Saturday, March 20, 2010

March 20.10 commentary.

Good morning Ladies and Gentlemen:
 
First of all, I would like to report on the last night's bank failures and they were plentiful:
 

Bank Name

City

State

CERT #

 

 

State Bank of Aurora Aurora MN 8221
First Lowndes Bank Fort Deposit AL 24957
Bank of Hiawassee Hiawassee GA 10054
Appalachian Community Bank Ellijay GA 33989
Advanta Bank Corp. Draper UT 33535
Century Security Bank Duluth GA
sorry:  just got a new one:
 

Bank Closing Information – March 19, 2010 
These links contain useful information for the customers and vendors of these closed banks.

 
American National Bank, Parma, OH

Seven banks failed last night.

 

Lets go to the closing numbers on gold and silver:
 
Gold closed down 19.90 to 1107.00  Silver fell 49 cents to 17.01.  The entire fall occurred in a few minutes as illustrated by this:
 
 
 
The time of the hit:  10:10 est
The comex was bombarded by 6000 contracts or 600,000 oz of gold  (20 tonnes)
The cartel tried to get below the 1100 mark but got stiff resistance at these lower levels.
 
The reason for the hit:  the huge number of options that are in the money in gold and silver  (160 tonnes of gold in the money) and option expiry on shares.
 
From Richard Guthrie in a letter to Bart Chilton yesterday afternoon.  Bart Chilton is a commissioner of the CFTC
and I will be facing Bart and the other members of the CFTC: on Thursday in Washington
 

RG sent this note to the CFTC:

Subject: Fw: Price Plunge orchestrated from the dumping of 6,000 sell orders

Bart,..
Inquiring with my broker as to what initiated today's almost instantaneous $20 plunge in the price of Gold, he said that one of the Bullion Banks had reputably dumped 6000 sell orders onto the Comex!..

If correct, this is an enormous single sell order and difficult to see as for any other purpose than manipulation in order to lower prices!.. After all there is no way any seller could hope to maximize his price by selling in such a manner!..

I can't help but feel this is something to do with the fact that there's some 50,000 April call and put options due to expire a week today, within the $1,100-$1,150 strike range,.. With contracts equating to the equivalent of circa 160 tonnes of gold at stake, there is a serious interest from a major short or two in seeing the price down below $1,100!..

What a circus the Futures Market has become,.. Please, please, please will the CFTC get a grip of this, as it's inevitable outing sometime in the future will make liable fools of all those who were in the knowledge but did nothing to arrest the irregular,..

Any individual stopped out or panicked to sell from today's orchestrated price plunge has been robbed in the same way as a woman mugged of her purse by a crack addict,.. The only difference is that when caught the crack addict must contemplate the error of his ways from a prison cell, whilst a banker does it from the confines of his New York Mansion!..

Yours faithfully,..
Richard Guthrie

 

 

end.

 

The open interest on the gold comex rose by 2590 contracts to 499,239.  The silver comex OI also advanced rising by 1043 to 114,132.

It seems whenever the OI rises close to 500,000, the trigger is set for the raid.  The increase of in the money options certainly caused our banking cartel into action

and supplying the massive paper comex gold short.

 

The COT report was released after the market closed and it was quite revealing:

The gold COT report showed:

*The larges specs reduced longs by 1,803 contracts and increased shorts by 6,045.

*The commercials decreased longs by 3,127 contracts and decreased shorts by 12,619.

*The small specs decreased longs by 671 contracts and increased shorts by 973.

 

notes:  as of last Tuesday, the longs decided to rest a bit and not enter the fray.  For some unknown reason, the commercials

decided to decrease some of their long holdings by 3127 contracts and they certainly covered quite a few shorts to the tune of 12,619

 

the small specs are out of business at the comex.

 

OK lets see silver:

 

Silver COT Report - Futures

Large Speculators

Commercial

Total

Long

Short

Spreading

Long

Short

Long

Short

40,126

5,270

17,821

29,779

77,787

87,726

100,878

75

384

252

559

2,768

886

3,404

Traders

70

23

32

39

32

123

75

 

Small Speculators

 

 

 

Long

Short

Open Interest

 

 

26,466

13,314

114,192

 

 

 

1,176

-1,342

2,062

 
 
 
notes:  the large speculators were neutral as some of the longs increased their positions by 75 contracts and
some of the large speculators went further shortby 384 contracts.
 
