Saturday, April 10, 2010

April 10.2010 commentary...very important.

Good morning to you all:
 
Before starting, it looks like only one bank failed last night in South Carolina:
 

Friday, April 09, 2010

FDIC Bank Failure #42: Beach First National Bank, Myrtle Beach, South Carolina

by CalculatedRisk on 4/09/2010 05:10:00 PM

The beach gets bigger
When the tide it does recede
Taxpayers stranded

by Rob Dawg

From the FDIC: Bank of North Carolina, Thomasville, North Carolina, Assumes All of the Deposits of Beach First National Bank, Myrtle Beach, South Carolina
Beach First National Bank, Myrtle Beach, South Carolina, was closed today by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of December 31, 2009, Beach First National Bank had approximately $585.1 million in total assets and $516.0 million in total deposits. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $130.3 million. ... Beach First National Bank is the 42nd FDIC-insured institution to fail in the nation this year, and the first in South Carolina. The last FDIC-insured institution closed in the state was Victory State Bank, Columbia, on March 26, 1999.
The FDIC gets back to work ...
 
end.
 
 
Gold closed up by $8.90 to 1161.10 and at 12 noon est gold hit 1164.00.  At 12 noon, the London physical gold and silver market is put to bed..all trades after that point are all paper obligations.
 
The powers to be seems to be trying to calm the precious metals down but are having no luck.
 
In silver, the price skyrocketed up by 29 cents to 18.39 in similar fashion to its stronger cousin, gold.
 
The open interest on the gold comex rose by an astonishing 9543 contracts to close the week  (basis Thursday) at 521,384.
 
I would like to add that if we remove some of the ridiculous spreaders we are close to record territory.
 
On the silver comex the OI rose in similar fashion to gold by a huge 2026 contracts to 121,609.
 
It is clear that two huge forces are facing off with each other: the speculator longs and the commercial bankers, the shorts.
 
The longs want their metal and the commercials are supplying paper not backed by any metal. The regulators are still discussing
 
the problem and not letting us in on their decisions.  As Jeffery Christian of CPM Metals described at the CFTC hearings, one oz of gold has over 100 obligations
 
searching for it. Something but give!
 
In another astonishing revelation, the CFTC released the COT report after the market closed last night.
 
 
here is gold:
 
To give you an idea just how badly The Gold Cartel wants to keep the price of gold from exploding, here are latest stats from the COT report (as of last Tuesday)...

*The large specs increased their longs by 32,428 contracts and increased their shorts by 2,748.

*The commercials decreased their longs by 8,802 contracts and increased their shorts by 28,413.

*The small specs increased their longs by 4,842 contracts and decreased their shorts by 2,693.

 

end.
 
Please note the massive increase by the longs by a humongous 32,428 contracts.  Just look at the commercials:  In an united frontal attack,
 
the commercials reduced some of the longs and massively supplied 28,413 new unbacked contracts to our gold hungry longs.
 
As I pointed out to you on many occasions, the small specs have left the arena not understanding how they have been fleeced by the bankers
too many times.
 
 
In silver:
 
the long speculators increased their longs by 5318 contracts but also increased some of their short positions by 776 contracts.
 
The commercials went to town:  the smaller raptor banks reduced their short positions on the silver side fearing the massive rise in the silver metal
 
by the tune of 1420 contracts.  However the larger commercials, JPMorgan and HSBC increased their shorts by, get this:  an almost unheard of 3949 contracts.
The short position by the bankers on silver total 81,525 or 405 million oz of silver which represents  almost 60% of annual production of silver.  The net silver short position
by taking the commercial longs from the shorts total an astonishing 51,686 contracts or 258 million oz net short. All of this short position is represented by my good friend
JPMorgan who is short around 240 million of those oz.
 
 
 
The defence of silver by the commercials is identical to gold. However the bankers are more vulnerable to silver as there is no available above ground silver to bail them out.
 
 
As promised, lets go to the silver and gold comex inventory and see how things are developing over there:
 
 
Here is a snapshot of the inventory last night:
 
 
COMEX Warehouse Stocks April 9, 2010

SILVER

59,078 ozs withdrawn from the dealer’s (registered) inventory
7,831 ozs withdrawn from the customer (eligible) inventory
Total dealer inventory 54.16 Mozs
Total customer inventory 61.22 Mozs
Combined Total 115.39 Mozs

GOLD

6,400 ozs deposited in the dealers (registered) category
1,987 ozs withdrawn from the customer (eligible) category
Total dealer inventory 2.35 Mozs
Total customer inventory 7.70 Mozs
Combined Total 10.05 Mozs

 
 
Notes: 
 
Note No 1:  we see that 59,078 oz of silver left the dealer inventory but there was no corresponding customer addition.
 
Note No 2:  we see a small withdrawal of 7831 oz from the customer list...a daily event.
 
Minor movements in gold..a small deposit of 6400 oz of gold in the dealer inventory and a 1987 oz withdrawal.  No doubt the withdrawal
of the 1,987 oz corresponds to 1/3 of the actual deposit.  It seems that many do not wish to leave their silver and gold at a comex warehouse.
 
 
Lets see how the delivery notices shaped up:
 
There were 4 delivery notices issued in the APR gold contract. The APR gold contract total for the month is 11,927 notices or 1,192,700 ozs.
 
 
OK:  the total notices issued so far this month totalled in gold 11927 or 1,192,700 oz of gold.
 
 
What is left?
 
The Open Interest in the APR gold contract is 1,721 or 0.17 Million ozs. Along with the already issued delivery notices the gold demand in April could be 1.36 Mozs or 58% of the dealer inventory! There is no indication of any sizeable movement out of the inventory yet.
 
 
 
 
 
 
Note 3:  there are 1721 contracts left to be served or .172 million oz.  We must add the .074 million oz from the March options. Thus the total gold standing for the April delivery month is
 
              .172 million oz +   1.1927 million oz  +  .074 million=  1.4387 million oz.  This figure is down from the 1.52 million oz on Wednesday.  This is rather strange for this late in the delivery cycle.
 
               Maybe somebody got a premium for cash and settled and put on more contracts in June with their new found wealth.
 
 
 
 
Lets see silver:
 
 
There were 36 delivery notices issued in the APR silver contract. The total delivery notices for the month in silver stand at 394 or 1.97 Mozs.
 
 
 
 
 
 
 
 
 
 
Now this is interesting.  We left Wednesday at 1.4 million oz and in two days a huge number of exercised silver contracts surfaced to the tune of 1/2 million oz. Option holders are always given future contracts.
Since silver is not a delivery month, the commercials did not have the available silver to serve our longs until yesterday.  To me, it looks like silver is going to be the comex's achilles heel.
 
 
I would like to show you an email we got on the delivery problems at the comex.  The letter is self explanatory: (it is from Tom of Kansas City Mo):
 
 
 

More on gold delivery problems…

Bill,
Last September I had mailed you informing you that we were taking delivery of a 100 oz COMEX Gold Bar.

Well, it is now April and BRINK'S, the COMEX warehouseman for the delivery, has still not sent me an invoice for storage yet. So far all I have to show for $90+K is a blurred e-mail with a bar number on it.

Our original plan was to have the bar del'd to 1st State Depository in Delaware (thanks, Dave in D), but then the TUNGSTEN STORY broke so I thought it better to leave it in the COMEX system for now.

I have hounded BRINK'S on several occasions to bill me, but they haven't. My feeling is that there is something rotten going on here. I am also trying to locate the original warrant supplied by Heraues (the bar maker) to the exchange, but have not succeeded.

Thanks for the GREAT WORK !! There is Cartel Blood in all seven seas now. Tom G Kansas City

 
 
 
 
end.
 
 
Please note:  this is for one bar.  In Dr Willie's paper Thursday night which will I will appendix to my commentary, there are countless stories of delivery problems at
 
the LBMA and at comex.
 
 
Bill Holter writes about Adrian Douglas, my son Lenny and myself, and other issues in the banking gold and silver fraud:
 

Bill H notes:

The Gold fraud and the recovery fraud

http://www.zerohedge.com/article/latest-gold-fraud-bombshell-c
anadas-only-bullion-bank-gold-vault-practically-empty
http://finance.yahoo.com/tech-ticker/recovery!--there's-no-recovery!-
the-u.s.-is-completely-screwed!-463817.html;_ylt=AslhBC2pDw_z
rRPo4UO8z9y7YWsA;_ylu=X3oDMTE2
dWxmNGlrBHBvcwMxMQRzZWMDd
G9wU3RvcmllcwRzbGsDcmVjb3Zlcnl3aG
F0?tickers=%5Edji,%5Egspc,dia,spy,gld,
tlt,man&sec=topStories&pos=9&asset=&ccode
 
 
end.
 
 
 
The price of gold has now reached record levels in British Pound terms.  First a record in Euros and now British pounds:
 
Gold hits record high for British investors

The price of gold has risen to an all-time high in sterling and euro terms.

http://www.telegraph.co.uk/finance/per
sonalfinance/investing/gold/7570991/G
old-hits-record-high-for-British-investors.html

 
 
 
As i have pointed out to you on many occasions, the Europeans are old established guards of the monetary system.  They smell trouble
and they are voting with their pounds and euros to obtain the last remaining oz of gold on the planet.
 
