Saturday, February 20, 2010

Feb 20.10 commentary...very important.

Good morning to all:
 
First of all, I would like to point out that last night, 4 banks failed:
 

Bank Name

City

State

CERT #

Closing Date

Updated Date

La Jolla Bank, FSB La Jolla CA 32423 February 19, 2010 February 19, 2010
George Washington Savings Bank Orland Park IL 29952 February 19, 2010 February 19, 2010
Marco Community Bank Marco Island FL 57586 February 19, 2010 February 19, 2010
The La Coste National Bank La Coste TX 3287 February 19, 2010 February 19.2010
 
The FDIC makes their official annoucement on Monday as to the size of the hit on their books. If I remember correctly,  the LaJolla Bank
in LaJolla California is quite large as is the George Washington Savings Bank in Orlanda Park Illinois.We will have to wait until Monday to see the damage.
 
It is interesting that no bank has failed when there is a holiday weekend.  I guess our FDIC workers are very tired as they must
give up their weekends every week of the year carrying out these tasks. They need a break and thus Sheila Bair never does a foreclosure
on a long holiday weekend.
 
 
OK lets start:
 
 
Gold closed the day up 2.80 to 1121.30 by the time the comex closed at 1:30.  Silver closed firmly up by 31 cents to 16.41.
 
I reported to you on Thursday night, that the Fed announced a hike of the discount rate to .75% from .5% to banks.  The move was
 
suppose to telegraph that the usa was finally going to withdraw the massive liquidity that they injected into the economy.
 
Two important points to remember:
 
Most announcements of this type are always given 1/2 hour before the market opens.  To issue these orders at 4:30 when all equity and future trading have ceased
is very surprising. 
 
There is no question in my mind that the banking cartel had to quell gold's demand as the physical stuff has been leaving all vaults around the world.
The cartel members were equally concerned that this Tuesday is options expiry day.  On this day, all options go off the board as does the February silver contract.
 
Option holders are generally considered the more sophisticated traders and those who stand, generally take delivery.  This is why there is always a concerted effort to blow them
away.
 
For those that missed my commentary, here is the announcement that came at 4:30 Thursday:
 
 

Gold falls 1 pct after Fed hikes discount rate

more than 1 percent on Friday as the dollar gained after the Federal Reserve said it was raising the interest rate charged to banks for emergency loans

http://in.news.yahoo.com/137/20100219/748/tbs-gold
-falls-1-pct-after-fed-hikes-dis.html

-END-

 
 
Peter Grandich comments on the Discount Rate hike:
 

Peter Grandich chips in with:

Fed Raises Interest Rates

Posted by Peter Grandich at 5:01 PM on Thursday, February 18th, 2010Lets see, the IMF announces gold sales at 4:30PM yesterday. The Fed announces a discount rate hike todayaround the same time and gold quickly drops $15. It's a good thing I'm not one of those conspiracy nuts like these guys:http://grandich.agoracom.com/2010/02/fed-raises-interest-rates/-END-

 

On Thursday, I pointed out that the 10 year bond fell badly to a yield of 3.80% The long bond fell to a price of 116.18 dangerously close to blowing up all of those interest rate swaps.

 

Here is a commentary by  Bill Murphy showing what happened to gold and the bond yields before and after the announcement:

 

During yesterday's normal trading hours, three points stuck out to me…

*Despite LOUSY U.S. economic news, the DOW dinked its way to an 80 point higher close … in the same turtle-like up fashion we have seen for so long.

*The price of the 10 yr T note broke down … an enormous threat to the money starved US Treasury and to the recovery of our economy.

*Gold's stunning price recovery, and breakout above key resistance at $1120, despite the IMF news.

Then came the Fed discount rate hike news….

*The DOW fell exactly what it rose for the day, but has since recovered and even gone HIGHER. It then made sense why the DOW rose so much yesterday. Thus it was allowed to drop the exact amount it made for the day, so no harm, no foul there.

*The yield of the T note didn't budge an iota.

*And, of course, the gold price was bombed.

 

 

end.

 

 

Thus gold started Friday at around 1100 and spent the entire day climbing to par and then climbing to 1125.  The cartel members were extremely nervous seeing gold's huge demand.

It was only in the last half hour that they lowered gold's value in the paper market when all the physical boys were satisfied with the metal that they had obtained.

Pay no attention to the whack of gold after 1:30 in the access market as they bankers are trading amongst themselves as everyone else had gone home.

 

Here are some numbers for yesterday:

 

The yield on the 10 yr T note dropped slightly to 3.78%.

The dollar fell .33 to 80.61. The euro went up .0121 to 1.3581. The pound gained .0023 to 1.5450. The yen rose .35 to 91.62.

While gold and silver are still under The Gold Cartel's gun, other commodities like crude oil (up 75 cents per barrel to $79.81) and copper (up 7 cents to $3.36 per pound) are really on the move.

The CRB gained 1.65 yo 277.80.

The turtle DOW did it again, up 9 to 10,402. The DOG gained 1 yo 2243.

 

end.

 

On the physical front, we had 5 stories to note:

 

1. Russia last month increased their official physical inventory of gold by 100,000 oz or 3.3 tonnes of gold.

 

2. The COT report released after the market closed at 4 pm showed short covering by the long speculators of some 5571 contracts in gold.

    The commercials were all over the board ---they lowered their long positions  (the intermediate bankers) by 9757 contracts but also the massive

    bank shorts  (JPMorgan and HSBC) lowered their shorts by 7400 contracts.

 

   It was the small specs that received the paper from the bankers to th tune of  3478 contracts.  Believe it or not but a rather large 5845 contracts went on the short side

   from these small specs.

 

   In silver: it seems that the silver COT was quite calm as very few longs exited and very few commercials released their short positions.

   Also remember that the COT report is basis Tuesday.

 

 

3.    The open interest on gold comex and silver comex basis Thursday:

 

       The open interest climbed a huge 5000 contracts rising to 469400 from 464000. The volume on the comex gold was estimated to be 181000 contracts.

 

        In silver, something spooked our banker friends:  the OI dropped from 120600 to 119100 which is a large move down with a rather large up movement in silver.

       

        Also mysteriously :

       There was a transfer of 187,274 ozs of silver from the dealers to the customers by way of an "adjustment".

       The dealer inventory is at an all time low of 47.1 million oz.

 

4.     another oh-oh moment:  Dennis Gartman decided to change fate:  He bought a gold contract unit.  However it was denominated in yen:

 

Today The Gartman Letter added a gold/yen "unit" to its position. This means that 4 out of 9 positions in this influential publication's model portfolio are FX hedged gold.

 

5.      On Thursday, I reported a significant event has occurred in that we had reached record levels in gold price with respect to Euro gold. Yesterday, Euro gold climbed another 1/2 Euro.

 

         The press over there are all over this fact.  Also remember that the Europeans are the ones that are basically in the physical market.  The paper gold market is over here:

 

Euro-priced gold hits record 825.96 euros/oz

LONDON, Feb 19 (Reuters) - Euro-priced gold rose to a record high at 825.96 euros an ounce on Friday, as investors spooked by fears over the fiscal health of some euro zone economies and weakness in the single currency sought a portfolio diversifier.

Euro-priced gold was bid at 825.09 euros an ounce at 1432 GMT, against 825.12 euros an ounce in late New York trade on Thursday.