The commercials:  the smaller commercials added to their longs by 559 contracts and our perennial powerful
JPMorgan and HSBC increased their shorts by a huge 2768 contracts.
 
The small specs saw some increase in longs by 1176 contracts.  They reduced their shorts by 1342 contracts.
Again, it was the large commercial banks that supplied the silver paper short.
 
 
 
 
Lets go to the silver and gold delivery pits and see what is happening over there:
 
 

COMEX Warehouse Stocks Mar 19, 2010

SILVER

5,242 ozs withdrawn from the dealer’s (registered) inventory 
824,552 ozs withdrawn from the customer (eligible) inventory 
Total dealer inventory 55.99 Mozs 
Total customer inventory 60.63 Mozs 
Combined Total 116.62 Mozs

GOLD

ZERO ozs withdrawn from the dealers (registered) category 
200 ozs deposited in the customer (eligible) category 
Total dealer inventory 1.67 Mozs 
Total customer inventory 8.35 Mozs 
Combined Total 10.02 Mozs

 
 
Notes:
 
Note 1:  again for some strange reason a massive 824,552 oz of silver left the customer inventory.
 
Note 2:  only a tiny 5,242 oz of silver left the dealer inventory.  That is one contract's worth of silver.
 
In gold:  no activity.
 
 
OK lets go to the delivery side of things:
 
First silver:
 

There were 79 delivery notices issued in the MAR silver contract. The total delivery notices for the month in silver stand at 3,893 or 19.5 Mozs. Bank of Nova Scotia issued 65 and stopped 25, while JPM issued 10 and stopped 39.

Note 3: 79 contracts were issued for the March silver contract.  The total now stands at 19.5 million oz of silver.
 
 
In Gold:
 
 

There were 76 delivery notices issued in the MAR gold contract. The MAR gold contract total for the month is 584 notices or 58,400 ozs. Bank of Nova Scotia issued 15 and stopped 54, while JPM issued 28 and stopped none.

Note 4:  the 76 delivery notices adds 7600 oz of gold.  The new total of gold delivery notices issued stands at 58400.
 
 
What is left to go?
 
In silver:
 
 

in silver, the open OI  declined by 2 contracts to stand at 329 contracts.

 

Note 5:  thus in silver, the amount of silver left to be served equals 329 x 5000 oz equals 1.645 million oz.

 

Note 6:  the total number of oz of silver standing for the march delivery season is:  1.645 million + 4.6 million (Feb options exercised for silver, delivery in March)  + 19.5 million =   25.75 million oz

             a little more than Thursday.

 

and now what is left in gold?

 

The open interest in the MAR gold contract remained at 86 contracts,

 

Note 7:  the number of oz left to served in gold stands at 8600 oz.  Add this to the 58,400 and we get 67,000 or 2.16 tonnes. This amount also increased from yesterday.

 

Summary:  the number of oz of gold and silver metal standing are increasing.  The number of oz of gold and silver leaving the dealer inventories are surprisingly small for this time of the delivery

month in silver. Somebody is very interested in obtaining physical metals in a hurry.

 

Lets go to other economic stories of the day:

 

This news hit the wires early and caused some concern with equity holders:

 

Unemployment soars in U.S. metropolitan areas WASHINGTON, March 19 (Reuters) - Unemployment rates in 363 U.S. metropolitan areas rose in January, and 346 areas reported year-on-year declines in their number of jobs, the Labor Department said on Friday.

Nearly 200 metropolitan areas reported jobless rates of at least 10 percent in January, showing that unemployment problems persist at the local level.

California has been especially hard hit during the recession that began in late 2007, and the Labor Department data showed the state's jobs situation continues to deteriorate, with an overall unemployment rate of 12.5 percent in January.

The three areas with the highest jobless rates in the country, all above 20 percent, were all located in California, the most populous U.S. state.

The Riverside and San Bernardino area of Southern California, along with Detroit-Warren-Livonia in Michigan had the highest unemployment rates for areas with populations of 1 million or more. While Detroit has been hurt by fluctuations in the automobile industry, Southern California has suffered mostly from the bursting of the housing bubble.

The sprawling California metropolis by the ocean formed by Los Angeles, Long Beach and Santa Ana, meanwhile, lost the most jobs over the year, at 248,600...

