globe is for countries to withdraw all of their liquidity fostered to stimulate demand.

Axel Weber announced that the ECB must rein into liquidity.

 

And now lets see how the usa housing market is faring:

 

Jim Sinclair's Commentary

Curtail QE? Yeah sure!

U.S. Home Vacancies Rise to 18.8 Million on Defaults (Update1) 
By Kathleen M. Howley

Oct. 29 (Bloomberg) — About 18.8 million homes stood empty in the U.S. during the third quarter as banks seized properties from delinquent borrowers and new home sales fell in September.

The number of vacant properties, including foreclosures, residences for sale and vacation homes, rose from 18.4 million a year earlier and 18.7 million in the second quarter, the U.S. Census Bureau said in a report today. The record high was in the first quarter, when 18.95 million homes were vacant. The homeownership rate, meaning households that own their own residence, stood at 67.6 percent.

The worst U.S. housing crash since the Great Depression has led to a record number of foreclosures and shaved almost a third off property values. The S&P/Case-Shiller Index of 20 cities in August was 29 percent below its 2006 high, after rising for four consecutive months.

"We are bumping along the bottom of the housing market," said James Lockhart, vice chairman of WL Ross & Co. and the former director of the Federal Housing Finance Agency. "There is the potential for another swing down."

Sales of new U.S. homes fell 3.6 percent in September to an annual pace of 402,000, the Commerce Department said yesterday. That was lower than the 440,000 median forecast of 75 economists surveyed by Bloomberg News.

More…

Look at all of those home vacancies rise to 18.8 million homes due to defaults.  How on earth are the usa going to rein in liquidity?.

end.

It looks like FASB is not happy with usa accounting:

 

Jim Sinclair's Commentary

It is encouraging that FASB is defending mark to market for fair value. As long as the bank holder of an asset is free to select any price as fair value no value will be fair.

"Herz said "fair value might have provided an early warning" and contributed to investor confidence in a recovery."

Keep accounting separate from U.S. bank regs-FASB 
Thu Oct 29, 2009 12:54pm EDT 
By Emily Chasan

NEW YORK, Oct 29 (Reuters) – Bank and securities regulators should "clearly delineate" their efforts to maintain economic stability from accounting rulemaking, the top U.S. accounting standard setter said on Thursday.

Robert Herz, chairman of the U.S. Financial Accounting Standards Board, said regulators should separate their rules on regulatory capital requirements designed to maintain economic stability from accounting rules designed to promote transparency.

"Both are essential public policy goals," Herz said in comments to the New York Society of Security Analysts.

Regulators should use U.S. Generally Accepted Accounting Principles (GAAP) as a "baseline" to evaluate bank health, rather than a primary measure, he said.

U.S. accounting rulemakers have been blamed by many investors and financial industry experts for accelerating the financial crisis by requiring a broader use of "mark-to-market," or "fair value," accounting that required companies to put a market value on financial instruments.

More…

 
 
And finally  our favourite CIT is getting in the limelight.
 
It looks like it will go into bankruptcy tonight:
 

CIT is to middle American business financing what Lehman was to OTC derivatives.

It is one thing to beat or not beat bankruptcy but it is critical that CIT is able to run day to day business at competitive rates and in volume. I doubt that it can do either now or in the future few years.

This is the overriding story of the past few month that few really understand the implications of.

New CIT aid is in hedges 
It's now fund group vs. Icahn 
By JOSH KOSMAN 
Last Updated: 3:26 AM, October 29, 2009 
Posted: 1:07 AM, October 29, 2009

A group of hedge funds yesterday offered to lend troubled finance company CIT Group $4.5 billion in order to shore up creditor support for a controversial debt swap, pitting the funds against billionaire activist investor Carl Icahn, who wants the swap voted down.

The lifeline, extended by a group that includes Silver Point Capital, comes as CIT's lenders must decide by midnight tonight whether to support a company-proposed debt exchange, a separate pre-packaged bankruptcy plan or neither proposal.

Icahn has spent this week urging creditors to reject both proposals in order for the company to default on its loans and give a bankruptcy court control of the company, which can then sell most of its $60 billion in assets and use the proceeds to pay off $42 billion in debt.

CIT provides financing to 1 million businesses, including Dunkin' Brands franchisees.

In making the loan to CIT, Silver Point is putting its support behind the company's board and management, whom Icahn has criticized as being responsible for CIT's woes.

More…

 

end.
 
Tomorrow will be a fascinating day.  I do not have the tools as I am not sure about the OI numbers.  If the OI is correct at 501000, then the cartel will need to get the monkey off of their back.
If the OI is 488000 then gold can resume without any hits by the cartel banks.
 
Regardless of the situation, it looks pretty ominous for our gold shorts.
 
There is a radio broadcast by Rob Kirby and you can hear it by going to my website and scroll down and see  the radio broadcast with Jay Taylor.
It is a terrific broadcast as it explains interest rate swaps and how the cartel manipulate gold.
 
Again, my website is:
 
 
See you on Saturday.
Harvey.

 

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