 
To prove this, the GLD found that it was finally necessary to increase their holdings of gold metal by a whopping 9.7  tonnes of gold:
 

Bullion Held in SPDR Gold ETF Surges 0.9% to Most on Record

April 8 (Bloomberg) -- Bullion held by SPDR Gold Trust, the biggest exchange-traded fund backed by the metal, rose by 9.7 metric tons to the largest amount ever, company figures show.

The fund’s holdings gained 0.9 percent, the biggest jump in more than six months, to 1,140.43 tons as of today, according to the company’s Web site. Holdings have increased 1.2 percent in the past year. The previous record was 1,134.03 tons on June 1, according to the Web site. The company listed the fund’s net asset value as $42.09 billion as of today.

Gold futures for June delivery fell 10 cents to $1,152.90 an ounce on the Comex in New York. The price has jumped 30 percent in the past year, touching a record $1,227.50 in December, as investor demand increased.

 

 

end.

 

 

 

 

 

Strangely, the SLV inventory remained constant at 295 million oz
 
 
 
In another development, the state government of Viet Nam closed the gold trading desks in their country.  It seems that the derivatives on the gold that trades far exceeds the physical metal
and they recognize the danger.  They basically ordered all derivative trading in gold to stop immediately:
 
 

The State Bank of Vietnam on December 31 announced a decision to close the 20 gold exchanges in the country by the end of March. It said the closure was necessary to eliminate risks posed to the national financial system.

END

Firms struggle after gold exchange closure

Last updated: 4/4/2010 9:00

World Gold, a gold trading floor in Ho Chi Minh City, officially closed on March 31

The recent closure of all gold trading floors in Vietnam will not have a great impact on commercial banks, but for other struggling companies, it means new business paths or a complete shutdown.

Most gold trading floors operated by commercial banks said they would simply shut down the business completely, and not offer any other service to investors.

Nguyen Duc Thai Han, director of Asia Commercial Bank’s gold exchange, said the company does not have any immediate plan to launch a new alternative investment service.

ACB opened the first gold trading floor in Vietnam in May 2007. At first the floor had just nine traders - large banks and gold trading companies…

http://www.thanhniennews.com/2010/Pages/20100404181637.aspx

 
 
 
 
 
end.
 
 
In other physical news, the price of platinum surpassed the 1700 dollar level and Palladium rose above 500 dollars for the first time. Rhodium rose to 2975 dollars per oz. It is in the same class
as platinum, palladium and nickel.
 
 
Finally, on the physical front, we got this comment from Standard Bank over in England on this important index..the physical gold flow index:
 
 

In an important piece on Thursday morning, Standard Bank reported

Late last week, the Standard Bank physical gold flow index recorded its highest level since we started tracking flows. Although the index declines slightly when gold approaches $1,150, overall, the index continues to confirm healthy physical demand

 
end.
 
 
 
Now that I have exhausted the physical stories out there, lets get to the economic stories that will effect gold and silver.
 
The big news is of course, Greece.
 
Here is the latest and I will comment at the end of this story:
 
 

EU Says It’s Ready to Aid Greece as Fitch Cuts Rating

April 9 (Bloomberg) -- European Union officials said they are ready to rescue Greece if needed as Fitch Ratings cut the country’s credit rating to the lowest investment grade and economists at UBS AG said that a bailout may be imminent.

Germany restated its opposition to below-market rate loans to Greece as officials in Brussels hammered out details to the framework calling for joint EU-International Monetary Fund aid. European Central Bank policy makers planned a teleconference tonight, two people familiar with the matter said…

http://www.bloomberg.com/apps/news?
pid=20601087&sid=arOAYr2JEKa8&pos=2

-END-

 
 
 
 
My comments:  it looks to me like lip service.
 
Greece has a debt to GDP ratio of 117% and cannot service its debt.  The IMF is proposing new loans but it will be at the prevailing rate and that rate is 448 basis points higher than the German
bonds.  Greece has stated flat out that they cannot pay 7.4% on money owed as they do not have enough incoming revenue as the recession has crippled this nation.
 
We are seeing a massive exit by wealthy Greek citizens who are converting their Euros, shipping it to Switzerland and buying gold.  They do not want to have euros on deposit at Greek
banks fearful that when Greece is expelled from the EMU they will be replaced by Greek  drachma at a hugely devalued level.
 
In essence, we have a bank run.
 
As I have stated in my radio interview:
 
"there is nothing like a bank run and there is nothing like a gold rush.  The two have never met globally at the same time.  It will make the current economic malaise tame in comparison."
 
Stay tuned on this as the global debt contagion catches fire.
 
 
 
The next big story out of Washington showed how the banks mask their debt at quarter's end:
 

05:58 Major banks have masked risk through sleight of hand for five quarters - WSJ
Data from the New York Fed shows a group of 18 banks have lowered their debt levels by an average 42% just before reporting it, then allowed the levels to rise as the next quarters get underway. The practice is legal, if misleading. The data only looks at outstanding net repo borrowings, but the article says it evidences the risks institutions take to trade. Though all the banks are called "major," only five are named as being in the data: Goldman Sachs (GS), Morgan Stanley (MS), JPMorgan Chase (JPM), Bank of America (BAC), and Citi (C).
http://online.wsj.com/article/SB2000142405270
2304830104575172280848939898.h
tml#mod=todays_us_money_and_investing
(subscription required)
* * * * *

Major U.S. banks masked risk levels -WSJ

April 9 (Reuters) - Major U.S. banks temporarily lowered their debt levels just before reporting in the past five quarters, making it appear their balance sheets were less risky, the Wall Street Journal said, citing data from the Federal Reserve Bank of New York.

The paper said on Friday 18 banks, including Goldman Sachs Group , Morgan Stanley , J.P. Morgan Chase Bank of of America and Citigroup , understated the debt levels used to fund securities trades by lowering them an average of 42 percent at the end of each period.

The banks had increased their debt in the middle of successive quarters, it said.

Citi, Bank of America, Goldman Sachs, JPMorgan Chase and Morgan Stanley were not immediately available for comment when contacted by Reuters outside regular U.S. business hours. Excessive leverage by the banks was one of the causes that led to the global financial crisis in 2008.

Due to the credit crisis, banks have become more sensitive about showing high levels of debt and risk, worried their stocks and credit ratings could be punished, the Journal said.

Federal Reserve Bank of New York could not be immediately reached for comment by Reuters.

 
 
end.
 
Dave Kranzler comments on the above:
 

Dave from Denver…

Friday, April 9, 2010

Big Wall Street Banks Hide Their True Debt Levels Every Quarter Now

Well it looks like the Wall Street Journal only took a little over three weeks to report what I suggested in mid-March: Lehmangate Part 2: What Is the Rest of Wall Street Hiding? Here's the link to my post in which I suggested that Lehman was one of many using similar fraudulent accounting in order to dress up their balance sheet: LINK.

The Wall Street Journal today reports
Big Banks Mask Risk Levels: Quarter-End Loan Figures Sit 42% Below Peak, Then Rise as New Period Progresses. I don't have a subscription to the Wall Street Journal, but here's a Reuters news report: "Major U.S. banks temporarily lowered their debt levels just before reporting in the past five quarters, making it appear their balance sheets were less risky, the Wall Street Journal said, citing data from the Federal Reserve Bank of New York" - Link: Reuters

This should not surprise readers of this blog. Wall Street is notoriously "Monkey see, Monkey do." So it only made sense that every other big Wall Street bank would be using accounting manipulations to accomplish the same fabulous results as Lehman, before Lehman collapsed. The only difference is that the remaining Wall Street banks have been deemed by the Fed/Treasury as "too big to fail." We have monkeys running the big banks and we have monkeys overseeing and regulating the big banks. I think Bernanke and Geithner deserve a Big Banana award. But what about the citizenry who enable these people to remain in power?

 
 
end.
 
 
I alerted you on this developing story.  It has far reaching implications:
 
 
Los Angeles Faces Threat of Insolvency

Dispute Between Municipal Utility and City Council Over Electricity Rates Deepens Fiscal Crisis; Bond Rating Cut

By PETER SANDERS

Associated Press

Los Angeles Mayor Antonio Villaraigosa, center, with business leaders last month in Washington, supported the increase in electricity rates but was overruled by the city council.

LOS ANGELES—A bitter political dispute between this city's elected leaders and its powerful municipal utility threatens to push the city into insolvency as early as next month.

Los Angeles City Controller Wendy Greuel warned this week that the city's general fund could run out of money and fall $10 million into the red by May 5 unless the Los Angeles Department of Water & Power transfers a planned $73.5 million payment it has so far said it would withhold. Without the payment, the city would need to dip into its reserve fund, leaving that contingency dangerously low in the event of other emergencies.

The Los Angeles utility, the nation's largest municipal utility, said it wasn't making the payment because the city council earlier this month failed to approve substantial increases in electricity rates.