While gold prices generally decline when the euro weakens against the dollar, sovereign worries sparked by Greek fiscal problems have pushed investors towards gold as an alternative to the euro.

          

However, lo and behold we have another European currency with respect to gold reaching record levels and this is Gold denominated in pounds: (from the Scarborough Bullion Desk)

Gold hit its record close of 723.00 British pounds per oz of gold:

 

With my screens flashing the news of a new all time Eurogold price over 825, I'm turning to my Sterling chart,

Am leaving the office shortly, but if we see Sterling Gold close tonight at current levels, it'll be a definitive all time weekly high in UK terms,

Bear in mind that it was only last week that Gold recorded a new all time weekly high against the Euro closing above the 800 level, Some 2-3 trading days later and it was notching up record interday high's as well!

Wishing all at Midas and the 'Cafe' a most enjoyable wknd,
Best,
Rich (Live from 'The Scarborough Bullion Desk')

 

end.

 

Ok lets go to other economic stories that hit the markets:

 

I find this one strange:  Bernanke announces a discount rate hike trying to give the impression that he is going to rein in the excess liquidity given to bankers.

 

  Then why this?

 

Isn't it kind of funny – the Fed raises the Discount Rate [the rate at which banks can borrow at the discount window] yesterday and the talking heads all claim that "excess liquidity" is now being drained from the market.

Meanwhile, TODAY – the Fed conducts Permanent Open Market Operations [POMO] to the tune of close to 1 billion in AGENCY BONDS [Fannie / Freddie]:

http://www.newyorkfed.org/markets/pomo/display/index.cfm?opertype=agny

Operation 1 - RESULTS 
Operation Date: 02/19/2010
Operation Type: Outright Agency Coupon Purchase 
Release Time: 10:30 AM 
Close Time: 11:00 AM 
Settlement Date: 02/22/2010 
Total Par Amt Accepted (mlns) : $946 
Total Par Amt Submitted (mlns) : $3,154

Where do you suppose the Fed got the money to buy those Agency Bonds????

The Discount Rate Hike spin as retraction of liquidity was a canard.

end.

 

Consumer prices rose less than expected but they always doctor the figures:

 

Consumer prices rise less than expected in January

WASHINGTON (Reuters) - Consumer prices rose less than expected in January, while prices excluding food and energy fell for the first time since 1982, according to a government report on Friday that soothed worries inflation pressures were starting to build up.

The Labor Department said its seasonally adjusted Consumer Price Index rose 0.2 percent last month, lifted by a spike in energy costs, after rising 0.2 percent in December.

Analysts polled by Reuters had forecast consumer prices rising 0.3 percent in January. Compared to January last year, prices rose 2.6 percent, also below market expectations for a 2.8 percent increase.

Energy costs soared 2.8 percent last month after rising 0.8 percent in December. Food prices climbed 0.2 percent following a 0.1 percent gain in December.

A surprise surge in prices paid at the farm and factory gate last month, owing to higher gasoline costs, had fanned fears that inflation pressures could soon weigh on the economy, which is recovering from the most brutal recession in 70 years.

Stripping out volatile energy and food prices, the closely watched core measure of consumer inflation fell 0.1 percent in January, the first decline since December 1982. Core prices rose 0.1 percent the prior month.

Analysts had expected core prices to rise 0.1 percent. Core prices were pulled down by declining costs for new vehicles, shelter and airline fares. High vacancy rates are keeping rentals depressed.

Compared to January last year, the core inflation rate rose 1.6 percent after increasing 1.8 percent in December.

-END-

From John Willliams of shadowstats.com on the release of the consumer prices: ( he is showing a 9.8% rise)

 

Are you interested in the real statistics and the real story?

Here they are. There are nowhere else. I am totally serious.

Commentary No. 280: January CPI, PPI, Housing Starts, Production

- Annual Inflation 2.6% (CPI-U), 3.3% (CPI-W), 9.8% (SGS) 
- Quarterly Inflation Shifted from Fourth- to Second-Quarter 2009 
- Economy Keeps Bottom-Bouncing as Intensified Contraction Nears

"No. 280: January CPI, PPI, Housing Starts, Production " 
http://www.shadowstats.com/


 

 

USA mortgages showed their biggest delinquency rate yet running at at 15% delinquency over the 4th quarter:

US mortgages foreclosing,delinquent at 15 pct Q4-MBA

NEW YORK, Feb 19 (Reuters) - A record proportion of U.S. mortgages were in foreclosure or at least one payment past due in the fourth quarter, according to industry data showing the fragile state of the recovery in the housing market.

The Mortgage Bankers Association said on Friday the combination of loans in foreclosure and at least one payment past due was 15.02 percent on a non-seasonally adjusted basis, 
the highest ever seen in the survey.

However, the delinquency rate for mortgage loans on one-to-four-unit residential properties fell to a seasonally adjusted rate of 9.47 percent of all loans outstanding as of the end of the fourth quarter of 2009, down from 9.64 percent in the third quarter, but up from 7.88 percent in the same quarter a year earlier, the MBA said in its National Delinquency Survey.

The percentage of loans on which foreclosure actions were started fell to 1.20 percent in the fourth quarter, down from 1.42 percent in the third quarter, but up from 1.08 percent in the same quarter a year earlier, the MBA said.

The U.S. foreclosure inventory rate for all loans was 4.58 percent in the fourth quarter, up from 4.47 percent in the third quarter and from 3.30 percent in the fourth quarter of 2008.

The records are based on MBA data dating back to 1972.

 

end.

 

This was certainly not welcomed news for our bankers as they are seeing their balance sheet crumble as their collateral dissipates away.

end

As many of you know, I like the Trimtabs data on the economy as they use tax receipts as opposed to survey to get their data on the unemployed.

Today we got a glimpse of the tax receipts so far this year.  Witholding taxes are running 13.1% behind last year (year over year).

Total individual tax recepits are faring worse:  down by almost 17%.: Here is the story:

 

 

more on tax receipts

For Jan 10 
Withholdings y/y: -13.1% 
Total Individual Tax Receipts y/y: -16.8% 
Still no improvement with comps getting easier. Tout tv keeps telling us everything is getting better, but it is pretty clear that the economy is continuing to decline at a 15% annualized rate. 
Jeff
Source: 
http://www.fms.treas.gov/mts/index.html

 

We are now hearing that many cities wish to enter Chapter 9 as they cannot fund their operations:

 

Muni Threat: Cities Weigh Chapter 9 
By IANTHE JEANNE DUGAN And KRIS MAHERJust days after becoming controller of financially strapped Harrisburg, Pa., in January, Daniel Miller began uttering an obscure term that baffled most people who had never heard it and chilled those who had: Chapter 9.

The seldom-used part of U.S. bankruptcy law gives municipalities protection from creditors while developing a plan to pay off debts. Created in the wake of the Great Depression, Chapter 9 is widely considered a last resort and filings under it are more taboo than other parts of bankruptcy code because of the resulting uncertainty for everyone from municipal employees to bondholders.

The economic slump, however, is forcing debt-laden cities, towns and smaller taxing districts throughout the U.S. to consider using Chapter 9. As their revenue declines faster than expenses, some public entities are scrambling to keep making payments on municipal bonds. And that is causing experts to worry about the safety of securities traditionally considered low risk.

