Saturday, February 6, 2010

FW: very important.

 


From: Harvey Organ [mailto:harveyorgan@rogers.com]
Sent: February-06-10 12:38 AM
To: 'Harvey Organ'
Subject: very important.

Good morning Ladies and Gentlemen:
 
Gold closed down by 10,20 in the regular trading at 1052.20.  However in the access market, gold rose to 1065.00 as the Dow in the last half hour finished up 10 points after being
 
down by 160 points going into the last hour of trading.  The Plunge Protection Team did their patented Hail Mary recoveries.
 
Silver was down by 52 cents to 14.82.  It recovered to 15.11 in the access market on the Dow recovery.
 
The big news was the jobs report. 
 
On an official BLS report, the number of jobs lost was 20,000.
The total revised job losses from April 08 through to March 09 was 930,000
The total revised job losses for the year 2009 was pegged at 617000.
 
In a strange announcement, the BLS stated that after a loss of 20,000 jobs and a loss of a further 65000 in December and a 60,000 gain in November,
 
the unemployment rate declined by .3% to 9.7% from 10.%.
 
The reason?  500,000 lost job seekers finally gave up looking.  The BLS removes them from the labour list and thus the unemployment rate goes down.
 
OK her e   is the official release:'
 

US payrolls fall in Jan, jobless rate at 5-mo low

* U.S. nonfarm payrolls fall 20,000 in January 
* Revisions show deeper losses than previously thought 
*Unemployment rate drops to 9.7 pct, lowest in five months

WASHINGTON, Feb 5 (Reuters) - U.S. employers unexpectedly cut 20,000 in January, but the unemployment rate surprisingly fell to a five-month low of 9.7 percent, according to a government report on Friday that hinted at some labor market improvement starting to take root.

The Labor Department said the economy shed 150,000 jobs in December, compared to 85,000 previously reported, but November was revised to a gain of 64,000, up from 4,000. Annual benchmark revisions to payrolls data showed the economy has purged 8.4 million jobs since the start of the recession in December 2007.

Analysts polled by Reuters had forecast payrolls gaining 5,000 and the unemployment rate to edge up to 10.1 percent in January from 10 percent. Median estimates from the top 20 forecasters expected payrolls to be unchanged last month.

A sharp increase in the number of people giving up looking for work helped to depress the jobless rate. The number of 'discouraged job seekers' rose to 1.1 million in January from 734,000 a year ago.

With Americans increasingly anxious about high unemployment, President Barack Obama has declared that job creation will be his top priority in 2010.

Obama's fellow Democrats fear voters could punish them in November congressional elections if the administration fails to make headway in tackling the high jobless rate.

Financial markets have grown nervous about the prospect of unemployment in the United States remaining high for a long time. The economy resumed growth in the second half of 2009 and labor market healing is crucial for a self-sustaining economic recovery to take root.

The economy grew at a 5.7 percent rate in the fourth quarter, the fastest clip in six years. Growth was driven by businesses reducing their stock of unsold goods less aggressively that in previous quarters.

While job losses in prior months were steeper than previously thought, details of the January report supported views the blood bath has stopped.

Last month, the services sector added 40,000 jobs after shedding 96,000 positions. The figure included a rise in federal government employment, partly as a result of the hiring of staff for the 2010 Census. Temporary help employment rose 52,000, maintaining a rising trend seen in the past month.

Manufacturing payrolls rose 11,000 last month, the first gain since January 2007, after dropping 23,000 in December. But the construction sector, continued to struggle, losing 75,000 jobs, likely because of unusually cold weather. Construction payrolls fell 32,000 in December.

In another sign of labor market improvement, the average workweek unexpectedly rose to 33.3 hours, the highest level in a year, from 33.2 hours in December. Total average hourly earnings increased $18.89 from $18.84 in December.

Manufacturing overtime rose to 3.5 hours, the highest since September 2008.

 

 

 

end.

 

 

Here is what Lemetropolecafe's expert ,  on the jobs numbers , Monty High,  writes as to his take on the situation:

 

Unadjusted Employed Population Ratio Continues To Drop

Here's the scoop on the Labor Department's monthly unemployment report:

  • Associated Press Headline And Lead: "January unemployment rate drops to 9.7 percent... The unemployment rate dropped unexpectedly in January to 9.7 percent from 10 percent while employers shed 20,000 jobs."
  • Labor Department News Release: click here and here and here.
  • Key Numbers: Not Seasonally Adjusted Labor Depart Civilian Non-Institutional Population: 236,832,000 vs 234,739,000 year ago. Not Seasonally Adjusted Employed: 136,809,000 vs 140,436,000. Not Seasonally Adjusted Private Hours Worked Per Week: 33.1 vs 33.2.
  • My Spreadsheet (click Download 20100205yoy).

Here's my uneducated interpretation - This data series shows an uneven change in the genuine employment condition. The employment population ratio (number employed / non-institutional adult population) continues to fall and has hit a new low. The hours worked per employed person bumped up some so that the Full Time Employment Population Ratio which assumes that in an ideal world every employed person would get 40 hours of work popped up a bit but is bouncing along at a low level. I calculate the Full Time Employment Population Ratio = (Num Employed / Non-Institutional Adult Population) * (Avg Private Hours Worked Per Week / 40).

MontyHigh, www.worldofwallstreet.us

 

 

 

end.

 

 

However, the very reliable TrimTabs report gives the true picture on the jobs number.  These guys look at only tax revenue as a guide to employment.

This is very rational and accurate and these guys do not miss.  This is the real picture!!.

 

OK what do they calculate ? .  They see continual deterioration in the January jobs picture, with a loss of 104,000 in January not the 20,000 of the BLS.

They also have affirmed the job loss for 2009 at 5.2 million jobs instead of the BLS original loss of 4.4 million souls and a revision today to 4.8 million loss.