Utility officials say they need those higher rates to help cover the costs of investing in renewable energy, such as wind and solar, that are mandated by state and municipal laws…
 
 
end.
 
 
 
 
 
 
 
I will be writing to the Chairman of the CFTC of these matters and I will release a copy to you.
 
I want to wish everyone a grand weekend and I will resume my commentaries to you on Monday.  As promised
 
here is the Jim Willie paper for you to read:
 
 

By Jim Willie CB

Apr 8 2010 3:38PM

www.GoldenJackass.com

 

 

Use the above link to subscribe to the paid research reports, which include coverage of several smallcap companies positioned to rise during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces.

An historically unprecedented mess has been created by compromised central bankers and inept economic advisors, whose interference has irreversibly altered and damaged the world financial system, urgently pushed after the removed anchor of money to gold. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy.

While the multitudes debate over whether an economic recovery is coming to the United States, signals sound loudly in harsh tones.

While they point to the recent rise in the USDollar, signals sound loudly in harsh tones. Admittedly the signals are confusing, but they are important. The long-term bond yield for USTreasurys threatens the 4.0% mark. The crude oil price is close to threatening the $100 mark.

Sleepy financial market anchors and mavens offer comment, but might miss altogether the significance of the signals. The signals clearly mean great strain on the credit markets still, and gradual decay of the major currencies led by the USDollar.

PREFACE ON MARKET RIGS

The hearings took place two weeks ago. The news of Andrew Maguire's testimony on March 25th has circled the globe, nudging the same multitudes tending toward dormancy. Maguire is a metals trader from London, but watch somehow that his career takes a turn for the worse.

He still walks and talks, but whistle blowers usually have short lives and shorter careers. Laws protect them, but the powerful syndicates control law enforcement. Maguire outlined the various mechanism of foul play in the gold market, and abused position of size by JPMorgan in particular. The monolith transmits its signals and enlists the support of a small army of traders who pile atop the price push tactics to the downside. Despite almost 20 years of complaints lodged with the Commodities Futures Trading Commission, JPMorgan continues to operate with such a high degree of impunity that their staff openly boasts about after their illicit profits are garnered. Maguire guided the CFTC, headed by Goldman Sachs alumnus Gary Gensler, through recent gold price manipulations before during and after a non-farm jobs report was issued. Maguire outlined in some detail how orders to short gold arrive in volume over 2500 contracts, designed to overwhelm the market, often when the market is thin. Reports are prevalent that the Big Four Banks often use naked short sales, without benefit of bullion posted as collateral. Their concentrated positions seem never scrutinized. Many claim they are executed with the implicit blessing of the USGovt and UKGovt. The trades are not intended to seek the optimal price, but appear to satisfy an ulterior motive. The defense of the major paper currencies is such a motive. The GATA warrior (aka El Cid) named Bill Murphy offered his testimony at the hearings, offering his usual razor sharp perspective. See the Gold Anti-Trust Action article on the unprecedented hearing (CLICK HERE), which has been covered by dozens of other web journals. Nowadays, in order to be treated to the actual news, one must rely upon the alternative locations from the internet, like Zero Hedge and their small platoon of Wall Street soldiers in service to the truth (CLICK HERE).

The US financial markets are slowly being revealed as a latticework of leveraged schemes. The gold market is the vulnerable linchpin for the USDollar and USTreasury markets. That is why gold is so important to be harnessed. Notice its cousin platinum is much higher in price, with similar dynamics. Hope has mixed with alarm and a dash of satisfaction, in the wake of the Maguire testimony about the CFTC lapses. The meeting organizers might have thought the hedge funds would be blamed for outsized illicit positions, but the blame was squarely place upon JPMorgan and the Big Four firms by both Maguire and Jeffrey Christian of the CPM Group. The exposure process is long and slow, however. The Goldman Sachs class is still in control of the USGovt purse, still guides funds to Wall Street after first feeding at the trough, still operates as a dominant urchin in too many markets.

The CFTC news and testimony about the Gold market has circled the globe, finding the financial pages in London and Germany. Some believe the news is too hot and viral to be reported on the mainstream US press networks. Do not hold your breath for exposure in the United States, where the syndicate maintains controlling ownership of the press networks. The obedient US press might cover the story eventually, but only after almost the entire planet covers it. My Jackass article about the corrupted gold market last May 2009 made a splash, earned some accolades, but also invited some mockery by dim bulbs who have turned silent. Great risk has come to the gold market.

The hitmen cometh to ply their trade. They are the new stronger vigilantes born of the bond vigilantes who were killed off by the JPMorgan Interest Rate Swap craftsmen years ago.

Rumors are ripe that London has been selling gold contracts without much gold bullion in inventory since mid-December. They almost entirely settle long gold futures contracts with cash settlement, offering a 25% cash payoff. Gold bullion has been flying out the vaults and doorways at the London Bullion Market Assn for months, demanded by the Chinese and Arabs who no longer trust the London or New York gold merchants in control. The Jackass is a pure observer in the process of syndicate exposure, never wishing to hold detailed evidence. My work is to connect the dots and to identify the patterns revealed by them, then to say "I TOLD YOU SO" afterwards each time.

The other controversial stories continue to find verification at some levels. Consider the tungsten gold bars, which some editors refuse even to touch. The gold bar lists are no longer consistent even at the US Federal Reserve. The Street Tracks SPDR (GLD) exchange traded fund also has no longer any consistent bar lists. The tungsten story broke out within the Hong Kong bank sector, where they reported several hundred tungsten fake gold bars. Tungsten gold substitutes were put on display at the W.C.Heraeus foundry, which is the world's largest privately owned precious metals refiner and fabricator, located in Hanau Germany. The truly suspicious forensic analysts suspect that tungsten bars are located in the gold exchange inventory that so mysteriously seems constant. But let me not digress.

STRAIN ON LONG-TERM RATES

By far the area of the most treacherous forecasting is long-term USTreasury Bonds. It is both the largest financial market outside of currencies, and the most corrupted. Refer to the leveraged Interest Rate Swaps, monetization by printed money in hidden arsenals, counterfeit bonds (double the historical sales versus actual historical issuance), and gaming versus the stock market. Refer to the USTreasury hedges against the mortgage bond market, the foundation of the housing bubble itself, now stuffed in the USGovt mattress where disclosure of its stains is impossible. After the autumn 2008 demise of the US banking system, my forecast was for much higher prevailing interest rates. They did not come. All claims to remedy the banking sector might be better described as masked events to redirect trillion $ in official rescue packages without a hint of disclosure.

While the long-term USTBond yield has touched 4.0%, the upward thrust is hardly strong. The incredibly large USGovt debt issuance supply should have sent the long-term rate to 7% or 8% or 9% or 10%, but JPMorgan has a device made by the same foundry as the US Federal Reserve. While the USFed can print money at near zero cost, the JPMorgan shamans can put to work Interest Rate Swaps at near zero cost. The IRSwaps are instrumental in pushing down long-term interest rates, using powerful leverage, the short-term USTBill as the fulcrum.

A Double Dip recession perception would go a long way to reducing the 10-year USTreasury Note yield, as demand would shift from stocks to bonds. Notice the significance of the 4.0% level. A huge reversal pattern is underway. The critical right side resistance level has been 3.9%, well defended. The left side critical resistance level has been 4.0% and 4.1% from late 2008. The trend is up, accentuated by the stochastix index since October. Watch a breakout above the important 4.0% level.

 

 

The chief nemesis of Gold is the USTreasury, both a US$ instrument and a traded paper security. THE NEMESIS USTREASURY BOND IS IN TROUBLE.

Lately, something seems to have gone awry. The official USTreasury auctions have not turned out well. The direct bids and indirect bids and bound bond dealer participation and bid ratios and accounting all offer spell trouble. The USDept Treasury even has resorted to a new fictional ledger item called "Households" to hide their vast monetization. Recall USFed Chairman claimed to the USCongress that no bond monetization continues as policy, possibly a grand fib, just a prevarication. The Household item, so we are told, pertains to Fannie Mae and the oodles of Pension funds out there who buy up hundreds of billion$ worth of USTreasury paper. They are joined by armies of private bank CD investors. Hardly!! Fannie Mae is selling USTreasurys, if truth be known, since slower repayment of mortgages has reduced the need for hedges. The Fannie Mae convexity is a remarkable phenomenon, whereby they dump their USTBond hedges as rates rise, and as homeowners hold loans longer into maturity. The hedged protection offered by USTBonds, in offset to mortgage bonds in performance mode, would not be needed if the mortgage defaults continue. The defaults are still increasing. So Fannie Mae sells off huge blocks of USTreasurys. But they are the Household ledger item doing the buying.

Other factors are at work. The Greek Govt debt situation has brought about a serious decline in confidence for all government debt. It is becoming widely understood and accepted that sovereign debt receives high credit ratings not deserved. Before long, a huge list of corporate bonds will sport a lower yield than USTreasurys.

Institutions are not lining up to purchase USTreasurys at auctions.