People believe that municipal debt is safe based on assumptions that are no longer true," says Kenneth Buckfire, managing director and chief executive of Miller Buckfire & Co., an investment bank that has worked with corporations on restructurings and now is advising municipalities. For example, it isn't safe to assume that governments can raise taxes to cover shortfalls, he says...

V&V Corporate Investments Inc.
Pete Yore President

end

I pointed this out to you on Thursday,  It is a big story and will certainly hit Californians big time:

 

Anthem Insurance-Rate Hikes Point to Broken Health System

By KATE PICKERT Kate Pickert – Thu Feb 18, 7:15 pm ET

Californians with individual health-insurance policies from Anthem Blue Cross must have breathed a collective sigh of relief on Feb. 13. Under heavy pressure from the state insurance commissioner and the Obama Administration, the company announced that it would delay a set of dramatic rate hikes. In the meantime, at the request of the commissioner, independent actuaries will review the company's books and investigate whether one-year premium increases of up to 39% are legal and justifiable. Surely they can't be, right

Well, actually, rate hikes from Anthem Blue Cross, a for-profit company, will probably still happen, according to actuaries and other experts with extensive knowledge of the individual health insurance market, in which the company operates. The best that Anthem Blue Cross customers in California can probably hope for, say these experts, is that the rate hikes will be less dramatic than what the company first proposed.

http://news.yahoo.com/s/time/20100219/us_time/08599196498800

 

 

As many of you know, I filed a complaint to the CFTC on the silver manipulation.  On Wednesday, I asked why they totally left off the number of banks who are short the silver metal off the banking participation report.

For many years, on the first Tuesday of the month, the CFTC prepares its banking participation report in all commodities whereby it lists the inherent risks to the banks who have gone short.

It was here that we first discovered that only two banks went massively short in silver (20% of wordly production) namely JPMorgan and HSBC and 12% of worldly gold production.

For the first time ever in their history, the CFTC redacted the massive silver banking short.

 

I wrote to the CFTC last week on this matter and copied Bill Murphy.  They responded to me and I would like to share this with you.

I also responded to the letter to Mr Gensler, the chairman of the CFTC in one email and the lawyer of the enforcement who wrote the email to me Laura Gardy.

 

Just in and it is a bombshell beauty from the CFTC….

Inquiry regarding Bank Participation Report

Dear Messrs. Organ and Murphy,

Commissioner Chilton asked that I look into your issue regarding the CFTC Bank Participation Report (the "BPR"). Specifically, you noticed that beginning with the December 2009 BPR, the CFTC has not included a breakdown of the participating banks in the silver futures, although the breakdown is provided for gold. You had inquired as to why the information has changed.

Beginning with the December 2009 BPR, the CFTC began suppressing the trader count in some markets. The change became effective with the Dec 2009 BPR because it was the next available report to be published following the Commission's November 2009 decision to implement the change. The decision to suppress the trader counts was made as part of an ongoing review of the methodology of the BPR. As part of that review, the Commission determined that where the number of banks in each reporting category is particularly small, fewer than four banks, there exists the potential to extrapolate both the identity of individual banks and the bank's positions. Under section 8(a) of the Commodity Exchange Act, the Commission, among other things, is generally prohibited from publishing data and information that would separately disclose the business transactions or market positions of any person/entity. Accordingly, in order to protect the confidentiality of market participants' positions, the Commission determined to suppress the individual category breakdown when that number is less than four. An explanation of this determination appears in the Explanatory Notes section of the BPR as it appears on the CFTC website, www.cftc.gov. I have cut and pasted the language below for your convenience. The Explanatory notes appear at: http://www.cftc.gov/marketreports/bankpa
rticipation/bankparticipation_about.html
. Notably, these Explanatory Notes were posted on November 30, 2009, prior to the release of the amended BPR.

I took a look at the January 2010 BPR, and noted that the change has affected the reporting on several commodities including soybeans, wheat, corn, heating oil, natural gas, etc., such that silver has not been treated in a manner inconsistent with the report structure.

I hope this explanation is helpful. Please do not hesitate to contact me if you have any further questions.

Regards,
Laura Gardy
Legal Assistant to Commissioner Bart Chilton
202-418-5354

 

 

Here is an explanation as to the particulars of the Banking Participation Report:

 

Bank Participation Report

Explanatory NotesSince the 1980s, the CFTC has provided, on a monthly basis, the U.S. banking authorities and the Bank for International Settlements (BIS, located in Basel, Switzerland) aggregate large-trader positions of banks participating in various financial and non-financial commodity futures. Since the BIS used some of this aggregate data in its own publications, beginning in the late '90s the CFTC has posted the "Bank Participation Report" (BPR) for public access on its website (cftc.gov).

Separate reports are generated for futures and for gross options (not delta adjusted). The as-of date of the monthly BPR is typically the first Tuesday of each month, and publication on the Commission's website occurs on the following Thursday or Friday. The BPR includes data for every market where five or more banks hold reportable positions. The BPR breaks the banks' positions into two categories—U.S. Banks and Non-U.S. Banks—and shows for each type their aggregate gross long and short market positions. For purposes of protecting the confidentiality of participants' market positions (as required under §8(a) of the Commodity Exchange Act), when the number of banks in either category (U.S. Banks or Non-U.S. Banks) is less than four, the number of banks in each of the two categories is omitted and only the total number of banks is shown for that market.The BPR is based on the same large-trader reporting system database that CFTC economists use to monitor large-trader activity in the regulated futures and options markets, and which also is used to generate the weekly Commitment of Traders (COT) report. The BPR's "U.S. Bank" and "Non-U.S. Bank" trader classifications are based on the self-description of a trading entity on its CFTC Form 40. Each trader files that Form upon first becoming reportable and every two years the trader remains reportable, or more frequently upon CFTC request.If any reportable trader is "commercially engaged in business activities hedged by use of the futures or option markets," it enumerates its business activities on Schedule 1 of the Form 40. If on that Schedule the reportable trader describes itself as a U.S. Commercial Bank or as a Non-U.S. Commercial Bank in any one commodity, that designation is applied to its positions in all commodities published in the BPR. A given business enterprise may have one or more trading entity among which are a U.S Commercial Bank or a Non-U.S. Commercial Bank, or a non-bank. Each trading entity could be a separate reportable trader, which would file a separateForm 40. Only traders that are classified as either a U.S. Commercial Bank or a Non-U.S. Commercial Bank are reported in the BPR.The CFTC does not maintain a history of BPR data except for the rolling most recent 25 months posted on the Commission's website.

 

end/

 

This is the data that the BIS uses to calculate bank risks from overexposure to shorts and it is the very data that Reg Howe uses to discuss the risks to the banks in his papers.

 

I will now show you my response to Mr Gensler and to Ms Gardy:

 

In a message dated 2/19/2010 4:27:04 P.M. Central Standard Time, harveyorgan@rogers.com writes:
Dear Mr Gensler:
 
 
In my letter to you  on Wednesday, I surmised correctly that the reason for the removal of the number of banks engaged in the massive short of silver was that we could deduce who were the guilty parties in their suppresion . I wrote to you stating that it was my  belief   and many others that JPMorgan and/or HSBC were probably giving you a mouthful and demanding that you omit this very important banking number.
 
