Saturday, May 1, 2010

Commentary May 1.2010..important.

Good morning Ladies and Gentlemen:ld
 
 
 
Before starting my commentary, here are the latest honourees for failed banks
 
The number of banks buried last night with full glowing fanfare and eulogy speeches numbered 7
and without further delay:
 
 
Champion Bank Creve Coeur MO 58362 April 30, 2010
Westernbank Puerto Rico
En Español
Mayaguez PR 31027 April 30, 2010
Eurobank
En Español
San Juan PR 27170 April 30, 2010
Frontier Bank Everett WA 22710 April 30, 2010
R-G Premier Bank of Puerto Rico
En Español
Hato Rey PR 32185 April 30, 2010
CF Bancorp Port Huron MI 30005 April 30, 2010
BC National Banks Butler MO 17792 April 30, 2010
 
 
On Monday, we will give the official story and the loss to the FDIC, So far 62 banks have been sent to the morgue for burial this year.
 
Here are the total assets and deposits of 5 of the failed banks and they are huge.  The loss to the FDIC will be gigantic this week:
 
 
. (Note for the first time we got Puero Rico banks failing.Data is coming on BC National Banks.(.Mo)
and  frontier Bank (Washington state).  Their departure from earth was reported late last night and we do not have data on
them)

Failed Banks Closing Date of Failed Bank Deposits Transferred to Total Assets of Failed Bank Total Deposits of Failed Bank
Champion Bank, Creve Coeur, MO
April 30, 2010
Closed by Missouri Division of Finance, and FDIC named Receiver. To protect insured depositors, the FDIC entered into a purchase and assumption agreement with BankLiberty, Liberty, Missouri
$187.3 million
$153.8 million
CF Bancorp, Port Huron, MI
April 30, 2010
Closed by Michigan Office of Financial and Insurance Regulation, and FDIC named Receiver. To protect insured depositors, the FDIC entered into a purchase and assumption agreement with First Michigan Bank, Troy, Michigan
$1.65 billion
$1.43 billion
Westernbank Puerto Rico, Mayaguez, PR
April 30, 2010
Closed by Office of the Commissioner of Financial Institutions of the Commonwealth of Puerto Rico, and FDIC named Receiver. To protect insured depositors, the FDIC entered into a purchase and assumption agreement with Banco Popular de Puerto Rico, San Juan, Puerto Rico
$11.94 billion
$8.62 billion
R-G Premier Bank of Puerto Rico, Hato Rey, PR
April 30, 2010
Closed by Office of the Commissioner of Financial Institutions of the Commonwealth of Puerto Rico, and FDIC named Receiver. To protect insured depositors, the FDIC entered into a purchase and assumption agreement with Scotiabank de Puerto Rico, San Juan, Puerto Rico
$5.92 billion
$4.25 billion
Eurobank, San Juan, PR
April 30, 2010
Closed by Office of the Commissioner of Financial Institutions of the Commonwealth of Puerto Rico, and FDIC named Receiver. To protect insured depositors, the FDIC entered into a purchase and assumption agreement with Oriental Bank and Trust, San Juan, Puerto Rico
$2.56 billion
$1.97 billion
 
 
 
OK lets start with the regular commentary:
 
 
Gold closed yesterday up by 13.00 dollars to close at 1181.40 and silver rose another 7 cents to close at 18.61
 
The comex gold OI (open interest) fell by a smallish 2522 contracts to rest at 536846.  The silver comex OI rose 839
 
as newtime buyers came into the market and the bankers giving them those contracts.
 
In gold, it was a little too hot for some small time bankers so they exited.
 
 
Last night we got the COT report which is basis Tuesday and thus before the actual run up in the gold and silver price.
 
In gold:
 
 
The gold Committment of Traders Report revealed...

*The large specs increased longs by 12,228 contracts and decreased shorts by 2,789.

*The commercials increased longs by 5,623 and increased shorts by 13,749.

*The surprise was in the small specs category. They increased longs by 1,417 contracts, but increased shorts by a BULLISH 8,308.

 
 
end.
 
 
This COT is quite revealing:
 
Note the large increase in the large specs who piled on a huge 12,228 contracts as well as decreasig their short interest by 2789 contracts.
They got a good scent of blood in the air and they decided to send in the Sherman tanks and buy.
 
The commericals :  the smaller banks increased their long positions as they are well aware of what is going on.
Note what the large commercials were doing:  they increased their short position again by a massive 13,749 setting up the battle of Waterloo
or control of the gold market.
 
In a surprising move we finally see our small specs enter the arena. Some increased their longs by a small 1417 contracts but they got it wrong by
increasing their shorts by 8308.  These guys always get in wrong so they will be fleeced again!!  Expect gold to rise and wipe these guys out of their short
positions.
 
 
 
In silver:
 
The longs increased their positions by a big 1903 contracts and the longs also increased their short positions by a tiny 15 contracts.
The commercials:  wow!   what a change:  they reduced their short position by a whopping  2843 contracts  but get this they reduced
 
their short positions by 739 contracts.  (note the difference from gold).  Looks like trouble is brewing in the delivery process with respect to silver.
 
the small specs:
 
not involved  (tiny changes)
 
 
Comment:  the commercials are aware that the gig is up and they are trying to exit their shorts.  JPMorgan has not been supplying  any new paper for 5 weeks. now.
 