 

Late in the day, the following shook the street pretty hard:

 

Markets spooked as Greek rescue plan crumbles

Europe’s rescue plan for Greece appears to be crumbling after the country threatened to call in the International Monetary Fund unless Brussels comes up with real money on acceptable terms within a week.

 

By Ambrose Evans-Pritchard

Published: 5:30AM GMT 19 Mar 2010

 

The inability of the eurozone to put together a viable package after a month of talks has dismayed markets, which thought the terms of a deal had already been agreed. Yields on 10-year Greek bonds spiked 17 basis points yesterday to 6.26pc. The euro fell two cents against the dollar to below $1.36. "The facade of unity among eurozone members hardly held for more than a day," said Beat Siegenthaler from UBS.

 

Greek Premier George Papandreou told the European Parliament that his country was running out of patience. It is in effect already subject to the full rigours of an IMF-style austerity plan but without enjoying any of the benefits. He said the savings from cost-cutting measures were vanishing into the pockets of bond-holders through higher interest rates.

 

We have the worst of the IMF and none of the advantages. This is where Europe must come in and provide what the IMF can offer. Or Greece will have to go to the IMF. We hope that will not be necessary," he said.

 

"I prefer a European solution as part of the eurozone, to show the world that Europe can act together. This is not to ask for money but to have an instrument on the table to stop the speculation. We expect the EU to live up to the challenge facing it. We are a eurozone country," he said. Hungary was better off with a "free currency", able to work with the IMF outside the eurozone.

 

"Papandreou is playing poker," said Silvio Peruzzi from RBS. The defiant tone leaves no doubt that this escalating game of brinkmanship has turned deadly serious. If Mr Papandreou is bluffing, his bluff is likely to be called since a German-led bloc of states is also warming to the IMF be the best way after all to maintain EMU discipline.

 

 

end.

 

 

and this story:

 

 

 

Greece threatens to call in IMF as Europe dithers

Greece has upped the ante in an escalating game of brinkmanship, threatening to turn to the International Monetary Fund for support unless EU leaders come up with an acceptable rescue package at their next summit on March 25.

 

By Ambrose Evans-Pritchard

Published: 11:00PM GMT 17 Mar 2010

 

 

end.

 

the stories are long so you can google  Ambrose Pritchard Evans for the two stories:

 

 

 

The Fed was not happy with this court result

 

 

Federal Reserve Must Disclose Bank Bailout Records

........March 19 (Bloomberg) -- The Federal Reserve Board must disclose documents identifying financial firms that might have collapsed without the largest ever U.S. government bailout, a federal appeals court said.The U.S. Court of Appeals in Manhattan ruled today that the Fed must release records of the unprecedented $2 trillion U.S. loan program launched primarily after the 2008 collapse of Lehman Brothers Holdings Inc. The ruling upholds a decision of a lower-court judge, who in August ordered that the information be released.The Fed had argued that it could withhold the information under an exemption that allows federal agencies to refuse disclosure of "trade secrets and commercial or financial information obtained from a person and privileged or confidential."

The U.S. Freedom of Information Act, or FOIA, "sets forth no basis for the exemption the Board asks us to read into it," U.S. Circuit Chief Judge Dennis Jacobs wrote in the opinion. "If the Board believes such an exemption would better serve the national interest, it should ask Congress to amend the statute."The opinion may not be the final word in the bid for the documents, which was launched by Bloomberg LP, the parent of Bloomberg News, with a November 2008 lawsuit. The Fed may seek a rehearing or appeal to the full appeals court and eventually petition the U.S. Supreme Courthttp://www.bloomberg.com/apps/news?pid=20601087&sid=a2rzjENZQV5k-END-

 

end.

 

The King report has come out with news that the Fed is increasing its balance sheet.  The numbers usually increase at expiration of options week.

 

The Fed;'s balance sheet has now expanded to 2.29 trillion dollars and all the excess is buying the garbage from the banks.  The Fed is also using taxpayer money and paying interest to

the banks for this worthless paper.  The Fed issues freshly minted dollar bills to our friendly bankers, who use this money in the corrupted trades whether it is in derivatives or the futures market/

 

One thing I can assure you:  they are not lending as the Fed's excess reserves climbs above 1.3 trillion dollars.  From the King report:

 

From The King Report…

Since July, we have noted monthly that Bennie Mae tends to contract the Fed balance sheet except during expiration week. Then Ben pours in the juice during expiration week.