The USGovt with its masters JPMorgan and the USFed are deeply committed to a gigantic private party of self-dealing. They are buying up between 50% and 75% of the auctioned bonds, but they are facing a dead end in a hall of mirrors. They have forced the primary bond dealers into a state of terminal constipation. Then the Chinese have been net sellers in the last few months. We were told just last year that the Chinese had no choice but to finance the USGovt debt. Again hardly!!

The long-term USTreasury Bond yields will not go out of control high, at least not until JPMorgan no longer has staff at its many posts. The yields might rise a little more, enough to spark a response. They have a new trick in their repertoire. They talk up the optimism and pacts to rescue the Greek Govt debt, so that volume on auctions rises significantly, enough for Wall Street firms to sell into the rally, joined by well financed hedge funds. Notice how the Greek 10-year Govt bond yield has risen to 7.19% this week, the highest ever. The other ploy used by the USDept Treasury and USFed is an old one. THEY CAUSE A STOCK DECLINE IN ORDER TO PRODUCE FRESH USTREASURY DEMAND. If the financial news networks report the economic recovery suffers from extraordinary lethargy or dysentery, then the bond demand will grow notably. Even sporadic reports of a return to recession would greatly aid the USTreasurys.

Thus the USGovt has a strong vested interest to promote recessions, which they have shown themselves expert in producing. They must after all enable demand to keep the USTreasury Bond bubble alive at near 0%.

Bring to the table the nonsensical contradictory story of a jobless recovery. It should elicit much more laughter, like claims of prevalent chastity at a house of ill repute. A quick shift to a temporary recession would be easy.

The USDept Agriculture has reported this week that 39.4 million Americans, the most ever, received food stamps in January. They are participants in the jobless recovery. They are legion, whose recipient numbers are 22% from a year earlier. The total number of Americans receiving the subsidy has reached a record for 14 consecutive months.

If one wishes for a whiff of reality, check the February and March reports within the paid Hat Trick Letter. Details on the powerful recession are provided, including home foreclosures, Fannie Mae default and delinquency rates, bankruptcies, municipal bond craters, tax revenue declines, and state budget shortfall crises. Such destruction must be the dark side of the recovery process. It is increasingly difficult to conceal the deterioration and lopsided nature of the USEconomy. It is irreparably imbalanced and lacks an adequate industrial base, something the elite cast of economists fail to notice. It suffers from debt saturation, which explains why new debt offered in aid rescues cannot succeed in producing much of any benefits.

Despite the fact that USTBond yields will not go out of control on the upside, what might be growing much worse is the fires in the JPMorgan credit derivative workshop. As long-term rates rise, the Interest Rate Swap contract turns hostile, electric, and viral. Enter leverage in support of trillion$ in debt securities. Huge hidden credit derivative losses at JPMorgan, at Fannie Mae, and at American Intl Group must be dealt with. If the accounting were properly reported from basement labs, the new US$ creation might be much more than a measly $200 billion per month seen in the USTreasury issuance. The toll for credit derivative fires might be a few trillion$ per month!!! The truth would kill the USDollar and send gold skyward.

ECONOMIC COST OF RUINED CURRENCIES

The dynamics of the Competing Currency War are truly amazing and fascinating. When the Euro currency shows fundamental weakness, if not turmoil within the union, the USDollar benefits. Nevermind the $1.5 trillion deficit in 2009 and the similar $1.4 trillion deficit in 2010 that the USGovt must drag along. The USDollar has risen by about 10% against the Euro currency since November. Some properly call the FOREX market a reverse beauty pageant whereby the least ugly contender wins.

The region with the least wrecked finances can boast of a rising currency. We are in Chapter 2 to the Dollar Death Dance. The first chapter occurred in autumn 2008 when Lehman Brothers was killed, when Fannie Mae was nationalized, and when the dead AIG corpse was adopted by the USGovt, the favored home of dead giants. The demand from credit derivative payouts for ruined corporate bonds and destroyed mortgage bonds actually lifted the USDollar valuation. Payouts for Credit Default Swaps, those bizarre insurance contracts against collateralized bonds, took place and did so in US$ denomination. The demand for the US$ zoomed. Uncle Sam danced hard, but it was a dead man that danced.

The second chapter is centered upon the Greek Govt debt. Unfortunately for Europe, but fortunately for the USGovt, the second chapter has many pages yet to be written, from Spain, from Italy, and from Portugal. The Irish pages have already been written, crumpled sheets written on IMF letterhead. This note came today by an email from an Irish friend. "Just heard from a good friend in Ireland that the austerity measures adopted by the Dublin government are causing untold hardship. He thinks there will be an uprising among the people that could get very nasty indeed." Outsized staggering Irish bank losses have been reported. The IMF fix is in and the harm should perpetuate.

But the Greek tragedy plays out slowly. Hope rises but is dashed. Aid is announced only to be illusory. Support is shown but not sincere.

Bickering has turned ugly, evidence of no rescue even remotely possible.

The beneficiary, we are told, of the Euro currency distress, is the USDollar. If the US$ exchange rate indeed was improving with tangible ancillary benefits, then a confirmation would come with gold and the crude oil prices. Gold holds its own, refusing to falter. But the crude oil price has just broken above the $80 mark. It threatens the $90 mark and is a clear lock to hit $100 and cause global shock waves.

If the US$ is on the mend, on the rise, gaining ground versus other major currencies, then the crude oil price should be moving toward $50, and not toward $90. What we see demonstrates the broken nature of the major currencies in general, and the USDollar in particular. If the USDollar was returning to health, a breakout in the crude oil price would never happen.

 

 

The consequence is not pleasant of a rising crude oil price. The entire commercial sector of the USEconomy has a cost structure tied to energy costs. The natural gas price is indeed subdued. But crude oil is widely used in the futures markets to hedge against the USDollar.

The demand for such hedges has increased. The light sweet Saudi crude oil is no longer available to meet WTIC crude oil contract demands.

The rise in the crude oil price for Europeans using the Euro currency is even more pronounced, brought to view in previous articles. The collection of major currencies is under siege, deeply damaged, and subjected to constant debasement. The ongoing credit crisis and strong recession requires a governmental response on all continents. In Europe, the Untied States, Great Britain, and Japan, the printing of new untethered money continues at an astonishing pace. All major currencies are together in a long slow downward descent. One key item of proof is the West Texas Intermediate Crude oil price shown above.

When it hits $100 per barrel, listen to the absurd explanations given by the mainstream press and financial arenas. You will not hear any argument that all major currencies are mortally damaged. You will not hear any arguments that the central bank franchise system of monetary management has faltered in spectacular fashion. You might even hear that the jobless recovery is strong enough to withstand the greater pressures of higher energy costs.

THE STEALTH RISE IN GOLD & SILVER

Give a hat tip to James Turk of Gold Money. He wrote in December that the gold low for 2010 would occur in the first quarter with a $1075 price, and a possible impulse low of $1050. We saw it almost exactly, but the year has nine more months to slug through. The 1Q2010 has been put to rest, the quarter ended last week. The March futures contracts are also put to rest, enough to clear a possible path to a higher price for both gold and silver. The gold price chart has a pennant pattern embedded that hints of a slow release to a higher price. It should start slowly and gain momentum once above the enclosed pattern.

The news of the gold price rigging has had a positive effect on the psychology of this gold market. The endless monetary growth and federal government deficit explosion adds power to the gold price.

Actually, the flip perspective is more accurate. The major currencies are all being diluted in value, while gold remains almost fixed in value. Seen from the currency point of view, gold is rising. Notice the uptrend in the MACD, which addresses the moving averages and the support offered. The long-term trend is still up, seen in the 200-day MA. The consolidation could be at an end. One thing is for certain.

The gold community has been put to sleep. All claims of a gold price plunge to $900 were baseless, but were given plenty of airtime. To have a falling gold price when trillion$ of new money is created and dispersed into the ether is pure nonsense, the part & parcel of wrong- footed tenets. Such invalid notions rely upon the discredited deflation argument that circulated.

 

 

The gold price is slowly moving up. Its psychological basis is gaining firm strength. The recognition of damaged major currencies is gaining broader acceptance. The deep compromise of central banks is being more widely understood. The solutions offered to Europe are not only vacant, but they expose the Untied States and Great Britain to comparisons of equal vulnerability and similar fundamental wreckage.

The gold price has made its lows in year 2010. The next important level is $1150. The resumed Quantitative Easing programs in the US and London will soon be given more publicity, more monetary debauchery via rampant dilution. All talk of an Exit Strategy is pure diversion, grossly insincere. The USGovt cannot afford to pay higher borrowing costs, nor can the USFed afford to dump its bloated balance sheet on the credit market. Doing so would reveal that there is almost no market for what they hold in leveraged toxic mortgage bonds. Doing so would result in mortgage rates rising another 1% to 2% quickly. Such will not happen! Instead, mortgage rates will rise 1% on their own without an Exit Strategy, without USFed liquidation of worthless bonds.

THE HAT TRICK LETTER PROFITS IN THE CURRENT CRISIS.

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The accuracy of your information has been second to none over the past couple of years."