 
You will note that in the treasury OTC report, these two banks are named in full view and they control 95% of the total derivatives in the precious metals and their holdings dwarf the entire notional open interest in gold and silver on the comex exchange in NY. Thus, as you state correctly to me, it would be easy to extropolate that these two characters, JPMorgan and HSBC, are the same ones doing the manipulating and are the identical duo in the banking participation report that you needed to redact.
 
I stand by what I emailed you earlier in the week:   you are protecting the interests of these two banks who are engaging in criminal manipulation ahead of your sworn duties to protect the interests of investors.
I are truly alarmed by your statement to me and let your response to me stand for your apparent lack of interest in safeguarding the interests of ordinary investors.
 
I enclose a commentary by Adrian Douglas whose views on the matter parallel mine.
 
Sincerely
 
Harvey Organ BScPhm. MBA
 
 
Please file this complaint in the same manner as my earlier emails to you.
 
 
 


and to Ms Gardy:

 

Dear Laura:
 
I responded to your email as I addressed my concerns to Mr Gensler.
 
There is no question that the legal and regulatory staff are getting the heat from the powerful banks, JPMorgan and HSBC. I guess the heat is also getting to our two banker friends
JPMorgan and HSBC, from the public,  as they do not like to see their names in the floodlights with manipulation of markets.
 
May I remind your legal staff, that your duty is to the public and not the bankers.
 
If criminal manipulation has occurred, you should be asking the pointed questions to ascertain how on earth they could attain a massive 20% of the world's silver production and how this is not manipulative?
You are engaging in a similar exercise with the energy complex as it is your desire to place position limits to prevent such manipulation.Your desire is to prevent such concentration from manipulating prices in the energy complex.
 
 
Yet you refuse to ask or pry into the affairs of JPMorgan and their massive short position in silver and gold. J{PMorgan claims that their short position is nothing but a hedge.  Yet you never ask them to show you their "hedge" which simply does not exist according to the BIS data. This is nothing but an outright lie and you know it.
The investigation on the silver manipulation by the enforcement arm of the CFTC has now exceeded 18 months and we have yet to see a response from them.
Smells pretty fishy to me!!
 
I am available to discuss these matters.
 
This email should be filed and be open for public scrutiny.
Sincerely
Harvey Organ
 

end.

 

 

This is Adrian Douglas's commentary on the email to Murphy and myself:

GATA's Adrian Douglas responds...

Bill,
Game, set and match!

Yesterday I sent an email to you that explained that HSBC and JPM are NAMED in the Treasury Department OCC Report on the holdings of derivatives by American banks. These reports show that these two banks hold more than 95% of the derivatives in precious metals but that these holdings dwarf the entire open interest notional value of gold and silver on the COMEX. I noted that as ONLY two banks hold a massive short position on the COMEX, it a very logical inference that these two banks are necessarily the same. That is to say that HSBC and JPM ARE the massive short sellers on the COMEX. Voila, just 24 hours later the CFTC confirms it for us because they say that it would be possible to extrapolate who the banks are that hold the positions. How could it be extrapolated? It would have to be from some other positional data that is made public. The only data of that nature that I know of is the OCC derivatives data.

Note the word used by the CFTC "suppress". Yes, that is the word GATA uses in talking about the gold market. It is suppressed and the CFTC is now complicit is suppressing the identity of the banks who are suppressing the price. Why are entities that have a manipulative, one-sided position (the banks hold almost no long position) be entitled to anonymity?

This is worse than the ex-Soviet Union. How can a Bank Participation Report SUPRESS the participation of banks???? Does nobody at the CFTC realize how comical that is?

I now expect that someone will contact the Treasury and get the names of the largest derivative holders to be "suppressed" in the OCC US Bank Derivatives report.
Cheers
Adrian

end.

 

In international news, we are hearing more stories that the risk to Britain defaulting is greater than of Greece:

 

Britain at risk of worse deficit crisis than Greece 
Britain is at risk of a Government deficit crisis worse than that of Greece, sparking serious fears over the economic stability of the country. 
Edmund Conway and James Kirkup  
Published: 10:43PM GMT 18 Feb 2010

In surprise news which sent the pound sliding on Thursday, official figures showed that the Government borrowed £4.3 billion last month.

It was the first time since 1993 that the public finances had gone into the red in January – a month in which tax revenues usually push the Exchequer into the black.

Economists said that the scale of the shortfall in the budget could this year mount to above £180 billion – higher than even the Chancellor's forecast of a record £178 billion.

Such a deficit would, at 12.8 per cent of British gross domestic product, be even greater than the deficit faced in Greece, which is facing a full-scale fiscal crisis and may need to be bailed out by fellow euro nations or the International Monetary Fund.

The public borrowing figures coincided with further bad news from the housing market, as the Council of Mortgage Lenders reported that mortgage lending dropped last month by 32 per cent, hitting the lowest monthly total in a decade.

The Bank of England also reported a decline in lending to businesses, indicating that the economic slowdown is far from over.

More…

I wish everyone a grand weekend.

On a personal note, I wish a very happy birthday to my bride of 39 years, my wife Daliah.

see you on Monday.

Harvey.

 

Thursday, February 18, 2010

Feb 18.10

Good evening Ladies and Gentlemen:
 
Gold closed today up $1.50 to 1118.00.  Silver closed down by 4 cents to 16.06.
 
The gold comex OI closed down by 1500 contracts to 464957.  Remember that gold closed up by 18.00 dollars yesterday so again we were witnessing some cartel short covering on gold contracts.
 
The silver comex OI closed up by only 460 contracts to 120600.
 
Yesterday, the big news was the story that the IMF wants to sell the remaining 191 tonnes "shortly".
 
Generally, they trot out the IMF whenever momentum is building in gold.  So they throw out this scare tactic hoping that gold buckles under.
 
Also remember that options expiry is this Tuesday and there are over 5200 contracts above the magically 1100 strike price.  Obviously the cartel members are very worried.
 
Many of you know my feelings on the IMF gold.  It just does not exist.  It was set aside but not really allocated to them. It is our belief that the IMF gold is double counted with sovereign gold of nations.
 
Chris Powell of GATA has views identical to mine on this issue.  I have highlighted his commentary from last night:
 

Why the IMF's supposed gold sales don't mean much

Submitted by cpowell on 05:24PM ET Wednesday, February 17, 2010. Section: Daily Dispatches8:40p ET Wednesday, February 17, 2010

Dear Friend of GATA and Gold:

Below is the press release issued this evening by the International Monetary Fund announcing that it "shortly" will sell 191 tonnes of gold on general markets, unlike the 212 tonnes it claimed to sell last year directly to India, Sri Lanka, and Mauritius. While the gold price quickly fell $7 or so on the news, there are a few things to remember.