Trim tabs believes their 2009 figure will prove to be accurate.

 

Today Trimtabs shoots down the flawed data of the BLS .  Here is this very important report by Trimtabs:

 

TrimTabs Employment NewsFlash – February 5, 2010

Real-Time Tax Data Says Job Losses Much Worse than BLS Reports

TrimTabs' Estimates 104,000 Jobs Lost in January, while BLS Reports Decline of 20,000

BLS Revises Job Losses Up Almost 500,000 in 2009, and a Whopping 930,000 in 2008

TrimTabs employment analysis, which uses real-time daily income tax deposits from all U.S. taxpayers to compute employment growth, estimated that the U.S. economy shed 104,000 jobs in January. Meanwhile, the Bureau of Labor Statistics (BLS) reported the U.S. economy lost 20,000 jobs. We believe the BLS has underestimated January's results due to problems inherent in their survey techniques.

In addition to their regular report, the BLS published benchmark revisions to their employment estimates derived from an actual payroll count for March 2009. As a result, job losses from April 2008 through March 2009 were revised up a whopping 930,000, or 23% from their earlier revisions. In addition, the BLS revised their job loss estimates for 2009 up 617,000, or 14.8%.

While the BLS originally reported job losses of 4.2 million in 2009, TrimTabs reported 5.3 million, a difference of more than a million lost jobs. We consistently reported that based on real-time tax data, job losses were much higher than the BLS was reporting. This past January, the BLS revised their job loss estimate to 4.8 million, an increase of almost 600,000 lost jobs. The new total brought the BLS' revised estimates much closer to TrimTabs' original estimate based on real-time tax data.

Since July 2009, TrimTabs estimates and the BLS estimates have diverged again. While the tax data points to a weak job market, the BLS estimates point to a steadily improving job market. We believe the job market is much worse than the BLS is reporting and that in January 2011, when the BLS revises their estimates for 2010, their April 2009 through December 2009 results will move much closer to TrimTabs' results.

The BLS has seriously underreported job losses for the past two years due to their flawed methodology. TrimTabs has identified the following four problems:

1. The BLS employment estimate is based on a survey, and not on an actual count of employees. While the BLS survey is large and supposedly designed to capture the complex nature of the employment market, it is still a survey and therefore subject to error. TrimTabs believes that rapid changes in an employment cycle cannot be captured by surveys.

2. Several times a year, the BLS applies enormous seasonal adjustments to their survey results to account for seasonal fluctuations in the job market. For example, this January, the BLS added 1.92 million jobs to their survey results to report a job loss of 20,000 to account for the layoff of retail holiday workers. In our opinion, the sheer magnitude of the seasonal adjustment which dwarfs the monthly result renders this month's job loss estimate meaningless.

3. At the time of the first release, only 40% to 60% of the BLS survey is complete and is subject to large revisions over the next two months.

4. The BLS applies a mysterious "birth/death" adjustment to their survey results to account for business openings and closings. While the payroll data was adjusted substantially, the "birth/death" adjustments were left unchanged. In 2008 and 2009, the BLS' "birth/death" adjustment added 904,000 and 882,000 jobs, respectively, for a total of 1.79 million. By way of comparison, in 2006 and 2007, the BLS' "birth/death" adjustment added 964,000 and 1.13 million jobs, respectively. We find it highly unlikely that in 2008 and 2009, during the worst recession since the 1930's, more businesses opened than closed netting 1.79 million jobs.

In our opinion, flawed BLS survey results, month-after-month, does the public a huge disservice. While its results point to a slowly recovering economy, TrimTabs' results point to a dangerously weak economy.

 

 

 

John Williams of shaowstats.com confirms the data of Trimtabs:

 

1.36 Million Jobs Knocked off December Payrolls; Depression's Job Loss Increased by 19%  
- January Unemployment: 16.5% (U-6), 21.2% (SGS)  
- Serious Jobs and Unemployment Deterioration in Months Ahead

"No. 276:  Reporting Focus: January Employment and Benchmark Revision " 
http://www.shadowstats.com/

 

end.
 
 
 
In a nutshell, the jobs scene is still deteriorating.  Very few are hiring workers back.
 
In the very reliable shadowstats.com figures the total unemployment-under employment
level is still very high at 21.2%.
 
 
 
Ok lets see what other economic news of the day revealed:
 
Yesterday, we got consumer credit and it was down for the 11th straight month.  How could the economy in the usa improve with this statistic?
 

December consumer credit down for 11th straight month

WASHINGTON (Reuters) - A weak job market and tight credit conditions caused consumer credit to fall $1.73 billion in December, the eleventh straight monthly decline, a report from the Federal Reserve showed on Friday.

December consumer credit outstanding fell at a 0.8 percent annual rate to $2.457 trillion, following a sharp downward revision to November's record drop. November credit fell $21.83 billion, or a 10.6 percent rate, compared to the record $17.5 billion first reported.

Analysts polled by Reuters had forecast consumer credit to decline by $9 billion in December.

The current string of 11 monthly declines in consumer credit is the longest since the Fed began keeping records in 1943 and the 10.6 percent drop in November is the sharpest decline in percentage terms since June 1975. Total credit has fallen in 15 of the last 17 months and had not fallen in a decade before the current string of declines began in August 2008.

Revolving credit, which includes credit cards, dropped $8.55 billion in December after falling a revised $13.79 billion in November. That's the 15th straight drop in revolving credit, the longest string of declines since those records began in 1968.

Nonrevolving credit, which takes in loans for new cars and mobile homes, rose $6.82 billion in December after falling by $8.04 billion in November.

There are some categories of credit use, such as home-equity loans, that are not measured by the Fed's monthly consumer credit report

-END-

 
In the physical gold and silver market, there was hardly any changes.  However it looks like there was some cash settlements in the gold comex.
 