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Jim Willie CB

Editor of the "HAT TRICK LETTER"

Hat Trick Letter

 

 

 

 

April 10.2010 commentary...very important.

Good morning to you all:
 
Before starting, it looks like only one bank failed last night in South Carolina:
 

Friday, April 09, 2010

FDIC Bank Failure #42: Beach First National Bank, Myrtle Beach, South Carolina

by CalculatedRisk on 4/09/2010 05:10:00 PM

The beach gets bigger
When the tide it does recede
Taxpayers stranded

by Rob Dawg

From the FDIC: Bank of North Carolina, Thomasville, North Carolina, Assumes All of the Deposits of Beach First National Bank, Myrtle Beach, South Carolina
Beach First National Bank, Myrtle Beach, South Carolina, was closed today by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. ...

As of December 31, 2009, Beach First National Bank had approximately $585.1 million in total assets and $516.0 million in total deposits. ...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $130.3 million. ... Beach First National Bank is the 42nd FDIC-insured institution to fail in the nation this year, and the first in South Carolina. The last FDIC-insured institution closed in the state was Victory State Bank, Columbia, on March 26, 1999.
The FDIC gets back to work ...
 
end.
 
 
Gold closed up by $8.90 to 1161.10 and at 12 noon est gold hit 1164.00.  At 12 noon, the London physical gold and silver market is put to bed..all trades after that point are all paper obligations.
 
The powers to be seems to be trying to calm the precious metals down but are having no luck.
 
In silver, the price skyrocketed up by 29 cents to 18.39 in similar fashion to its stronger cousin, gold.
 
The open interest on the gold comex rose by an astonishing 9543 contracts to close the week  (basis Thursday) at 521,384.
 
I would like to add that if we remove some of the ridiculous spreaders we are close to record territory.
 
On the silver comex the OI rose in similar fashion to gold by a huge 2026 contracts to 121,609.
 
It is clear that two huge forces are facing off with each other: the speculator longs and the commercial bankers, the shorts.
 
The longs want their metal and the commercials are supplying paper not backed by any metal. The regulators are still discussing
 
the problem and not letting us in on their decisions.  As Jeffery Christian of CPM Metals described at the CFTC hearings, one oz of gold has over 100 obligations
 
searching for it. Something but give!
 
In another astonishing revelation, the CFTC released the COT report after the market closed last night.
 
 
here is gold:
 
To give you an idea just how badly The Gold Cartel wants to keep the price of gold from exploding, here are latest stats from the COT report (as of last Tuesday)...

*The large specs increased their longs by 32,428 contracts and increased their shorts by 2,748.

*The commercials decreased their longs by 8,802 contracts and increased their shorts by 28,413.

*The small specs increased their longs by 4,842 contracts and decreased their shorts by 2,693.

 

end.
 
Please note the massive increase by the longs by a humongous 32,428 contracts.  Just look at the commercials:  In an united frontal attack,
 
the commercials reduced some of the longs and massively supplied 28,413 new unbacked contracts to our gold hungry longs.
 
As I pointed out to you on many occasions, the small specs have left the arena not understanding how they have been fleeced by the bankers
too many times.
 
 
In silver:
 
the long speculators increased their longs by 5318 contracts but also increased some of their short positions by 776 contracts.
 
The commercials went to town:  the smaller raptor banks reduced their short positions on the silver side fearing the massive rise in the silver metal
 
by the tune of 1420 contracts.  However the larger commercials, JPMorgan and HSBC increased their shorts by, get this:  an almost unheard of 3949 contracts.
The short position by the bankers on silver total 81,525 or 405 million oz of silver which represents  almost 60% of annual production of silver.  The net silver short position
by taking the commercial longs from the shorts total an astonishing 51,686 contracts or 258 million oz net short. All of this short position is represented by my good friend
JPMorgan who is short around 240 million of those oz.
 
 
 
The defence of silver by the commercials is identical to gold. However the bankers are more vulnerable to silver as there is no available above ground silver to bail them out.
 
 
As promised, lets go to the silver and gold comex inventory and see how things are developing over there:
 
 
Here is a snapshot of the inventory last night:
 
 
COMEX Warehouse Stocks April 9, 2010

SILVER

59,078 ozs withdrawn from the dealer’s (registered) inventory
7,831 ozs withdrawn from the customer (eligible) inventory
Total dealer inventory 54.16 Mozs
Total customer inventory 61.22 Mozs
Combined Total 115.39 Mozs

GOLD

6,400 ozs deposited in the dealers (registered) category
1,987 ozs withdrawn from the customer (eligible) category
Total dealer inventory 2.35 Mozs
Total customer inventory 7.70 Mozs
Combined Total 10.05 Mozs

 
 
Notes: 
 
Note No 1:  we see that 59,078 oz of silver left the dealer inventory but there was no corresponding customer addition.
 
Note No 2:  we see a small withdrawal of 7831 oz from the customer list...a daily event.
 
Minor movements in gold..a small deposit of 6400 oz of gold in the dealer inventory and a 1987 oz withdrawal.  No doubt the withdrawal
of the 1,987 oz corresponds to 1/3 of the actual deposit.  It seems that many do not wish to leave their silver and gold at a comex warehouse.
 
 
Lets see how the delivery notices shaped up:
 
There were 4 delivery notices issued in the APR gold contract. The APR gold contract total for the month is 11,927 notices or 1,192,700 ozs.
 
 
OK:  the total notices issued so far this month totalled in gold 11927 or 1,192,700 oz of gold.
 
 
What is left?
 
The Open Interest in the APR gold contract is 1,721 or 0.17 Million ozs. Along with the already issued delivery notices the gold demand in April could be 1.36 Mozs or 58% of the dealer inventory! There is no indication of any sizeable movement out of the inventory yet.
 
 
 
 
 
 
Note 3:  there are 1721 contracts left to be served or .172 million oz.  We must add the .074 million oz from the March options. Thus the total gold standing for the April delivery month is
 
              .172 million oz +   1.1927 million oz  +  .074 million=  1.4387 million oz.  This figure is down from the 1.52 million oz on Wednesday.  This is rather strange for this late in the delivery cycle.
 
               Maybe somebody got a premium for cash and settled and put on more contracts in June with their new found wealth.
 
 
 
 
Lets see silver:
 
 
There were 36 delivery notices issued in the APR silver contract. The total delivery notices for the month in silver stand at 394 or 1.97 Mozs.
 
 
 
 
 
 
 
 
 
 
Now this is interesting.  We left Wednesday at 1.4 million oz and in two days a huge number of exercised silver contracts surfaced to the tune of 1/2 million oz. Option holders are always given future contracts.
Since silver is not a delivery month, the commercials did not have the available silver to serve our longs until yesterday.  To me, it looks like silver is going to be the comex's achilles heel.
 
 
I would like to show you an email we got on the delivery problems at the comex.  The letter is self explanatory: (it is from Tom of Kansas City Mo):
 
 
 

More on gold delivery problems…

Bill,
Last September I had mailed you informing you that we were taking delivery of a 100 oz COMEX Gold Bar.

Well, it is now April and BRINK'S, the COMEX warehouseman for the delivery, has still not sent me an invoice for storage yet. So far all I have to show for $90+K is a blurred e-mail with a bar number on it.

Our original plan was to have the bar del'd to 1st State Depository in Delaware (thanks, Dave in D), but then the TUNGSTEN STORY broke so I thought it better to leave it in the COMEX system for now.

I have hounded BRINK'S on several occasions to bill me, but they haven't. My feeling is that there is something rotten going on here. I am also trying to locate the original warrant supplied by Heraues (the bar maker) to the exchange, but have not succeeded.

Thanks for the GREAT WORK !! There is Cartel Blood in all seven seas now. Tom G Kansas City

 
 
 
 
end.
 
 
Please note:  this is for one bar.  In Dr Willie's paper Thursday night which will I will appendix to my commentary, there are countless stories of delivery problems at
 
the LBMA and at comex.
 
 
Bill Holter writes about Adrian Douglas, my son Lenny and myself, and other issues in the banking gold and silver fraud:
 

Bill H notes:

The Gold fraud and the recovery fraud

http://www.zerohedge.com/article/latest-gold-fraud-bombshell-c
anadas-only-bullion-bank-gold-vault-practically-empty
http://finance.yahoo.com/tech-ticker/recovery!--there's-no-recovery!-
the-u.s.-is-completely-screwed!-463817.html;_ylt=AslhBC2pDw_z
rRPo4UO8z9y7YWsA;_ylu=X3oDMTE2
dWxmNGlrBHBvcwMxMQRzZWMDd
G9wU3RvcmllcwRzbGsDcmVjb3Zlcnl3aG
F0?tickers=%5Edji,%5Egspc,dia,spy,gld,
tlt,man&sec=topStories&pos=9&asset=&ccode
 
 
end.
 