1) The IMF really doesn't have any gold, just a tenuous claim on the national gold reserves of its members. Where the IMF's supposed gold is kept is a state secret. So is the location of the gold the IMF supposedly recently sold to India, Sri Lanka, and Mauritius. So are the gold bar numbers. There is no public evidence that the IMF's gold even exists, no public evidence that last year's supposed IMF gold sales were anything more than bookkeeping entries. Indeed, those sales may have been nothing more than a few press releases. See what is, as far as GATA knows, the only attempt to address these issues journalistically with the IMF:http://www.gata.org/node/80522) In its announcement the IMF says again that its supposed gold sales will fit comfortably within the annual quotas set by the Central Bank Gold Agreement. That's because the signatories to that agreement -- the Western European central banks -- stopped selling gold last year. Since the Western European central banks are not selling, the IMF gold sales are a hint that any gold now being dishoarded is coming straight from U.S. gold reserves. The IMF is headquartered in Washington, the United States has a de-facto veto on its operations, and there can be little doubt anymore that the United States is operating surreptitiously in the gold market, the Federal Reserve having acknowledged last September that it has at least contemplated such intervention in the gold market via gold swap agreements with foreign banks:

http://www.gata.org/node/81923) The rationale for the IMF's supposed gold sales -- to raise cash for its operations helping (that is, expropriating) poor countries -- is ridiculous on its face. The IMF is the issuer and custodian of the world's supreme money, Special Drawing Rights (SDRs), and in just one afternoon last year the IMF conjured $250 billion of them into existence:

http://www.imf.org/external/np/sec/pr/2009/pr09264.htmBy comparison, the first 212 tonnes of gold supposedly sold by the IMF last year raised only $7 billion, or less than 3 percent of the money created by mere conjuring:

http://www.bloomberg.com/apps/news?pid=20601087&sid=alOoEXinykfo&pos=5In such circumstances gold is not sold to "raise money"; it is sold to suppress the price of a currency that competes with fiat currencies and, when traded freely, is a measure of their debasement.

4) That is why, as Jim Sinclair and others have noted many times, official gold sales correspond with risinggold prices, not falling gold prices. Official sales are manifestations of central banking's controlled retreat when money and credit creation have gotten out of hand relative to the gold supply and gold's price is threatening to explode and make a scene very embarrassing to governments and central banks. The last decade has been a time of massive Western central bank gold dishoarding, probably a time of cash settlement of central bank gold leases that could not be settled by recovery of the borrowed metal without exploding the gold price, and during this time gold has risen from $250 to more than $1,000 per ounce:http://www.kitco.com/charts/popup/au3650nyb.htmlIf central banks were not on the desperate defensive with gold, how, amid all that official gold selling, could the gold price have quadrupled?

No doubt some gold holders and traders will be duly frightened out of their gold by the IMF's latest announcement, and that will be discouraging for those who remain gold investors. But if this gold "sale" turns out like the others over the last 10 years, before long the gold price will be higher still.

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

* * *

 

Most of the GATA camp believe the IMF gold does not exist.  The banking cartel continue to trot out the story of potential sales whenever momentum on gold pricing picks up.

I knew last night that gold would climb to the same point it left the day before and it certainly did.

Wednesday's volume was preliminary announced at 147000 contracts.  It's actual volume it turned out to be 187800 contracts.  The cartel members must have been frightened at the huge demand facing them.

Thus the IMF story release at 4:30 pm.

 

Look at what the bankers did one hour ago  (4:30 easter time).  The Fed announced a raise in the discount rate to banks from .50 % to .75%:

 

LATE NEWS:

Fed raises discount rate to 0.75 percent

WASHINGTON, Feb 18 (Reuters) - The Federal Reserve said on Thursday it was raising the interest rate it charges banks for emergency loans, citing improvement in financial market conditions.

The Fed said the discount rate would be increased to 0.75 percent from 0.50 percent, effective Friday.

"Like the closure of a number of extraordinary credit programs earlier this month, these changes are intended as a further normalization of the Federal Reserve's lending facilities," the Fed said in a statement.

"The modifications are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy," it said.

-END-

 

and this Bloomberg article:

 

Fed Raises Discount Rate by Quarter-Point to 0.75% (Update1)

By Craig Torres

Feb. 18 (Bloomberg) -- The Federal Reserve Board raised the discount rate charged to banks for direct loans by a quarter point to 0.75 percent and said the move will encourage financial institutions to rely more on money markets rather than the central bank for short-term liquidity needs.

"These changes are intended as a further normalization of the Federal Reserve's lending facilities," the central bank said today in a statement. "The modifications are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy."

The dollar jumped and Treasuries extended losses as the Fed took another step in a gradual retreat from its unprecedented actions to halt the deepest financial crisis since the Great Depression. The Fed has provided hundreds of billions of dollars in backstop credit to banks, bond dealers, commercial paper borrowers and troubled financial institutions such as American International Group Inc.

The U.S. currency rose to $1.3541 per euro at 4:40 p.m. from $1.3616 before the announcement, while the yield on two- year Treasuries increased to 0.93 percent from 0.87 percent.

The discount rate increase is effective on Feb. 19. The Board also said that effective March 18 "the typical maximum maturity for primary credit loans will be shortened to overnight."

January Statement

The Fed Board said the outlook for policy remains "about as it was at the January meeting of the Federal Open Market Committee." The central bank also cited last month's statement, which said economic conditions are likely to warrant "exceptionally low" levels of the federal funds rate "for an extended period."

It was the first increase in the discount rate in more than three years.

 

 

end.

 

 

This increase by a quarter point is really nonsense.  The banks can freely borrow from the Fed at zero.  It looks to me that the Fed is trying to window dress the idea that the economy is improving.

I guess the Fed is getting very nervous at seeing gold close today at basically par with the announcement from IMF.  The move was slated to cause the price of gold to fall below 1100.

 

Now we get this news of a discount rate hike and again gold was belted in the thin access market.  It is now trading at 1108.10 down from 1122.00 at 4:30 when the announcement came.

We got news on the following items and I will talk about them briefly:

 

*Wal-Mart disappointed, indicating the consumer is still retrenching.
*Inflation was bonkers as the PPI number soared.
*The jobless claims were terrible, rising sharply and unexpectedly.
*The January leading economic indicator was weaker than anticipated.
*US bank lending has fallen apart.

 

 

The news out today was not good and yet the Dow climbs 84 points.  The Plunge Protection Team was operating full steam ahead.

Before going into the above stories, I would like to highlight this one on the plight of State public pensions that must be funded by the individual states:

U.S. state pension funds have $1 trillion shortfall: Pew

WASHINGTON

Thu Feb 18, 2010 12:15am EST

WASHINGTON (Reuters) - U.S. states face a total shortfall of at least $1 trillion in their funds for employees' pensions and retirement benefits, and their financial problems are quickly mounting, according to a report released by the Pew Center on the States on Thursday.

Illinois is in the worst shape, with only 54 percent of its pension obligations funded, according to the report, which looked at fiscal year 2008.

Because the analysis did not encompass the final six months of calendar year 2008 -- most states' fiscal year's end during the summer -- it does not include the market downturn that devastated many funds' investment portfolios.

"The funding gap will likely increase when the more than 25 percent loss states took in calendar year 2008 is factored in," the report said…

 

 

end.

 

Here is a more detailed commentary on the PEW report:

 

States Sink in Benefits Hole 
FEBRUARY 18, 2010, 1:32 P.M. ET 
By AMY MERRICK

State governments face a trillion-dollar gap between the pension, health-care and other retirement benefits promised to public employees and the money set aside to pay for them, according to a new report from the Pew Center on the States.

States promised current and retired workers a total of $3.35 trillion in benefits through June 30, 2008, said the report from the nonprofit research group, a division of Pew Charitable Trusts. But state governments had contributed only $2.35 trillion to their benefit plans to pay current and future bills, the report said.