The open interest on the gold comex declined by only 2900 contracts despite the huge drop in gold.  Silver's Oi dropped by only 475 contracts despite the massive drop in price:
 
 

The gold open interest only dropped 2974 contracts to 477,358 … which is negligible considering the magnitude of the price fall. The silver open interest only went down 475 contracts to 122,817.

 

 
 
 
 
 
 
end.
 
 
It seems that the long holders on the gold comex and the silver comex are not paying attention to JPMorgan's massive supplying of gold and silver comex paper--the metal to which they do not have
 
any ownership to.
 
Anybody who plays the comex gold and silver market has to have his head read with this manipulation occuring on a daily basis.
 
My suggestion?  buy the metal from a bullion bank and put it in a safety deposit box and buy nothing else  and avoid listening to the background noise which is nothing but nonsense!
 
The COT report was not important as it did not include the big trading days of Wed-Friday.
 
However this occurred on Wednesday which is a clear sign of the assault which was to occur the next day (GLD shedding 5.8 tonnes of gold)

The GLD ETF shed 5.78884 tonnes to 1,104.54976 tonnes. MarketVane's Bullish Consensus dropped 4 points to 73% (below the December low). The HGNSI was unchanged at 32.3%, but for technical reasons it effectively lags a day.

 

It is clear, that this gold is needed as the cartel bankers in their quest to influence the gold market.  The volume on the gold comex was approximately 300,000 contracts with no switches  on Thursday .

That represents 30 million oz or about  42% of yearly production of gold.  And our regulators watch this in total awe and do nothing!.

 

I am going to spend time on international events which are very important for us to understand:

 

I am going to download, the entire Ambrose Pritchard Evans article on the plight of three nations, Greece, Spain and Portugal:

 

 Fears of 'Lehman-style' tsunami as crisis hits Spain and Portugal

The Greek debt crisis has spread to Spain and Portugal in a dangerous escalation as global markets test whether Europe is willing to shore up monetary union with muscle rather than mere words.

 

By Ambrose Evans-Pritchard

Published: 7:29PM GMT 04 Feb 2010

 

Spain is going through a "deep crisis" in its housing sector. Photo: AFP Julian Callow from Barclays Capital said the EU may to need to invoke emergency treaty powers under Article 122 to halt the contagion, issuing an EU guarantee for Greek debt. "If not contained, this could result in a `Lehman-style' tsunami spreading across much of the EU."

 

Credit default swaps (CDS) measuring bankruptcy risk on Portuguese debt surged 28 basis points on Thursday to a record 222 on reports that Jose Socrates was about to resign as prime minister after failing to secure enough votes in parliament to carry out austerity measures.

 

Parliament minister Jorge Lacao said the political dispute has raised fears that the country is no longer governable. "What is at stake is the credibility of the Portuguese state," he said.

 

Portugal has been in political crisis since the Maoist-Trotskyist Bloco won 10pc of the vote last year. This is rapidly turning into a market crisis as well as investors digest a revised budget deficit of 9.3pc of GDP for 2009, much higher than thought. A €500m debt auction failed on Wednesday. The yield spread on 10-year Portuguese bonds has risen to 155 basis points over German bunds.

 

Daniel Gross from the Centre for European Policy Studies said Portgual and Greece need to cut consumption by 10pc to clean house, but such draconian measures risk street protests. "This is what is making the markets so nervous," he said.

 

In Spain, default insurance surged 16 basis points after Nobel economist Paul Krugman said that "the biggest trouble spot isn't Greece, it's Spain". He blamed EMU's one-size-fits-all monetary system, which has left the country with no defence against an adverse shock. The Madrid's IBEX index fell 6pc.

Finance minister Elena Salgado said Professor Krugman did not "understand" the eurozone, but reserved her full wrath for the EU economics commissioner, Joaquin Almunia, who helped trigger the panic flight from Iberian debt by blurting out that Spain and Portugal were in much the same mess as Greece.

 

Mrs Salgado called the comparison simplistic and imprudent. "In Spain we have time for measures to overcome the crisis," she said. It is precisely this assumption that is now in doubt. The budget deficit exploded to 11.4pc last year, yet the economy is still contracting.

 

Jacques Cailloux, Europe economist at RBS, said markets want the EU to spell out exactly how it is going to shore up Club Med states. "They are working on a different time-horizon from the EU. They don't think words are enough: they want action now. They are basically testing the solidarity of monetary union. That is why contagion risk is growing," he said.

 

"In my view they underestimate the political cohesion of the EMU Project. What the Commission did this week in calling for surveillance of Greece has never been done before," he said.

 

Mr Callow of Barclays said EU leaders will come to the rescue in the end, but Germany has yet to blink in this game of "brinkmanship". The core issue is that EMU's credit bubble has left southern Europe with huge foreign liabilities: Spain at 91pc of GDP (€950bn); Portugal 108pc (€177bn). This compares with 87pc for Greece (€208bn). By this gauge, Iberian imbalances are worse than those of Greece, and the sums are far greater. The danger is that foreign creditors will cut off funding, setting off an internal EMU version of the Asian financial crisis in 1998.

 

Jean-Claude Trichet, head of the European Central Bank, gave no hint yesterday that Frankfurt will bend to help these countries, either through loans or a more subtle form of bail-out through looser monetary policy or lax rules on collateral. The ultra-hawkish ECB has instead let the M3 money supply contract over recent months.

 

Mr Trichet said euro members drew down their benefits in advance -- "ex ante" -- when they joined EMU and enjoyed "very easy financing" for their current

joined EMU and enjoyed "very easy financing" for their current account deficits. They cannot expect "ex post" help if they get into trouble later. These are the rules of the club.

 

Then this article on Greece:
 
 

Greece rattled by 'hidden debt' controversy

Greek debt markets have come under fresh assault from hot money funds after a commission of experts in Athens told the country's parliament that it had uncovered €40bn (£35bn) of "hidden debts" during an investigation into past manipulation by the financial authorities.