 
 
The price of gold has now reached record levels in British Pound terms.  First a record in Euros and now British pounds:
 
Gold hits record high for British investors

The price of gold has risen to an all-time high in sterling and euro terms.

http://www.telegraph.co.uk/finance/per
sonalfinance/investing/gold/7570991/G
old-hits-record-high-for-British-investors.html

 
 
 
As i have pointed out to you on many occasions, the Europeans are old established guards of the monetary system.  They smell trouble
and they are voting with their pounds and euros to obtain the last remaining oz of gold on the planet.
 
 
To prove this, the GLD found that it was finally necessary to increase their holdings of gold metal by a whopping 9.7  tonnes of gold:
 

Bullion Held in SPDR Gold ETF Surges 0.9% to Most on Record

April 8 (Bloomberg) -- Bullion held by SPDR Gold Trust, the biggest exchange-traded fund backed by the metal, rose by 9.7 metric tons to the largest amount ever, company figures show.

The fund’s holdings gained 0.9 percent, the biggest jump in more than six months, to 1,140.43 tons as of today, according to the company’s Web site. Holdings have increased 1.2 percent in the past year. The previous record was 1,134.03 tons on June 1, according to the Web site. The company listed the fund’s net asset value as $42.09 billion as of today.

Gold futures for June delivery fell 10 cents to $1,152.90 an ounce on the Comex in New York. The price has jumped 30 percent in the past year, touching a record $1,227.50 in December, as investor demand increased.

 

 

end.

 

 

 

 

 

Strangely, the SLV inventory remained constant at 295 million oz
 
 
 
In another development, the state government of Viet Nam closed the gold trading desks in their country.  It seems that the derivatives on the gold that trades far exceeds the physical metal
and they recognize the danger.  They basically ordered all derivative trading in gold to stop immediately:
 
 

The State Bank of Vietnam on December 31 announced a decision to close the 20 gold exchanges in the country by the end of March. It said the closure was necessary to eliminate risks posed to the national financial system.

END

Firms struggle after gold exchange closure

Last updated: 4/4/2010 9:00

World Gold, a gold trading floor in Ho Chi Minh City, officially closed on March 31

The recent closure of all gold trading floors in Vietnam will not have a great impact on commercial banks, but for other struggling companies, it means new business paths or a complete shutdown.

Most gold trading floors operated by commercial banks said they would simply shut down the business completely, and not offer any other service to investors.

Nguyen Duc Thai Han, director of Asia Commercial Bank’s gold exchange, said the company does not have any immediate plan to launch a new alternative investment service.

ACB opened the first gold trading floor in Vietnam in May 2007. At first the floor had just nine traders - large banks and gold trading companies…

http://www.thanhniennews.com/2010/Pages/20100404181637.aspx

 
 
 
 
 
end.
 
 
In other physical news, the price of platinum surpassed the 1700 dollar level and Palladium rose above 500 dollars for the first time. Rhodium rose to 2975 dollars per oz. It is in the same class
as platinum, palladium and nickel.
 
 
Finally, on the physical front, we got this comment from Standard Bank over in England on this important index..the physical gold flow index:
 
 

In an important piece on Thursday morning, Standard Bank reported

Late last week, the Standard Bank physical gold flow index recorded its highest level since we started tracking flows. Although the index declines slightly when gold approaches $1,150, overall, the index continues to confirm healthy physical demand

 
end.
 
 
 
Now that I have exhausted the physical stories out there, lets get to the economic stories that will effect gold and silver.
 
The big news is of course, Greece.
 
Here is the latest and I will comment at the end of this story:
 
 

EU Says It’s Ready to Aid Greece as Fitch Cuts Rating

April 9 (Bloomberg) -- European Union officials said they are ready to rescue Greece if needed as Fitch Ratings cut the country’s credit rating to the lowest investment grade and economists at UBS AG said that a bailout may be imminent.

Germany restated its opposition to below-market rate loans to Greece as officials in Brussels hammered out details to the framework calling for joint EU-International Monetary Fund aid. European Central Bank policy makers planned a teleconference tonight, two people familiar with the matter said…

http://www.bloomberg.com/apps/news?
pid=20601087&sid=arOAYr2JEKa8&pos=2

-END-

 
 
 
 
My comments:  it looks to me like lip service.
 
Greece has a debt to GDP ratio of 117% and cannot service its debt.  The IMF is proposing new loans but it will be at the prevailing rate and that rate is 448 basis points higher than the German
bonds.  Greece has stated flat out that they cannot pay 7.4% on money owed as they do not have enough incoming revenue as the recession has crippled this nation.
 
We are seeing a massive exit by wealthy Greek citizens who are converting their Euros, shipping it to Switzerland and buying gold.  They do not want to have euros on deposit at Greek
banks fearful that when Greece is expelled from the EMU they will be replaced by Greek  drachma at a hugely devalued level.
 
In essence, we have a bank run.
 
As I have stated in my radio interview:
 
"there is nothing like a bank run and there is nothing like a gold rush.  The two have never met globally at the same time.  It will make the current economic malaise tame in comparison."
 
Stay tuned on this as the global debt contagion catches fire.
 
 
 
The next big story out of Washington showed how the banks mask their debt at quarter's end:
 

05:58 Major banks have masked risk through sleight of hand for five quarters - WSJ
Data from the New York Fed shows a group of 18 banks have lowered their debt levels by an average 42% just before reporting it, then allowed the levels to rise as the next quarters get underway. The practice is legal, if misleading. The data only looks at outstanding net repo borrowings, but the article says it evidences the risks institutions take to trade. Though all the banks are called "major," only five are named as being in the data: Goldman Sachs (GS), Morgan Stanley (MS), JPMorgan Chase (JPM), Bank of America (BAC), and Citi (C).
http://online.wsj.com/article/SB2000142405270
2304830104575172280848939898.h
tml#mod=todays_us_money_and_investing
(subscription required)
* * * * *

Major U.S. banks masked risk levels -WSJ

April 9 (Reuters) - Major U.S. banks temporarily lowered their debt levels just before reporting in the past five quarters, making it appear their balance sheets were less risky, the Wall Street Journal said, citing data from the Federal Reserve Bank of New York.

The paper said on Friday 18 banks, including Goldman Sachs Group , Morgan Stanley , J.P. Morgan Chase Bank of of America and Citigroup , understated the debt levels used to fund securities trades by lowering them an average of 42 percent at the end of each period.

The banks had increased their debt in the middle of successive quarters, it said.

Citi, Bank of America, Goldman Sachs, JPMorgan Chase and Morgan Stanley were not immediately available for comment when contacted by Reuters outside regular U.S. business hours. Excessive leverage by the banks was one of the causes that led to the global financial crisis in 2008.

Due to the credit crisis, banks have become more sensitive about showing high levels of debt and risk, worried their stocks and credit ratings could be punished, the Journal said.

Federal Reserve Bank of New York could not be immediately reached for comment by Reuters.

 
 
end.
 
Dave Kranzler comments on the above:
 

Dave from Denver…

Friday, April 9, 2010

Big Wall Street Banks Hide Their True Debt Levels Every Quarter Now

Well it looks like the Wall Street Journal only took a little over three weeks to report what I suggested in mid-March: Lehmangate Part 2: What Is the Rest of Wall Street Hiding? Here's the link to my post in which I suggested that Lehman was one of many using similar fraudulent accounting in order to dress up their balance sheet: LINK.

The Wall Street Journal today reports
Big Banks Mask Risk Levels: Quarter-End Loan Figures Sit 42% Below Peak, Then Rise as New Period Progresses. I don't have a subscription to the Wall Street Journal, but here's a Reuters news report: "Major U.S. banks temporarily lowered their debt levels just before reporting in the past five quarters, making it appear their balance sheets were less risky, the Wall Street Journal said, citing data from the Federal Reserve Bank of New York" - Link: Reuters

This should not surprise readers of this blog. Wall Street is notoriously "Monkey see, Monkey do." So it only made sense that every other big Wall Street bank would be using accounting manipulations to accomplish the same fabulous results as Lehman, before Lehman collapsed. The only difference is that the remaining Wall Street banks have been deemed by the Fed/Treasury as "too big to fail." We have monkeys running the big banks and we have monkeys overseeing and regulating the big banks. I think Bernanke and Geithner deserve a Big Banana award. But what about the citizenry who enable these people to remain in power?

 
 
end.
 
 
I alerted you on this developing story.  It has far reaching implications:
 
 
Los Angeles Faces Threat of Insolvency

Dispute Between Municipal Utility and City Council Over Electricity Rates Deepens Fiscal Crisis; Bond Rating Cut

By PETER SANDERS

Associated Press

Los Angeles Mayor Antonio Villaraigosa, center, with business leaders last month in Washington, supported the increase in electricity rates but was overruled by the city council.

LOS ANGELES—A bitter political dispute between this city's elected leaders and its powerful municipal utility threatens to push the city into insolvency as early as next month.

Los Angeles City Controller Wendy Greuel warned this week that the city's general fund could run out of money and fall $10 million into the red by May 5 unless the Los Angeles Department of Water & Power transfers a planned $73.5 million payment it has so far said it would withhold. Without the payment, the city would need to dip into its reserve fund, leaving that contingency dangerously low in the event of other emergencies.