The Pew report said its estimate of the funding gap would likely prove conservative, because it didn't account for the massive investment losses pension funds suffered during the second half of 2008. Although there was a slight rebound last year, it wasn't nearly enough to cover the previous losses, Pew said.

Researchers compiled the data by reviewing each state's comprehensive annual financial report for fiscal year 2008, which for most states ended June 30, 2008. They also looked at pension-plan annual reports.

The pension problems started well before the recession. Even in good times, states were skipping pension payments, leaving larger holes to fill in future years. State legislatures also increased benefit levels without setting aside extra money to pay for them.

More…


 

 

Please note two important details:

 

1. Illinois , whose pension problems I have highlighted to you on previous occasions is in the worst shape of all 50 states with only 54% of its pension obligations funded.

  And this is at midyear 2008.  The downfall in the economy had not started yet.

 

2. Most states fiscal year end is during the summer.  This study is for fiscal 2008 and thus the 1 trillion dollar shortfall will probably escalate dramatically in the 2009-2010 cycle.

    And yes, the downfall in the economy will certainly cause the pension shortfall to be greater due to stock market losses.

end

Goldman Sachs is certainly getting a lot of ink lately.  Here is a great article written by Matt Taibbi:

 

Matt Taibbi: Wall Street's Bailout Hustle 

Goldman Sachs and other big banks aren't just pocketing the trillions we gave them to rescue the economy - they're re-creating the conditions for another crash 

February 17, 2010 5:57 AM

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=46783581

-END-

 

 

OK lets start with the economic news of the day:

 

The producer price index rose by a huge 1.4%. Inflation is rearing its ugly head:

 

US January producer prices rise more than expected

WASHINGTON, Feb 18 (Reuters) - U.S. producer prices rose faster than expected in January as higher gasoline prices and unusually cold temperatures helped boost energy costs, a government report showed on Thursday.

The Labor Department said the seasonally adjusted index for prices paid at the farm and factory gate rose 1.4 percent, following a 0.4 percent rise in December.

Analysts polled by Reuters had expected producer prices to increase 0.8 percent last month. Compared to January last year, producer prices increased 4.6 percent, the largest advance since October 2008. Markets had expected producer prices to increase 4.4 percent versus a year ago. It was the third consecutive 12-month increase.

The Labor Department said about three-fourths of the increase in PPI last month was due to a 5.1 percent jump in prices for energy goods. Energy costs were pushed up by a spike in prices for gasoline, liquefied petroleum and home heating oil.

Strong energy prices overshadowed a slowdown in the food prices, which rose 0.4 percent after increasing 1.3 percent in December.

Stripping out the volatile food and energy costs, core producer prices rose a faster than expected 0.3 percent last month after being flat in December. The core index had been forecast to rise 0.1 percent in January.

Investors are keeping a wary eye on inflation following massive efforts by the Federal Reserve to pull the economy out of its worst slump since the Great Depression of the 1930s. Low capacity utilization and a weak labor market are, however, keeping inflation pressures in check.

Core prices last month were lifted by a 1.9 percent surge in the index for light motor trucks. The core producer price index rose 1 percent measured on a year-on-year basis, versus a forecast for a 0.8 percent gain.

 

 

end.

 

The jobless number today was really bad.  The market was expecting a big improvement in the jobless but got the opposite:

Jobless claims unexpectedly jump last week

WASHINGTON (Reuters) - The number of U.S. workers filing new applications for unemployment insurance unexpectedly surged last week, a government report showed on Thursday, dealing a setback to hopes the economy was on the verge of job growth.

Initial claims for state unemployment benefits increased 31,000 to a seasonally adjusted 473,000 in the week ended February 13, up from an upwardly revised 442,000 the prior week, the Labor Department said. Analysts polled by Reuters had expected claims to drop to 430,000. The prior week was initially reported as 440,000.

A Labor Department official said the weather did not deter people from filing claims because at least 95 percent of initial claims are now filed on line or by telephone. Claims for four states, including California and Texas, were estimated. Two blizzards slammed the Mid-Atlantic region last week, dropping record snow, and brought the region to a standstill.

Last week was the survey week for the employment report for February, which is scheduled for release in early March.

The labor market, hardest hit by the worst recession in seven decades, has lagged the economic recovery that started in the second half of 2009. The economy has lost 8.4 million jobs since the start of the downturn in December 2007. However, the pace of layoffs has dropped sharply from early last year.

The four-week moving average of new claims, which irons out week-to-week volatility, fell 1,500 to 467,500, the Labor Department said. The number of people still receiving for benefits after an initial week of aid was unchanged at 4.56 million in the week ended February 6.

This measure has held below the 5 million mark for eight straight weeks and analysts believe it is starting to reflect an improvement in the labor market rather than people merely dropping off rolls because they have exhausted their benefits.

 

and this commentary from Jim Sinclair on the jobless numbers:

 

Real, Uglier American Unemployment 
by Joel S. Hirschhorn

Can you trust national averages?  As bad as the jobless data you hear are, you have not been told the whole truth.  If you think the terrible impact of America 's Great Recession is shown by an official unemployment rate of about 10 percent, think again.

Economic inequality and the myth of Reagan trickle down logic are shown by new data from the Center for Labor Market Studies at Northeastern University in Boston .  The report noted: "What has been missing from the public debate over the labor market crisis is an honest and detailed analysis of which American workers have been most adversely affected by the deep deterioration in labor markets."  The researchers found a correlation between household income and unemployment rate in the last quarter of 2009:  Look carefully at these numbers and see how unemployment rises as income drops:

$150,000 or more, 3.2 percent 
$100,000 to 149,999, 8 percent 
$75,000 to $99,999, 5 percent 
$60,000 to $75,000, 6.4 percent 
$50,000 to $59,000, 7.8 percent 
$40,000 to $49,000, 9 percent 
$30,000 to $39,999, 12.2 percent 
$20,000 to $29,999, 19.7 percent 
$12,500 to $20,000, 19.1 percent 
$12,499 or less, 30.8 percent

Ten times worse unemployment in the lowest class than in the highest class!  Truly amazing and disheartening, don't you think?  And you can also infer that in some hard hit geographical areas the poorest people and people of color are being even more adversely impacted.  And don't think for a minute that things have really improved in 2010.

More…


 

 

end.

 

 

The leading indicators rose but not as much as expected:

 

U.S. leading economic index rises for 10th month

WASHINGTON, Feb 18 (Reuters) - A gauge of the U.S. economy's prospects rose for the 10th month to a record high in January, signaling the economic recovery should continue through the spring, a private research group said on Thursday.

The Conference Board said its index of leading economic indicators rose 0.3 percent in January, following a 1.2 percent gain in December, which was revised up from the previously reported 1.1 percent. Analysts polled by Reuters had anticipated a heftier increase of 0.5 percent in January.

Ataman Ozyildirim, an economist at the Conference Board said improvements in financial markets and manufacturing had boosted the index, with consumer expectation and housing permits also contributing to the gains.

The coincident index, which measures current economic conditions, rose 0.2 percent in January while the lagging index was fell 0.1 percent.

 

 

end.