 

By Ambrose Evans-Pritchard

Published: 7:30PM GMT 02 Feb 2010

 

Greece rattled by 'hidden debt' controversy. Truck drivers stuck as tractors block a highway crossing at Promahonas on the Greek-Bulgarian border. Premier George Papandreou said the spike in Greek borrowing costs was "completely unjustified" and lashed out at the rating agencies, which precipitated this crisis by downgrading Greek bonds.

 

"Greece is at the centre of an unprecedented speculative attack: we cannot be at the mercy of creditors. Despite our tragic mistakes, our fate is today defined by rating agencies that bear responsibility for the 'bubble' that led to the global crisis in the first place," he said.

 

Yields on 10-year Greek bonds jumped 14 basis points to 6.74pc, widening the spread over German Bunds to 355 points. Portuguese bonds suffered after the central bank said the government had not done enough to tackle its ballooning deficit.

 

Jittery markets are waiting for clearer guidance on whether the hidden liabilities found by the inquiry – and reported in glaring headlines by the Greek press – go beyond revisions already made by the PASOK government when it took power last year.

 

European Commission spokesman Amelia Torres said there was no indication at this stage that the data must be revised again.

 

 

Chris Pryce, director of Fitch Ratings for Greece, said the devil is in the detail. "It is a further confirmation that things went badly wrong, and a reminder that there may be further increases in debt that need to be recognised before we get to the bottom of this," he said.

 

Spyros Papanicolau, head of the Greek debt office, said that large areas of debt covering the defence ministry and loans from the European Investment Bank and other agencies, as well as the state's contingent liabilities, are beyond its purview, leaving the situation unclear.

 

The EC has no data on public debt beyond 2008, when the figure was €237bn, or 99.2pc of GDP. A surging budget deficit of 13pc of GDP has pushed the figure much higher since then. Brussels expects the debt to reach 125pc this year, and 135pc in 2011 unless spending is slashed.

 

If auditors discover a fresh chunk of hidden debts, this would test Greek financial credibility to the limits. "If there is anything too this, it is the final straw," said one banker.

 

Nobel economist Joseph Stiglitz told Greek politicians and economists that Europe's budget "fetishism" was worsening matters. The comments were an invitation for them to rebel against the austerity measures imposed by Brussels under German prodding.

 

He said the whole eurozone shared responsibility for the unfolding drama in Greece and has a duty to step with a "Euro Bond" or solidarity fund. "There ought to be assistance through the ECB, through issuing euro bonds. Any small country in Europe can't do it on its own," he said.

 

Dr Stiglitz said it was perverse that the EU can help private companies, but not to national treasuries. "If you are willing to lend to banks, why not lend to governments? Does Europe not have confidence in the governments that constitute it?"

 

 
 
end.
 
 
 
The key developments here are as follows:
 
1. Credit Default Swaps rose 28 basis points to 222 , on Portugal,   as the prime minister of Portugal was about to resign.
 
2. A 500 million Euro bond auction in Portugal failed completely and had to be withdrawn as there were no bidders.
 
3. Portugal's debt to GDP has now risen to 9.3%
 
4. Its debt to GDP has risen to 108%
 
 
Spain has its deficit a t  around 10% of the GDP.  Its total debt to GDP is around 70% but rising.
However its unemployment is 20% for all and 38% for the youth of the nation.
 
Greece has its deficit to GDP at 12.7% which is very alarming.
It has a total debt to GDP of 117%.
 
There are strikes planned as truckers block the hiways.
It looks like civil unrest is occuring here.
 N ow we see that 40 billion euros of debt was hidden.
This will be deadly to Greece's finances.
 
 
 
end.
 
 
Here is a commentary on the stock market meltdown in Europe caused by the threat of a debt default on that side of the pond:
 
 

 I nvestors Fear Europe's Woes May Extend Global Slump 
By JAVIER C. HERNANDEZ and JACK EWING 
Published: February 4, 2010

Just as America's recession begins to ebb, trouble is brewing in Europe that may prolong a downturn on the Continent and ricochet through the global economy as it struggles toward a recovery.

A rout in stock markets that began in Europe spread to Wall Street on Thursday and around the globe to Asia on Friday, amid fears that Europe may be the world's next financial flashpoint. Pressure has been mounting across the Atlantic as Greece, Portugal and a handful of struggling countries that use the euro scramble to pay off mountains of debt accumulated from years of profligate spending.

The Dow Jones industrial average slid 2.61 percent, or 268.37 points, to 10,002.18 Thursday, after briefly falling below 10,000 for the first time since November, as American investors grew more uncertain about Europe's economy.

Stock markets across Europe slumped as much as 6 percent, and worries that the troubles might push even big European nations like Spain into a financial crisis drove the euro to $1.37, a seven-month low against the dollar.

Markets in Europe slipped further on Friday, after a sharp sell-off in Asia, amid continued worries about government debt in several European countries and about the state of the U.S. labor market.

More…


Here is a commentary by Jim Sinclair on the plight of debt defaults in Europe
 
 

Jim Sinclair's Commentary

The Euro is down again today on the sovereign debt concerns focusing on a debt to GDP percentage. The nations presently in focus of this have been quite impolitely nicknamed PIIGS. The PIIGS are Portugal, Italy, Ireland, Greece and Spain.

Although this means little to floor traders, Forex speculators of F-TV guess what nation stands directly in the middle of the PIGS on the debt to GDP percentage?

Yes, you are right, the USA.

So much for logic.

Algorithms will yank markets into the stratosphere and down again.

Fundamentals make the trend and algorithms make the noise. Fundamentals will pay off on insurance policies.

The argument against the PIGS is the debt to GDP percentage. The exact same argument would place the US dollar in a crisis position.

So what does this mean for the future? Gold will be elected the currency of choice.