There has been little movement in the Fed balance sheet over the past three weeks. But for the week ended on Wednesday, Bennie Mae poured $25.536B into the system on the monetization of $37.268B of MBS. The Fed sold $1.523B of agency debt. The Fed balance sheet is now a record $2.29 trillion. http://www.federalreserve.gov/releases/h41/Current/

It cannot be a coincidence that for every expiration week since the June expiration, Ben has poured huge amounts of credit into the system. This is a blatant attempt to juice stocks higher.

Commercial Paper declined $22.4B last week. Companies do not yet see a lasting economic rebound.

One reason for the lack of institutional participation in the stock market is confusion over the US economy now and its outlook for the second half of 2010.

Rail traffic is doing better than 2009 but is greatly below 2008 levels. Autos sales jumped in March; but home sales have retreated and foreclosures are set to increase significantly.

Fannie as Bearish as MBA on Production Forecast

The first two months of the year have been weak in terms of loan applications and a new forecast from Fannie Mae suggests that 2010 will result in just $1.32 trillion in residential loans being funded this year.

If Fannie's forecast becomes reality, that means loan volume will be down 31% this year compared to 2009. Fannie's forecast is slightly more bearish than a recent one issued by the Mortgage Bankers Association that sees production coming in at $1.33 trillion this year.

Mark Hanson: I still don't think investors and the media have grasped the variety of consequences that a near 50% YoY drop in mortgage volume in 2010 will bring. Just think about all the lost jobs and income or how many times 'mortgage banking revenue' has driven bank earnings. Mortgage loan volume dropping by 50% YoY can't be what the 'normalized earnings' crowd has plugged into their models..

-END-.

 

 

This came late in the day, Latvia Government collapses.   I can assure you that Swedish banks are very concerned as they have the greatest number of loans to the Baltic nations.

 

Latvia government collapses amid economic crisis

Latvia's coalition government has collapsed after failing to tackle a crippling economic crisis.

http://www.telegraph.co.uk/news/worldnews/europe/latvia/7466920/
Latvia-government-collapses-amid-economic-crisis.html

-END-

 

 

Here is a commentary by Bill Holter on the Repo 105 rule which is making headlines throughout the world:

 

The "West" killed itself with fraud.

http://www.observer.com/2010/wall-street/repo-men%E2%80%99s-new-lehman-shrugTo all; the above link interviews former Lehman Bros. employees regarding their use of rule "105". Was rule 105 legal? Maybe. Was it ethical in the way it was used? No. Is it still being used now? I would lay 1,000/1 odds it is! Europe is currently looking into many derivative transactions by U.S. investment banking firms and the first criminal action is ongoing in Italy. Anyone who believes the U.S. Dollar will act as a safe haven while U.S. financial institutions are being lined up, shot at from all directions and executed needs to have their head examined! Once this growing pile of crap gains some momentum there will be no stopping it from engulfing the credibility of the entire Western financial system led of course by the U.S. and U.K..

This will end up casting a shadow on the supposed "politically stable and free markets" the U.S. is (was) so proud of. As criminal actions and civil suits are filed the rest of the world will back away from doing business with firms like Lehman (now dead) and Goldman, JP Morgan etc. (currently in the crosshairs). BUT... in the end this will not be about individual firms, it will be about the Dollar and Treasuries. The biggest "export" from the U.S. to the rest of the world has for years been "safe" Dollars and Treasuries, the shadow of fraudulent accounting will put an end to this "export".

Get ready for a drastic change in the U.S. standard of living because foreigners will not only halt their purchases of U.S. debt but they will turn sellers. No more "real goods" for "fake paper". The days of "something for nothing" are coming to a halt and the U.S. no longer has the industrial or manufacturing capacity to trade "something for something". Again Main St. will suffer for Wall Steet/Washington's greed, fraudulence and outright theft. You must protect yourself as no one else will. Have a nice weekend, Bill H.