 

 

But the big story is the consumer and they are just not spending.  Here are two stories on this issue:

 

US consumers spent at 2009 levels in January -poll

WASHINGTON, Feb 18 (Reuters) - American consumers say they reduced their spending in January to levels similar to early 2009, when the U.S. economy was still in recession, according to a Gallup poll released on Thursday.

The findings, which contradict U.S. data suggesting spending strength in January, showed consumers in all income brackets and geographic regions spending less in January vs. December in stores, restaurants, gas stations and online.

In many cases, Gallup said consumers spent less in the first month of 2010 than in January 2009, a weak economic period when monthly retail sales fell nearly 10 percent and the economy headed for a 6.4 percent first-quarter contraction.

"Consumer spending during the first two weeks of February shows a similar pattern. Year-over-year comparisons show consumer spending returning to the new-normal range of last year," Gallup said.

President Barack Obama has made economic growth and job creation his top priorities for 2010, an election year for Congress.

The economy has grown for two straight quarters after the worst downturn since the Great Depression. Financial markets are now watching closely for signs that consumer spending can sustain the recovery after the effects of Obama's $787 billion stimulus and other temporary factors wane.

Last week, the Commerce Department reported U.S. retail sales rose an unexpected 0.5 percent in January as consumers stepped up spending for essential goods and luxury items.

But Gallup, which interviewed more than 14,000 adults, said its data show even upper-income consumers cutting back. The findings have an overall error margin of 1 percentage point.

Consumers with household incomes of $90,000 a year or more told Gallup they spent an average of $113 per day last month, down 14 percent from December's $132 and just above their $110 daily average of a year earlier, the data showed.

Middle- and lower-income consumers cut back daily spending by 13 percent to levels slightly below those of January 2009.

Women, often the decision-makers on household purchases, reduced spending 25 percent from December to January to a level 14 percent below that of January 2009, Gallup said.

Geographic data showed spending declines ranging from 18 percent in the Eastern United States to 11 percent in the South. Gallup said consumers in all U.S. regions except the South also reported January spending levels below those of a year earlier.

-END-

 

and this story from Bloomberg that Walmart's sales are down because of lack of consumer spending:

Wal-Mart's Sales Trail Its Forecast After Price Cuts

Feb. 18 (Bloomberg) -- Wal-Mart Stores Inc., the world's largest retailer, reported fourth-quarter sales that trailed its projection after cutting grocery and electronics prices, and predicted a "challenging" first quarter for U.S. stores.

Sales at U.S. stores open at least a year fell 1.6 percent, the Bentonville, Arkansas-based company said today in a statement. Wal-Mart had projected sales to decline no more than 1 percent.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aIac56y1zXP0&pos=1

-END-

 

 

This next story is a dandy.  It shows that bank lending is falling at the fastest rate in history.  And the usa is attempting to exit its stimulus program?  And tonight, they raised their discount rate?

What do they hope to accomplish?

The story verifies the low dry Baltic Index.  Here is this great piece by Ambrose Pritchard Evans:

U.S. bank lending falls at fastest rate in history

Submitted by cpowell on 08:41PM ET Wednesday, February 17, 2010. Section: Daily DispatchesBy Ambrose Evans-Pritchard
The Telegraph, London
Wednesday, February 17, 2010

Bank lending in the US has contracted so far this year at the fastest rate in history, raising concerns that the Federal Reserve may have jumped the gun by withdrawing emergency stimulus.

David Rosenberg from Gluskin Sheff said lending has fallen by over $100 billion (L63.8 billion) since January, plummeting at an annual rate of 16 percent. "Since the credit crisis began, $740 billion of bank credit has evaporated. This is a record 10 percent decline," he said.

Mr Rosenberg said it is tempting fate for the Fed to turn off the monetary spigot in such circumstances. "The shrinking in banking sector balance sheets renders any talk of an exit strategy premature," he said.

The M3 broad money supply -- watched by monetarists as a leading indicator of trouble a year ahead -- has been contracting at a rate of 5.6 percent over the last three months. This signals future deflation. The Fed's "Monetary Multplier" has dropped to a record low of 0.81, evidence that the banking system is still broken…http://www.telegraph.co.uk/finance/economics/7259323/US-bank-lending-fal...

 

 

end.

 

Here is a story that the UK deficit is greater than Greece's:

 

Britain's deficit to be 'higher than Greek deficit' - Times Online

Good morning Bill and Chris, 
I thought that you might like to see a report in The Times on the horrific government borrowing performance in January which was announced today. It is the month when a high proportion of both personal and corporate tax receipts are normally paid. For the government not to report a surplus in the month is, I believe, aptly described as a disaster. As the headline highlights, the Greeks are looking paragons of fiscal virtue compared to Gordon Brown and his motley crew. I suppose the UK has one advantage - we are not in the euro zone so we can inflate and debase the currency.

Although it will never be admitted, there is really only one way out of this mess now which is inflation together with a probably substantial decline in real GDP until the trade deficit is eliminated. Raising new government debt without more QE is going to be a challenge.

The possible suspension of the UK's membership of the EU might yet be needed so the UK can introduce import tariffs to enable industrial capacity to be re-built to provide an alternative to imports. The mess created by the Blair/Brown period in government is nothing short of a scandal. Although, to be fair, there has been little criticism of their policies since economists and journalists as well as opposition politicians were to a lesser or greater extent "captured" by the government spin machine. Manufacturing and industry have become dirty words here and the establishment will need to re-focus on them before this crisis is solved.

One of my oldest friends runs a successful private company which exports about 70% of its sales. His business makes things - that is real tangible objects made to tight specifications which go into many applications. In the last year he has had many visits from staff at government agencies all trying to help his business. One of them advised him that it all seemed too tough to run his business from the UK and suggested that he sold out or relocated. To me that mind-set says more about the scale of the UK's problems than anything else.

One of the modern economic mantras, supported by government spin, here has been that the trade balance does not matter. This always was nonsense, but now it will become a major issue to resolve as importers will more than likely be reluctant to accept pounds as settlement. The decline in North Sea oil production is very serious as on top of the oil formerly exported, the UK's exports still include a substantial level of chemicals, many of which are produced here because of the oil availability. Hence, I suspect that real GDP will have to fall by as much as a further 15% to 20% to strike a trade balance. This is the stuff of major political upheaval and potential revolution. No wonder the UK government is taking steps to defend the oil which is thought to surround the Falkland Islands.

I am convinced that the gold price suppression scheme, so admirably exposed by GATA, which Blair and Brown supported, without really understanding what they were doing, has been a major element in creating this very tough situation here and elsewhere. Too low nominal interest rates plus doctored inflation statistics have kept the economy seemingly growing well, but has encouraged too much debt to be taken on and has also resulted in a major misallocation of capital investment.

I wish that I had bought more gold. Demand for it here is bound to remain strong amongst those with any cash to spare.

I am very grateful to you two and GATA for digging out so much of the truth of what our masters have done to screw the global economy with their crazy policies based on market manipulations. At least I feel I understand what has happened even if I have been unable to protect my family to the extent that I would have liked.

Best wishes, 
Bob
http://business.timesonline.co.uk/tol/business/economics/article7031896.ece 

 

 

I thought you might like this story:

 

South Carolina Lawmaker Seeks to Ban Federal Currency

(scstatehouse.gov)South Carolina Rep. Mike Pitts has introduced legislation that would mandate that gold and silver coins replace federal currency as legal tender in his state. 