The Los Angeles utility, the nation's largest municipal utility, said it wasn't making the payment because the city council earlier this month failed to approve substantial increases in electricity rates.

Utility officials say they need those higher rates to help cover the costs of investing in renewable energy, such as wind and solar, that are mandated by state and municipal laws…
 
 
end.
 
 
 
 
 
 
 
I will be writing to the Chairman of the CFTC of these matters and I will release a copy to you.
 
I want to wish everyone a grand weekend and I will resume my commentaries to you on Monday.  As promised
 
here is the Jim Willie paper for you to read:
 
 

By Jim Willie CB

Apr 8 2010 3:38PM

www.GoldenJackass.com

 

 

Use the above link to subscribe to the paid research reports, which include coverage of several smallcap companies positioned to rise during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces.

An historically unprecedented mess has been created by compromised central bankers and inept economic advisors, whose interference has irreversibly altered and damaged the world financial system, urgently pushed after the removed anchor of money to gold. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy.

While the multitudes debate over whether an economic recovery is coming to the United States, signals sound loudly in harsh tones.

While they point to the recent rise in the USDollar, signals sound loudly in harsh tones. Admittedly the signals are confusing, but they are important. The long-term bond yield for USTreasurys threatens the 4.0% mark. The crude oil price is close to threatening the $100 mark.

Sleepy financial market anchors and mavens offer comment, but might miss altogether the significance of the signals. The signals clearly mean great strain on the credit markets still, and gradual decay of the major currencies led by the USDollar.

PREFACE ON MARKET RIGS

The hearings took place two weeks ago. The news of Andrew Maguire's testimony on March 25th has circled the globe, nudging the same multitudes tending toward dormancy. Maguire is a metals trader from London, but watch somehow that his career takes a turn for the worse.

He still walks and talks, but whistle blowers usually have short lives and shorter careers. Laws protect them, but the powerful syndicates control law enforcement. Maguire outlined the various mechanism of foul play in the gold market, and abused position of size by JPMorgan in particular. The monolith transmits its signals and enlists the support of a small army of traders who pile atop the price push tactics to the downside. Despite almost 20 years of complaints lodged with the Commodities Futures Trading Commission, JPMorgan continues to operate with such a high degree of impunity that their staff openly boasts about after their illicit profits are garnered. Maguire guided the CFTC, headed by Goldman Sachs alumnus Gary Gensler, through recent gold price manipulations before during and after a non-farm jobs report was issued. Maguire outlined in some detail how orders to short gold arrive in volume over 2500 contracts, designed to overwhelm the market, often when the market is thin. Reports are prevalent that the Big Four Banks often use naked short sales, without benefit of bullion posted as collateral. Their concentrated positions seem never scrutinized. Many claim they are executed with the implicit blessing of the USGovt and UKGovt. The trades are not intended to seek the optimal price, but appear to satisfy an ulterior motive. The defense of the major paper currencies is such a motive. The GATA warrior (aka El Cid) named Bill Murphy offered his testimony at the hearings, offering his usual razor sharp perspective. See the Gold Anti-Trust Action article on the unprecedented hearing (CLICK HERE), which has been covered by dozens of other web journals. Nowadays, in order to be treated to the actual news, one must rely upon the alternative locations from the internet, like Zero Hedge and their small platoon of Wall Street soldiers in service to the truth (CLICK HERE).

The US financial markets are slowly being revealed as a latticework of leveraged schemes. The gold market is the vulnerable linchpin for the USDollar and USTreasury markets. That is why gold is so important to be harnessed. Notice its cousin platinum is much higher in price, with similar dynamics. Hope has mixed with alarm and a dash of satisfaction, in the wake of the Maguire testimony about the CFTC lapses. The meeting organizers might have thought the hedge funds would be blamed for outsized illicit positions, but the blame was squarely place upon JPMorgan and the Big Four firms by both Maguire and Jeffrey Christian of the CPM Group. The exposure process is long and slow, however. The Goldman Sachs class is still in control of the USGovt purse, still guides funds to Wall Street after first feeding at the trough, still operates as a dominant urchin in too many markets.

The CFTC news and testimony about the Gold market has circled the globe, finding the financial pages in London and Germany. Some believe the news is too hot and viral to be reported on the mainstream US press networks. Do not hold your breath for exposure in the United States, where the syndicate maintains controlling ownership of the press networks. The obedient US press might cover the story eventually, but only after almost the entire planet covers it. My Jackass article about the corrupted gold market last May 2009 made a splash, earned some accolades, but also invited some mockery by dim bulbs who have turned silent. Great risk has come to the gold market.

The hitmen cometh to ply their trade. They are the new stronger vigilantes born of the bond vigilantes who were killed off by the JPMorgan Interest Rate Swap craftsmen years ago.

Rumors are ripe that London has been selling gold contracts without much gold bullion in inventory since mid-December. They almost entirely settle long gold futures contracts with cash settlement, offering a 25% cash payoff. Gold bullion has been flying out the vaults and doorways at the London Bullion Market Assn for months, demanded by the Chinese and Arabs who no longer trust the London or New York gold merchants in control. The Jackass is a pure observer in the process of syndicate exposure, never wishing to hold detailed evidence. My work is to connect the dots and to identify the patterns revealed by them, then to say "I TOLD YOU SO" afterwards each time.

The other controversial stories continue to find verification at some levels. Consider the tungsten gold bars, which some editors refuse even to touch. The gold bar lists are no longer consistent even at the US Federal Reserve. The Street Tracks SPDR (GLD) exchange traded fund also has no longer any consistent bar lists. The tungsten story broke out within the Hong Kong bank sector, where they reported several hundred tungsten fake gold bars. Tungsten gold substitutes were put on display at the W.C.Heraeus foundry, which is the world's largest privately owned precious metals refiner and fabricator, located in Hanau Germany. The truly suspicious forensic analysts suspect that tungsten bars are located in the gold exchange inventory that so mysteriously seems constant. But let me not digress.

STRAIN ON LONG-TERM RATES

By far the area of the most treacherous forecasting is long-term USTreasury Bonds. It is both the largest financial market outside of currencies, and the most corrupted. Refer to the leveraged Interest Rate Swaps, monetization by printed money in hidden arsenals, counterfeit bonds (double the historical sales versus actual historical issuance), and gaming versus the stock market. Refer to the USTreasury hedges against the mortgage bond market, the foundation of the housing bubble itself, now stuffed in the USGovt mattress where disclosure of its stains is impossible. After the autumn 2008 demise of the US banking system, my forecast was for much higher prevailing interest rates. They did not come. All claims to remedy the banking sector might be better described as masked events to redirect trillion $ in official rescue packages without a hint of disclosure.

While the long-term USTBond yield has touched 4.0%, the upward thrust is hardly strong. The incredibly large USGovt debt issuance supply should have sent the long-term rate to 7% or 8% or 9% or 10%, but JPMorgan has a device made by the same foundry as the US Federal Reserve. While the USFed can print money at near zero cost, the JPMorgan shamans can put to work Interest Rate Swaps at near zero cost. The IRSwaps are instrumental in pushing down long-term interest rates, using powerful leverage, the short-term USTBill as the fulcrum.

A Double Dip recession perception would go a long way to reducing the 10-year USTreasury Note yield, as demand would shift from stocks to bonds. Notice the significance of the 4.0% level. A huge reversal pattern is underway. The critical right side resistance level has been 3.9%, well defended. The left side critical resistance level has been 4.0% and 4.1% from late 2008. The trend is up, accentuated by the stochastix index since October. Watch a breakout above the important 4.0% level.

 

 

The chief nemesis of Gold is the USTreasury, both a US$ instrument and a traded paper security. THE NEMESIS USTREASURY BOND IS IN TROUBLE.

Lately, something seems to have gone awry. The official USTreasury auctions have not turned out well. The direct bids and indirect bids and bound bond dealer participation and bid ratios and accounting all offer spell trouble. The USDept Treasury even has resorted to a new fictional ledger item called "Households" to hide their vast monetization. Recall USFed Chairman claimed to the USCongress that no bond monetization continues as policy, possibly a grand fib, just a prevarication. The Household item, so we are told, pertains to Fannie Mae and the oodles of Pension funds out there who buy up hundreds of billion$ worth of USTreasury paper. They are joined by armies of private bank CD investors. Hardly!! Fannie Mae is selling USTreasurys, if truth be known, since slower repayment of mortgages has reduced the need for hedges. The Fannie Mae convexity is a remarkable phenomenon, whereby they dump their USTBond hedges as rates rise, and as homeowners hold loans longer into maturity. The hedged protection offered by USTBonds, in offset to mortgage bonds in performance mode, would not be needed if the mortgage defaults continue. The defaults are still increasing. So Fannie Mae sells off huge blocks of USTreasurys. But they are the Household ledger item doing the buying.

Other factors are at work. The Greek Govt debt situation has brought about a serious decline in confidence for all government debt. It is becoming widely understood and accepted that sovereign debt receives high credit ratings not deserved. Before long, a huge list of corporate bonds will sport a lower yield than USTreasurys.

Institutions are not lining up to purchase USTreasurys at auctions.