The race to the bottom is what makes currency values. While size is being used today for dollar strength versus the Euro, in time the argument of size in terms of a currency whose debt to GDP ratio is equally bothersome as the PIGS, the US dollar, will accelerate in the race to the bottom.

The US dollar is no safe haven. Stay the course.

 

end.
 
 
This quote from David Berman on his blog says it all:  his site is :www.theglobeandmail.com/blogs/markets/quote-of-the-week/article1457846/
 
 
 

David Berman – Globe Investor Market Blog   (from the globe and mail) 

Best quote I've seen all week regarding the European debt crisis. From Erik Nilsson, an economist at Scotia Capital: "Let me get this straight: investors are getting out of the euro zone (2010 deficit/GDP 6.7 per cent; debt/GDP 88 per cent, according to OECD) because of its poor fiscal situation and flocking to the U.S. (10.7 per cent and 92 per cent, respectively)."

More…

 
 
In plain English:   the entire Eurozone countries including the new editions of Greece and Turkey have the following:
 
1.  A deficit to GDP of 6.7%
 
2. A debt to GDP of 88%
 
 
a deficit to GDP means a cash shortfall in the current year 2010.  That deficit at the end of 2010 must be added to the debt .  The accumulation of all previous deficits is the debt.
This figure is divided by the revenue of the country-entity to get the debt to GDP ratio.
 
Any deficit to GDP of 10% is very harmful and quite often leads to default.  Any debt:GDP over 100% always leads to default.
 
 
 
Lets see the usa side of things:
 
Berman states that the deficit to GDP is 10.7% for 2010.  However that was before the CBO upped its deficit figures.
 
The usa is slated for a deficit of 1.65 trillion dollars for 2010. The nominal GDP for 2009 is 14.4 trillion dollars. The real deficit to GDP is 11.4%.
 
However if you use the real GDP and take away ficticious non revenue numbers, the real GDP of the usa for 2009 is 12.98 trillion.
Thus the deficit to GDP is 12.7% and this is the figure that many commentators are using.
 
The usa DEBT to GDP is  easier to calculate:
 
The total debt right now is 12.4 trillion dollars.  If we use nominal GDP then the debt/GDP is 86..1%  If we use the real GDP then the ratio is 12.4 divided by 12.98 or  95%.
 
 
 
Here are some commentaries on this important ratio for the Euro side and the USA side/
This first chart shows each fiscal year and the deficit recorded.  Please note that Sinclair has included both nominal GDP and real GDP in his figures:
 
 

Jim Sinclair's Commentary

This calculation places the US dollar as #3 out of the 5, now 6, so called PIIGUS.

clip_image001


 
In my commentary Europe places 5 countries in severe financial trouble namely Portugal, Greece, Italy, Ireland and Spain.
Many authors use the term PIIGS to refer to these countries.  Ambrose Pritchard Evans uses the term  Club Med Countries.
 
Regardless of terminology, these deficits and debts are extremely dangerous and we must be very cognizant of what is going on.
 
 
I would like to point out that the usa side of the equation does not include woes from the states or municpalities or the following:
 

Teachers pension fund is $43 billion short 
The California State Teachers' Retirement System says that as of June 30, 2009, it could meet only an estimated 77% of its future pension obligations — far less than the 100% recommended by actuaries 
By Marc Lifsher 
January 29, 2010

Reporting from Sacramento – Another pension alarm bell is ringing in Sacramento, this time at the teachers retirement system, where the nation's second-largest public pension fund is reporting a $43-billion shortfall.

The California State Teachers' Retirement System said that as of June 30, 2009, it could meet only an estimated 77% of its future pension obligations — far less than the 100% recommended by actuaries.

Known as CalSTRS, the fund took a big hit during the 2008-09 fiscal year, losing a quarter of its value. Since then, its investment returns have improved, but the growth isn't strong enough to keep up with a widening funding gap.

What's worse, CalSTRS Chief Executive Jack Ehnes said in a report to be presented to the board Feb. 5, the fund could be broke in 35 years — the length of a typical teaching career.

To avoid that calamity, Ehnes wants the state Legislature to raise employer pension contributions paid by the state and, indirectly, California's 1,043 school districts in the next few years.

More…

end.

I would also like to point out that Europe probably has this amt of gold still in its vaults:

 

1. The ECB      538 tonnes of gold

2.France:        2487 tonnes of gold.

 

I doubt the usa has any gold in their ownership in the usa.

 

Many have asked what happens in a debt default if Greece or Ireland defaults?  What if the Euro defaults?  What happens if the usa defaults?

 

Many commentators do not tell this side of the story as it spreads fear and panic.  However we should be ready.

 

First, a country like Greece probably would be kicked out of the EMU and they would automatically print Drachmas.

IIf Spain defaulted they would go back to Pesatas and Portugal to Escudos. Italy would revert back to their old  Lira.

 

However, the cost to do so would be great. All contracts would be written in Euros and must be honoured.

As the country uses its old currency, a huge devaluation occurs as this is the last step a country can do to escape its problems.

The devaluation of these old currencies also sends the Euro down to reflect trade problems and imbalances.

Right now we are seeing a huge rise in the usa dollar to reflect this even though the usa is in worse shape than Europe.

 

The devaluation of those countries automatically raises the costs of imports and thus the country will experience massive inflation.

The citizens get angry because of high food prices and we eventually get the "storming of the bastille".  You get truckers blocking the hiways as

 the cost to operate a truck rises and his net revenue falls such that he can not make a living.

 

Before, the IMF would come to the rescue of a nation in need.  However this time the problem is global and there is not enough money in the system

to bail out major countries.  The countries would then try and  announce a debt moratorium  (a debt default) and try and start all over again.