As the Palmetto Scoop 
first reported, Pitts, a Republican, introduced legislation this month banning "the unconstitutional substitution of Federal Reserve Notes for silver and gold coin" in South Carolina. 

In an interview, Pitts told Hotsheet that he believes that "if the federal government continues to spend money at the rate it's spending money, and if it continues to print money at the rate it's printing money, our economic system is going to collapse."
http://www.cbsnews.com/blogs/2010/02/17/politics/poli
ticalhotsheet/entry6217403.shtml

 

 

end.

 

 

This one has to take the cake.  There is no one there to buy the derivatives on AIG.  Look at the spin they put on the situation:

 

Jim Sinclair's Commentary

It sounds to me like no buyers means no value, notional or real.

De-risked sound to me like it is zero value and therefore no more risk.

AIG to keep part of derivatives portfolio. 
AIG (AIG) plans to keep up to a quarter of a derivatives portfolio from its AIG Financial Products, the unit responsible for the insurer's near collapse. A spokesman said AIG decided it no longer wanted to sell these derivatives, which have $300B-$500B in notional value, because they have been de-risked and have potential upside as the markets improve.


 

end.

 

I brought to your attention the plight of many cities in the usa that might seek Chapter 9.  I highlighted to you that Harrisburg PA was contemplating protection.

It now looks like they are going to do it and many more cities falling right behind them.

 

Threat: Cities Weigh Chapter 9 
by Ianthe Jeanne Dugan and Kris Maher 
Thursday, February 18, 2010

Just days after becoming controller of financially strapped Harrisburg, Pa., in January, Daniel Miller began uttering an obscure term that baffled most people who had never heard it and chilled those who had: Chapter 9.

The seldom-used part of U.S. bankruptcy law gives municipalities protection from creditors while developing a plan to pay off debts. Created in the wake of the Great Depression, Chapter 9 is widely considered a last resort and filings under it are more taboo than other parts of bankruptcy code because of the resulting uncertainty for everyone from municipal employees to bondholders.

The economic slump, however, is forcing debt-laden cities, towns and smaller taxing districts throughout the U.S. to consider using Chapter 9. As their revenue declines faster than expenses, some public entities are scrambling to keep making payments on municipal bonds. And that is causing experts to worry about the safety of securities traditionally considered low risk.

"People believe that municipal debt is safe based on assumptions that are no longer true," says Kenneth Buckfire, managing director and chief executive of Miller Buckfire & Co., an investment bank that has worked with corporations on restructurings and now is advising municipalities. For example, it isn't safe to assume that governments can raise taxes to cover shortfalls, he says.

Even threatening bankruptcy signals that municipalities are willing to compromise the security of bondholders, says Richard Raphael, an analyst at Fitch Ratings. That makes it harder for cities and towns to raise money from investors and will slow the U.S. economic recovery.

More…

 

 

end

 

And this is not inflationary?

HHS Warns of Double-Digit Increase in Health Premiums 
By PATRICK YOEST

WASHINGTON—The Department of Health and Human Services took aim Thursday at health insurers for what it characterized as "massive increases" in insurance premiums, highlighting one company's 39% premium increase for an individual plan in California.

Health and Human Services Secretary Kathleen Sebelius held a news conference to highlight a department report showing double-digit percentage increases in health insurance premiums in California, Michigan, Connecticut, Oregon and Maine. The report specifically cites Anthem Blue Cross of California, a company owned by Wellpoint Inc., for premium increases as high as 39% for their insurance plans on the individual market.

The report argues that health-care overhaul legislation—a White House priority that has seen its prospects fade this year—would make the insurance market more competitive by making more information available about how companies are using premiums. An insurance "exchange" created by the legislation could also bar companies from offering plans if officials decide that premiums are out of line with the benefits offered by the plans.

"Unfortunately, this is pretty widespread," Ms. Sebelius said of the dramatic rate increases. "What we'd like is transparency for every company in every state of the country."

The report comes as the White House prepares to hold a Feb. 25 summit on health care, in which President Barack Obama and congressional leaders of both parties will discuss their health care proposals. The administration is trying to make its case that House and Senate-passed health-care legislation, which saw almost no support from Republicans, would bring down costs for consumers and enable more people to purchase health insurance.

More…

 

end.

 
The 10 yr treasury picked up on this as the 10 year bond closed with a yield of 3.80%
 
The long 30 year bond closed right at its danger point 116.18
 
Expect the markets to fall so that bond prices rise.  The trillions of dollars of interest rate swaps blow up if the bond yields rise from here.
 
 
As for international events:  this is not good for Greece and the Euro:
 

Greece loses EU voting power in blow to sovereignty

The European Union has shown its righteous wrath by stripping Greece of its vote at a crucial meeting next month, the worst humiliation ever suffered by an EU member state.

By Ambrose Evans-Pritchard, International Business Editor
Published: 7:56PM GMT 16 Feb 2010

Comments 265 | Comment on this article

A woman walks through the Athens stock exchange lobby Photo: REUTERS

The council of EU finance ministers said Athens must comply with austerity demands by March 16 or lose control over its own tax and spend policies altogether. It if fails to do so, the EU will itself impose cuts under the draconian Article 126.9 of the Lisbon Treaty in what would amount to economic suzerainty.

While the symbolic move to suspend Greece of its voting rights at one meeting makes no practical difference, it marks a constitutional watershed and represents a crushing loss of sovereignty.

"We certainly won't let them off the hook," said Austria's finance minister, Josef Proll, echoing views shared by colleagues in Northern Europe. Some German officials have called for Greece to be denied a vote in all EU matter until it emerges from "receivership".

The EU has still refused to reveal details of how it might help Greece raise €30bn (£26bn) from global debt markets by the end of June. Investors are unsure whether this is part of Kabuki play of "constructive ambiguity" to pressure Greece and keep markets guessing, or reflects the deep reluctance by Germany to be drawn deeper in an EU fiscal union. Greek bonds sold off as ten-year yields jumped to 6.42pc, but the euro rallied to $1.3765 against the dollar as broader issues resurfaced in currency markets.

Jean-Claude Juncker, head of the Eurogroup, hinted that ministers have already agreed on a support mechanism, should it be necessary. It will most likely involve by bilateral aid by eurozone states. He said proposals for an IMF bailout - backed by Britain - were "absurd" and would shatter the credibility of monetary union.

Many Germans disagree, including Otmar Issing, once the backbone of the European Central Bank. He said an EU rescue for Greece would be fatal, arguing that unflinching rigour is the only way to hold monetary union together without political union.

Tuesday's EU verdict amounted to a thumbs down on Greece's earlier austerity efforts, viewed as too reliant on one-off measures and too light on spending cuts. Greece must reduce its deficit from 12.7pc of GDP to 3pc in three years. Greek customs officials expressed their anger by kicking off a three-day strike, the first of many stoppages set to culminate in a general strike next week.

However, premier George Papandreou has won support from key political parties and a majority of the people. Greece may yet surprise critics by mustering its Spartan Spirit.

 
end.
 
As I leave you tonight, the gold price is now 1104.30.  The cartel are orchestrating another raid tomorrow as they want the gold price to fall below the 1100 level.
 
 
 
See you on Saturday
Harvey.
 


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