The USGovt with its masters JPMorgan and the USFed are deeply committed to a gigantic private party of self-dealing. They are buying up between 50% and 75% of the auctioned bonds, but they are facing a dead end in a hall of mirrors. They have forced the primary bond dealers into a state of terminal constipation. Then the Chinese have been net sellers in the last few months. We were told just last year that the Chinese had no choice but to finance the USGovt debt. Again hardly!!

The long-term USTreasury Bond yields will not go out of control high, at least not until JPMorgan no longer has staff at its many posts. The yields might rise a little more, enough to spark a response. They have a new trick in their repertoire. They talk up the optimism and pacts to rescue the Greek Govt debt, so that volume on auctions rises significantly, enough for Wall Street firms to sell into the rally, joined by well financed hedge funds. Notice how the Greek 10-year Govt bond yield has risen to 7.19% this week, the highest ever. The other ploy used by the USDept Treasury and USFed is an old one. THEY CAUSE A STOCK DECLINE IN ORDER TO PRODUCE FRESH USTREASURY DEMAND. If the financial news networks report the economic recovery suffers from extraordinary lethargy or dysentery, then the bond demand will grow notably. Even sporadic reports of a return to recession would greatly aid the USTreasurys.

Thus the USGovt has a strong vested interest to promote recessions, which they have shown themselves expert in producing. They must after all enable demand to keep the USTreasury Bond bubble alive at near 0%.

Bring to the table the nonsensical contradictory story of a jobless recovery. It should elicit much more laughter, like claims of prevalent chastity at a house of ill repute. A quick shift to a temporary recession would be easy.

The USDept Agriculture has reported this week that 39.4 million Americans, the most ever, received food stamps in January. They are participants in the jobless recovery. They are legion, whose recipient numbers are 22% from a year earlier. The total number of Americans receiving the subsidy has reached a record for 14 consecutive months.

If one wishes for a whiff of reality, check the February and March reports within the paid Hat Trick Letter. Details on the powerful recession are provided, including home foreclosures, Fannie Mae default and delinquency rates, bankruptcies, municipal bond craters, tax revenue declines, and state budget shortfall crises. Such destruction must be the dark side of the recovery process. It is increasingly difficult to conceal the deterioration and lopsided nature of the USEconomy. It is irreparably imbalanced and lacks an adequate industrial base, something the elite cast of economists fail to notice. It suffers from debt saturation, which explains why new debt offered in aid rescues cannot succeed in producing much of any benefits.

Despite the fact that USTBond yields will not go out of control on the upside, what might be growing much worse is the fires in the JPMorgan credit derivative workshop. As long-term rates rise, the Interest Rate Swap contract turns hostile, electric, and viral. Enter leverage in support of trillion$ in debt securities. Huge hidden credit derivative losses at JPMorgan, at Fannie Mae, and at American Intl Group must be dealt with. If the accounting were properly reported from basement labs, the new US$ creation might be much more than a measly $200 billion per month seen in the USTreasury issuance. The toll for credit derivative fires might be a few trillion$ per month!!! The truth would kill the USDollar and send gold skyward.

ECONOMIC COST OF RUINED CURRENCIES

The dynamics of the Competing Currency War are truly amazing and fascinating. When the Euro currency shows fundamental weakness, if not turmoil within the union, the USDollar benefits. Nevermind the $1.5 trillion deficit in 2009 and the similar $1.4 trillion deficit in 2010 that the USGovt must drag along. The USDollar has risen by about 10% against the Euro currency since November. Some properly call the FOREX market a reverse beauty pageant whereby the least ugly contender wins.

The region with the least wrecked finances can boast of a rising currency. We are in Chapter 2 to the Dollar Death Dance. The first chapter occurred in autumn 2008 when Lehman Brothers was killed, when Fannie Mae was nationalized, and when the dead AIG corpse was adopted by the USGovt, the favored home of dead giants. The demand from credit derivative payouts for ruined corporate bonds and destroyed mortgage bonds actually lifted the USDollar valuation. Payouts for Credit Default Swaps, those bizarre insurance contracts against collateralized bonds, took place and did so in US$ denomination. The demand for the US$ zoomed. Uncle Sam danced hard, but it was a dead man that danced.

The second chapter is centered upon the Greek Govt debt. Unfortunately for Europe, but fortunately for the USGovt, the second chapter has many pages yet to be written, from Spain, from Italy, and from Portugal. The Irish pages have already been written, crumpled sheets written on IMF letterhead. This note came today by an email from an Irish friend. "Just heard from a good friend in Ireland that the austerity measures adopted by the Dublin government are causing untold hardship. He thinks there will be an uprising among the people that could get very nasty indeed." Outsized staggering Irish bank losses have been reported. The IMF fix is in and the harm should perpetuate.

But the Greek tragedy plays out slowly. Hope rises but is dashed. Aid is announced only to be illusory. Support is shown but not sincere.

Bickering has turned ugly, evidence of no rescue even remotely possible.

The beneficiary, we are told, of the Euro currency distress, is the USDollar. If the US$ exchange rate indeed was improving with tangible ancillary benefits, then a confirmation would come with gold and the crude oil prices. Gold holds its own, refusing to falter. But the crude oil price has just broken above the $80 mark. It threatens the $90 mark and is a clear lock to hit $100 and cause global shock waves.

If the US$ is on the mend, on the rise, gaining ground versus other major currencies, then the crude oil price should be moving toward $50, and not toward $90. What we see demonstrates the broken nature of the major currencies in general, and the USDollar in particular. If the USDollar was returning to health, a breakout in the crude oil price would never happen.

 

 

The consequence is not pleasant of a rising crude oil price. The entire commercial sector of the USEconomy has a cost structure tied to energy costs. The natural gas price is indeed subdued. But crude oil is widely used in the futures markets to hedge against the USDollar.

The demand for such hedges has increased. The light sweet Saudi crude oil is no longer available to meet WTIC crude oil contract demands.

The rise in the crude oil price for Europeans using the Euro currency is even more pronounced, brought to view in previous articles. The collection of major currencies is under siege, deeply damaged, and subjected to constant debasement. The ongoing credit crisis and strong recession requires a governmental response on all continents. In Europe, the Untied States, Great Britain, and Japan, the printing of new untethered money continues at an astonishing pace. All major currencies are together in a long slow downward descent. One key item of proof is the West Texas Intermediate Crude oil price shown above.

When it hits $100 per barrel, listen to the absurd explanations given by the mainstream press and financial arenas. You will not hear any argument that all major currencies are mortally damaged. You will not hear any arguments that the central bank franchise system of monetary management has faltered in spectacular fashion. You might even hear that the jobless recovery is strong enough to withstand the greater pressures of higher energy costs.

THE STEALTH RISE IN GOLD & SILVER

Give a hat tip to James Turk of Gold Money. He wrote in December that the gold low for 2010 would occur in the first quarter with a $1075 price, and a possible impulse low of $1050. We saw it almost exactly, but the year has nine more months to slug through. The 1Q2010 has been put to rest, the quarter ended last week. The March futures contracts are also put to rest, enough to clear a possible path to a higher price for both gold and silver. The gold price chart has a pennant pattern embedded that hints of a slow release to a higher price. It should start slowly and gain momentum once above the enclosed pattern.

The news of the gold price rigging has had a positive effect on the psychology of this gold market. The endless monetary growth and federal government deficit explosion adds power to the gold price.

Actually, the flip perspective is more accurate. The major currencies are all being diluted in value, while gold remains almost fixed in value. Seen from the currency point of view, gold is rising. Notice the uptrend in the MACD, which addresses the moving averages and the support offered. The long-term trend is still up, seen in the 200-day MA. The consolidation could be at an end. One thing is for certain.

The gold community has been put to sleep. All claims of a gold price plunge to $900 were baseless, but were given plenty of airtime. To have a falling gold price when trillion$ of new money is created and dispersed into the ether is pure nonsense, the part & parcel of wrong- footed tenets. Such invalid notions rely upon the discredited deflation argument that circulated.

 

 

The gold price is slowly moving up. Its psychological basis is gaining firm strength. The recognition of damaged major currencies is gaining broader acceptance. The deep compromise of central banks is being more widely understood. The solutions offered to Europe are not only vacant, but they expose the Untied States and Great Britain to comparisons of equal vulnerability and similar fundamental wreckage.

The gold price has made its lows in year 2010. The next important level is $1150. The resumed Quantitative Easing programs in the US and London will soon be given more publicity, more monetary debauchery via rampant dilution. All talk of an Exit Strategy is pure diversion, grossly insincere. The USGovt cannot afford to pay higher borrowing costs, nor can the USFed afford to dump its bloated balance sheet on the credit market. Doing so would reveal that there is almost no market for what they hold in leveraged toxic mortgage bonds. Doing so would result in mortgage rates rising another 1% to 2% quickly. Such will not happen! Instead, mortgage rates will rise 1% on their own without an Exit Strategy, without USFed liquidation of worthless bonds.

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Jim Willie CB

Editor of the "HAT TRICK LETTER"

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