However there is nothing to back their drachmas, their liras, their pesatas!.  The confidence in the currency has now dissipated 

Those countries would at first go into a deep deflation (depression) as their economy stops. The government would then increase the money supply to pay off all its debts and stimulate the economy.

The drachmas, or liras, or pesatas,  in circulation would flow with such speed (velocity) that they would change hands 3 or 4 times in a day.  The velocity causes prices to escalate and \

goods disappear off of shelves in a nanosecond.

While this default has occurred, the usa banks will experience another huge problem, a credit default swap placed on the country in question.

The problem will be the health of the counterparties that underwrote the contracts.  Most of these contracts were written in the usa , with the largest underwriters being:

 

1.AIG

2.JPMorgan

The largest overseas bank underwritting the above is UBS.

 

These contracts total in the trillions of dollars. The default in Europe will bring down the big usa banks and then the usa must print trillions of dollas into the system.

 

In the usa then you will get the same result as Greece, or Spain,  as dollars must flood the system.  Citizens take these dollars and run and buy physical goods. In an extremely short period

of time, most goods disappear off the shelf and thus we will have a hyperinflationary global depression.

I cannot see how we can avoid the above scenario.  I wish it will not happen but I am afraid it will.

I fear this is what you should expect:

clip_image001

Jim Sinclair's Commentary

See you on Monday.

 

Harvey.

 

 

 

 

 

Wednesday, February 3, 2010

commentary Feb 3.10 extremely important.

Good evening Ladies and Gentlemen:
 
I will try and keep todays commentary a little shorter.  However what I will comment upon is extremely important.
 
Gold closed down today, falling by 7.40 to 1111.00  Silver fell by 33 cents to 16.31
 
The open interest on the gold comex rose by 2200 contracts to 480,860.  I would like to add that the OI automatically reduces once a contract has been filled with physical
metal. Thus with 1 million oz of gold standing, the OI would drop if all else remains the same to 470,860 once gold is removed from the comex warehouse to a buyer.
 
The silver Oi rose by only 642 contracts to 122261.
 
Clearly, short covering by the bankers continued from Friday.
 
Everything is shaping up for the jobs number this coming Friday.
 
I need to explain some terms to you.
 
The BLS  (Bureau of Labour Statistics) estimates the jobs by telephone interviews and then they extropolate their findings.
 
When an individual loses his job, the bureau immediately postulates that he went into business for himself and hired family members.
 
Thus the jobs lost  (D= death) leads to self employment  (birth=B).  The Bureau self corrects their postulated jobs gains every Feb jobs number where the jobs gains of the
 
previous months are removed.  They used to do this twice a year, in August and in February.  Now it is only in February that we get a revision.
 
Now look at what Bloomberg thinks the revision will be:
 
 

U.S. May Lose 824,000 Jobs as Employment Data Revised: AnalysisFeb. 3 (Bloomberg Multimedia) -- The U.S. may lose 824,000 jobs when the government releases its annual revision to employment data on Feb. 5, showing the labor market was in worse shape during the recession than known at the time.end.

 

Click http://www.bloomberg.com/insight/birth-death-model.html for a Bloomberg Multimedia interactive visual analysis of the economy’s job losses.

 

 

 

end

 

Today we got two numbers, first the private ADP number and the second the Challenger Grey number which calculates predicted job losses:

 

First the ADP number:

 

08:15 Jan ADP Employment reports payrolls (22K) vs. consensus (30K)
•Dec figure revised to (61K) from (84K) 
* * * * *

US private sector loses 22,000 jobs in Jan-report

NEW YORK, Feb 3 (Reuters) - U.S. private employers cut 22,000 jobs in January, less than the 61,000 jobs lost in December, a report by a private employment service said on Wednesday.

The December decline was originally reported at 84,000. The median of estimates among economists surveyed by Reuters for the ADP Employer Services report, jointly developed with Macroeconomic Advisers LLC

 

 

and now the Challenger Christmas number:
 

07:32 Challenger reports Jan job cuts rose to 71,482 in Jan from 45,094 in Dec
The numbers are not seasonally adjusted. 
* * * * *

US planned job cuts rise to 5-mth high in January

NEW YORK, Feb 3 (Reuters) - The number of planned layoffs at U.S. companies rose to the highest level in five months in January, led by the retail and telecommunications sectors, a report on Wednesday showed.

Employers announced 71,482 planned job cuts last month, up 59 percent from December and the most monthly job cuts since August, according to the report from Challenger, Gray & Christmas, Inc, a global outplacement consultancy.

"The increase in January is not necessarily a sign of a recession relapse. It is not uncommon to see a surge in job-cut announcements to begin the year," said John Challenger, chief executive of Challenger, Gray & Christmas, in a statement.

"Companies are making adjustments based on the previous year's results and the outlook for the year ahead. The beginning of the year is particularly rough on retail workers, as these employers enter one of the slower sales periods of the year," he said.

The January job cuts were up from 45,094 in December and marked the first increase since July. December had marked the fewest job cuts in 24 months.

Still, the planned layoffs remain well below year-ago levels, when planned job cuts hit 241,749 in January 2009, the peak of downsizing activity in the recession.

"The fact that January job cuts did not exceed 100,000 bodes well for much lighter downsizing this year," Challenger said. "Of course, any major shock to the economy could set off a surge in job cuts but, at the moment, conditions appear to have stabilized.

-END-

 
 
The market certainly did not like the planned jobs cuts at a 5 month high.  We are all led to believe that the market is mending and thus jobs are coming back.
 
Doesn't look it to me!!
 
 
The Service Sector is the backbone of the usa economy. Since the usa moved all of its manufacturing off shore, they are dependent on a strong service sector
and we see this number in the ISM non manufacturing number.
 
The number was neutral, not a big gain as everyone thought:
 
 

U.S. service sector grew in Jan-ISM survey

NEW YORK, Feb 3 (Reuters) - The U.S. services sector grew slightly in January, according to an industry report released on Wednesday.