 

And this report on how Lehman executives feel about the repo 105 rule and the damage it is having througout the world:  (they are laughing at it):

 

Former Lehman Executives ‘Giggle’ at ‘Nonprofessionals’ Who Think Losing Billions of Dollars Is a Big Deal 
3/17/10 at 10:58 AM

How do you think former Lehman Brothers executives felt about the recently released report on the firm’s failure that reveals, among other things, the firm used a weird accounting practice known as "Repo 105" to move $50 billion of toxic mortgage assets off its books in order to make its balance sheet look healthier? Embarrassed? Regretful? Are they thinking to themselves Wow, in retrospect, that does look pretty bad. What were we thinking? Not really, no. This morning’s Post reports that former CEO Richard Fuld feels "vindicated" by the report, since Repo 105 is not illegal, but merely kind of skeazy. Others apparently feel the same way: "I’m like, whatever," a former managing director of Lehman London tells the Observer. "When I read this, I giggle a little bit, because $50 billion is a drop in the ocean."

The "yappers" who are shocked by it, he said, are merely unsophisticated "nonprofessionals" who are just looking for someone to point the finger at for the near-collapse of the financial system. But as amusing as it is, it’s also kind of sad, really, said another executive, that people are just so stupid. They’re like a bunch of animals. Like wild, ignorant bulls, starved into rage, stupidly crashing around and driving their horns into things just because they don’t know what else to do.

"They just want to be mad and don’t know what they’re talking about and want to be outraged.” After an interview, that executive sent a follow-up email comparing the widespread furor over Lehman Brothers to the groupthink that sent America into Iraq after Sept. 11.

Only a few people are smart enough to understand *the truth* of the matter, which is that ultimately bankers are smarter and better than everyone else, always have been always will be. Not that it’s fun to have this knowledge! Quite frankly, it is a terrible burden, because no matter how much you say it and how true it is, no one wants to believe you.

More…

Here is another state with budgetary shortfalls  The state is Mississippi:

 

Gov. Barbour trims another $40.6M from FY 2010 budget 
Posted: Mar 17, 2010 2:13 PM Updated: Mar 17, 2010 2:31 PM

JACKSON, MS (WLOX) – Governor Haley Barbour has ordered another $40.6 million in budget cuts for the current fiscal year after the state revenue estimating committee lowered its projection for Fiscal Year 2010. This reduction brings the total amount of cuts this year to $499.1 million.

Wednesday’s budget cuts mean nearly every state government account, except those exempt by statute, have been cut by almost 9.5 percent.

Among those cut were the budgets for the Governor’s Mansion and Governor’s Office. But a news release from Barbour pointed out "the Legislature’s budget has not been reduced, as it has exempted itself from being subjected to budget cuts."

"I must reiterate that this deficit, coupled with continued lower revenues, means we must take a serious look at how Mississippi government is structured," Governor Barbour said. "Real changes will be necessary if we are to continue providing essential services to our citizens while prudently spending our reserve funds and achieving a balanced budget."

Governor Barbour asked lawmakers to give agency heads the authority to be flexible with the additional cuts. The Senate quickly agreed, but the House did not.

More…

 
 
 
 
 
Lets see what is happening in Massachusetts:
 

More cuts loom as state faces $295m in red ink 
MassHealth, other services blamed for drain on coffers

Massachusetts is potentially facing a new budget gap of up to $295 million this year, a grim forecast that state officials said could spell yet another round of painful cuts before the fiscal year ends in June.

Patrick administration officials blamed the gap on rising demand for the joint state and federal health care program for low-income residents known as MassHealth, increasing demand for homeless shelters, and on below-projected revenue from state fees and federal aid.

Massachusetts, like other states, has grappled with more than two years of declining revenue as a result of the global economic downturn, which prompted Governor Deval Patrick to make midyear budget cuts four times last fiscal year and once already this year, in October.

Jay Gonzalez, secretary of administration and finance, said that officials were monitoring the situation and that the gap could ultimately be as low as $195 million.

He said officials would decide in the next few weeks how to find savings, with the potential for further cuts and additional withdrawals from the state’s dwindling reserve fund.

More…

 
 
 
end.
 
 
 
I will report to you  on Monday and Tuesday and then on Saturday.  I will not  give any commentary on Wednesday and Thursday as I will be in Washington.
I will send you to my written submission to the CFTC on Tuesday. and then I will forward my oral remarks on Saturday.
 
Have a great weekend.
 
Harvey.

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