The Institute for Supply Management said its services index rose to 50.5 in January from 49.8 in December. That was slightly below the median forecast of 51 from 73 economists surveyed by Reuters.

A reading above 50 indicates expansion in the sector.

-END-

 
 
 
 
end.
 
 
The following story was picked up by Lemetropolecafe and Jim Sinclair as both thought that this was significant. So do I;
 
 

February 3, 2010

No Help in Sight, More Homeowners Walk Away

By DAVID STREITFELD

In 2006, Benjamin Koellmann bought a condominium in Miami Beach. By his calculation, it will be about the year 2025 before he can sell his modest home for what he paid. Or maybe 2040.

"People like me are beginning to feel like suckers," Mr. Koellmann said. "Why not let it go in default and rent a better place for less?"

After three years of plunging real estate values, after the bailouts of the bankers and the revival of their million-dollar bonuses, after the Obama administration’s loan modification plan raised the expectations of many but satisfied only a few, a large group of distressed homeowners is wondering the same thing.

New research suggests that when a home’s value falls below 75 percent of the amount owed on themortgage, the owner starts to think hard about walking away, even if he or she has the money to keep paying.

In a situation without precedent in the modern era, millions of Americans are in this bleak position. Whether, or how, to help them is one of the biggest questions the Obama administration confronts as it seeks a housing policy that would contribute to the economic recovery.

"We haven’t yet found a way of dealing with this that would, we think, be practical on a large scale," the assistant Treasury secretary for financial stability, Herbert M. Allison Jr., said in a recent briefing.

The number of Americans who owed more than their homes were worth was virtually nil when the real estate collapse began in mid-2006, but by the third quarter of 2009, an estimated 4.5 million homeowners had reached the critical threshold, with their home’s value dropping below 75 percent of the mortgage balance.

They are stretched, aggrieved and restless. With figures released last week showing that the real estate market was stalling again, their numbers are now projected to climb to a peak of 5.1 million by June — about 10 percent of all Americans with mortgages.

"We’re now at the point of maximum vulnerability," said Sam Khater, a senior economist with First American CoreLogic, the firm that conducted the recent research. "People’s emotional attachment to their property is melting into the air."…

-END-

Feb. 2, 2010,

 
 
 
This next commentary is a must read as it shows that any one of the next 20 reasons why the global debt bomb will burst and cause a global meltdown:
 
 

20 reasons Global Debt Time Bomb explodes soon.

Commentary: Which trigger will ignite the Great Depression II?

By Paul B. Farrell, MarketWatch

ARROYO GRANDE, Calif. (MarketWatch) -- Retire? You can fuggetaboutit if the new Global Debt Time Bomb is detonated by any one of 20 made-in-America trigger mechanisms.

Yes, 20. And yes, any one can destroy your retirement because all 20 are inexorably linked, a house-of-cards, a circular firing squad destined to self-destruct, triggering the third great Wall Street meltdown of the 21st century, igniting the Great Depression II that George W. Bush, Ben Bernanke, Henry Paulson and now President Obama have simply delayed with their endless knee-jerk, debt-laden wars, stimulus bonanzas and bailouts.

http://www.marketwatch.com/story/our-debt-time-bomb-is-r
eady-to-go-ka-boom-2010-02-02?pagenumber=2

-END-

 
 
 
As for the physical gold market, this is huge news.  Sprott has got final clearance to proceed with his $750 million offering.  The entire proceeds will buy only physical gold and store in a vault.
The prospectus is identical to Central Fund of Canada
 
This will be the death knell of the cartel  Eric Sprott is one of us and he has the muscle to purchase all of the gold available and bring it to Toronto gold vaults.We will probably see many of the GLD jump ship and load onto
Sprotts gold fund. This may explain some of the strange things going on at the physical gold comex inventory where adjustments occur regularly.
Today the level remained at 1.6 million oz.
 
 
 
 
Here is the story:
 
 
Sprott Physical Gold Trust sets IPO terms

Tue Feb 2, 2010 6:01pm EST

* Plans to sell 75 mil units for $10 each

*Plans to list on NYSE Arca and TSX

NEW YORK, Feb 2 (Reuters) - Gold investor Sprott Physical Gold Trust on Tuesday set the terms of its initial public offering.

The Toronto, Canada-based company said it hopes to sell 75 million units for $10 each, raising about $750 million at the midpoint.

Sprott invests in gold bullion. It said in a filing with the U.S. Securities and Exchange Commission that it provides an exchange-traded alternative for investors interested in a long-term gold bullion investment.

The company said it would use net proceeds from the IPO to buy gold bullion.

The Trust plans to list on the New York Stock Exchange Arca under the symbol "PHYS" and the Toronto Stock Exchange under the symbol "PHY".

The underwrites are being led by Morgan Stanley and RBC Capital Markets. They have the option to purchase an additional 11.25 million units.

 
end.
 
 
 
However, it is the following story that really baffles me---the complete collapse in the Baltic Dry Index:
 
 
 
 
 
Many of you know that I follow religiously two important statistics:
 
1. the TIC report which measures the flow of dollars into or out of the USA.
 
2. the Baltic Dry Index which measures the rate that ships charge to move dry commodities from place to place.
 
The Baltic Dry Index does not measure the movement of oil  from a ship, only dry commodities, thus it is called the Baltic Dry Index.
 
This figure never fails.  It the index rises, the economy is in good shape as commodities are requested globally.
 
If the dry index remains neutral then the economy is flat.
 
If the dry index plummets, then something is seriously wrong.  The economy is tanking.
 
 
Here is the release of the Baltic Dry Index today:
 

Baltic Dry Index Collapses Signal Further Worldwide Economic Weakness In 2010

New York, NY – The Baltic Dry Index has collapsed by 40% over the last 10 weeks further signaling economic weakness.

Chart: www.bloomberg.com/apps/cbuilder?ticker1=BDIY%3AIND

The dry bulk shipping vessel order book is so massive over the next two years that even huge cancellation estimates would have trouble making it manageable, and thus saving the Baltic Dry Index (a measure of spot rates for bulk shipping).

FTAlphaville highlights that broker Icap expects 1,400 vessels to be delivered in 2010, which equates to 120 vessels per month on average. (Even if in reality they won’t be spread out evenly) How bad is 120 ships per month relative to what the market has had to deal with so far?

More…

 
 
 
end.
 
 
Here is what Moody's think of the Bank Debts from England:
 
 

Banks’ bad debts to rise for another year, says Moody’s 
Bad debts at Britain’s banks will not peak for another 12 months, according to credit-rating agency
Moody’s, in a warning that the UK’s emergence from recession is a "false dawn for credit". 
By Philip Aldrick 
Published: 6:15AM GMT 02 Feb 2010

Robert Thomas, Moody’s senior vice-president, said "banks remain fragile" and there are "reasons to remain concerned about bank asset quality and earnings in 2010 and 2011".

He added that lenders are likely to push "more companies into a wind-up" as they grow "less willing to continue forbearance measures such as extending repayment periods or relaxing covenant rules".

Mr Thomas’s bleak outlook comes despite the UK’s emergence from its longest and deepest recession on record. He cited the prospect of higher interest rates as a reason for concern.

"Many households have benefited from a significant reduction in mortgage interest costs over the past 18 months," he said. "This has helped defer a portion of the banks’ arrears as borrowers have not felt the full impact of the economic downturn."

More…

 
 
end
 
 
Here is another state with revenue problems.  The state is NY and Wall Street is not contributing tax revenues as everyone expected:
 

Propaganda is the battle cry of our esteemed leaders. 
Wall St. Revenue Falls, So State’s Deficit Rises 
By DANNY HAKIM 
February 3, 2010, 1:35 pm

ALBANY — New York State’s revenue collections keep coming up short.

The state’s budget division said Wednesday that lower than expected tax revenue from Wall Street and rising Medicaid costs are driving up the state’s deficit. For the coming fiscal year, which begins on April 1, the deficit is now $8.2 billion, up from $7.4 billion when Gov. David A. Paterson laid out his proposed budget.

Robert L. Megna, the state budget director, said in comments to reporters Wednesday morning that revenue collections from Wall Street banks came in well below expectations and that personal income tax collections over all were about $1 billion below expectations.

“We know that big guys typically pay us at the end of January,” Mr. Megna said, referring to large banks like Goldman Sachs and JPMorgan Chase. “Last week, after the budget came out, they didn’t pay us.”

He offered a number of theories that might explain why the payments were delayed — more bonus payments made in stock, payments being spread out over a longer period — but added that the state was not expecting the lowered payments to be fully made up in the coming weeks.

Spending on Medicaid also continues to rise faster than expected as the economic crisis has driven more people to enroll. Costs are $400 million higher than expected in the coming year, the budget office said.

More…


John Williams brought out this special warning to his paid subsribers.  You can find parts of his findings at his website at www.shadowstats.com.
 
Here is his alert:
 

Shadow Stats reports on today’s MOPE. This is a by subscription service and the best means of seeing through the MOPE.

- Revisions Allow for Unusual January Jobs Reporting 
- Meaningful Payroll and Unemployment Deterioration Ahead

"No. 275:  Employment Outlook Update, New Site Feature" 
http://www.shadowstats.com

The next scheduled Commentary is for Friday, February 5th, following the release of January 2010 employment and unemployment. It will include details of the benchmark revision to payroll employment.

– Best wishes to all, John Williams


end.
 
 
This next article discusses the real deficit and what to expect:
 
The author is famed Greg Hunter and he is commenting on deficits with a discussion with non other than John Williams:
 
 

Real Deficit Numbers and Real Consequences 
3 FEBRUARY 2010 NO COMMENT 
By Greg Hunter  

We just finished 2009 with a record federal deficit of $1.4 trillion.  Let’s think about that for a minute.  The U.S. government says it is $1,400 billion in the red at the end of 2009.  But is that the “real” deficit number?  The reason why I ask is the government uses accounting gimmicks to make just about every number it puts out look better than what it really is.  For example, the most recent Consumer Price Index for inflation was officially 2.7%; but if you compute inflation the way Bureau of Labor Statistics did it in 1980, the inflation rate would be 9.7%.  The same goes for unemployment.  Officially, it stands at 10%; but if computed the way BLS did it prior to 1994, it would come out to 21.9%. (source: shadowstats.com)

I asked economist John Williams of shadowstats.com to weigh in on last year’s record $1.4 trillion of red ink for the “real” deficit number.  Williams told me, “It was closer to $2 trillion because they knocked off $500 billion with accounting gimmicks.” Just because the government knocked off a half trillion bucks using an accounting gimmick, doesn’t mean we owe any less. The reduced number just doesn’t look quite as ominous. Another way to state the $2 trillion of red ink from last year is $2,000 billion!  It is a very big number, even for the U.S.  

In its latest budget, the White House is projecting $1.56 trillion in red ink, and that is another new record!  What will the “real” deficit be when the year is over?  Williams says, “With a weaker than expected economy, the 2010 deficit likely will top $2 trillion…”  So, according to Williams, the government probably understated the “real” red ink this year by another half trillion bucks.   If this analysis turns out to be correct, then the government will have understated the red ink by at least $1 trillion in the last 2 years alone!  

More…

end.

 

Tomorrow I will try and bring you a commentary.  However I must attend a pharmaceutical meeting and I will be home late.

If I feel that the data is important, it will bring it to you late in the evening and receive the scorn of my bride.

If it is not earth shattering, I will wait until Saturday.

 

until then

 

bye.

 

Harvey.

 

 

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