 
Over in London England, the GLD added another 6 tonnes of gold:
 

MarketVane's Bullish Consensus shed a point to 74% but the HGNSI was unchanged at 46.6%. Continuing its recent vivacity, the GLD ETF added 6.088 tonnes to 1,159.00152 tonnes, a new record.

 
This is a new record.  It is quite obvious that we are witnessing huge demand coming in from all global sectors for gold.We are probably witnessing many wealthy citizens of Greece, Ireland, Italy,
 
Great Britain,  France, Spain or Portugal, trying to find the right vehicle to put their declining fiat currency to work.  Many are crowding into the GLD and thus the GLD inventory is rising.
 
It is amazing that the SLV has not increased by an oz for the past week.  However it fell by 18 million oz from Feb 26  to its present inventory (from 305 million to its current 287 million )
Many are seeking the real metal and lining up at the bullion banks for metal and taking that metal and putting it in their safety deposit boxes at the bank.
Demand for gold coins is going through the roof as we are witnessing smaller and smaller quantities surfacing of good quality older coins.
 
 
I am going to give you a snapshot of depositors of Greek banks to give you an idea of where their money may be going:
 
 
From Peter R, a regular Lemetropolecafe member:
 
 

Greek bank deposits fall

Bill, 
According to Reuters, "Business and household deposits at Greek banks dropped by 0.9 percent month-on-month in March, a central bank official said on Thursday, bringing total deposit losses in the first quarter to 10.6 billion euros." So €10.6 billion went looking for a new home in Greece from January – March. No doubt the pace has quickened as the crisis grew this month, too. However, using just the Q1 figures, if just 10% of the €10.6 billion in withdrawals decided to seek a safe haven in gold, that would represent 20 tons of buying. One might also suspect a little bit of this is going on in Spain and Portugal to add fuel to the fire.

So a significant part of the current bid in gold may represent demand for bullion — a daunting proposition for market cappers and short sellers. That this demand is coming out of Europe also explains why the price of gold in Euros keeps hitting record highs. 
Best wishes,
Peter R.

 

end.

 

OK lets go to the all important gold and silver inventories. As you will recall yesterday was the first day of notices to deliver.

I will go in detail what happened:

 

First the inventories:

 

SILVER

ZERO ozs withdrawn from the dealer's (registered) inventory 
749, 586 ozs deposited in the customer (eligible) inventory 
Total dealer inventory 50.25 Mozs 
Total customer inventory 65.93 Mozs 
Combined Total 116.18 Mozs

GOLD

4,000 ozs deposited in the dealers (registered) category 
31,841 ozs deposited in the customer (eligible) category 
Total dealer inventory 2.45 Mozs 
Total customer inventory 7.73 Mozs 
Combined Total 10.18 Mozs

 

First of all, I would like to report that the Comex at 1 am last night updated its dealer inventory

and reported that approx 1 million oz of silver have been removed from the registered and dealer inventory.

The dealer inventory, I guess, lost some of their newfound babies. The new supposed inventory levels of the dealers

rest at 50.25 million. In reality if they have 10% of that inventory they would celebrate.  Silver inventories around the

world are depleting faster than a speeding bullet.

 

That set the stage for todays inventory number as 749000 oz were deposited into the eligible inventory

We will have to wait and see if this inventory leaves like all of the other nervous nellies witnessed during this past month.

 

OK lets go to the all important deliveries.  Lets start with silver:

 

There were 1796 delivery notices issued in the MAY silver contract. The total delivery notices for the month in silver stand at 1796 or 9.0 Mozs.

 

These are the number of notices served and in a "short" period of time, silver will be delivered with bar number and weights attached.

 

Here is the open interest for the May silver:

 

The open interest in silver for the MAY contract declined to 3,685 contracts. These contracts must by now be 100% paid for and are standing for delivery. This is 18.4 Mozs. This is a very large amount of silver compared to the dealer inventory of approximately 50 Mozs. It should be noted that almost 22 Mozs stood for delivery in March which according to my analysis of the Comex warehouse inventory has only been partially delivered (about 4 mozs).

 

 

end.

 

So we can get a good idea of what will stand for the month:

 

The number of May silver contracts standing at May 1.2010 is 3685 or 18.4 million oz.

We must add the 2.43 million oz silver options exercised for April ( a non delivery month for silver).  Thus total silver to be served for metal in May is 18.4 plus 2.43 or 20.83 or almost

21 million oz,  a little drop from March. Only 4 million oz from the March silver delivery month have been settled!! Maybe the well informed insiders know that

the comex has little physical silver that can be delivered upon.

 

(It is very important for all to understand that the comex is really not a physical market for gold and silver.  That rests with the LBMA over in London England.

That is the dominate market for physical. For those wishing physical gold, they just call up their friendly banker and deposit money and get whatever gold is available at

a price determined by the customer or at a fix price.  A wealthy Greek purchaser, wishing to get out of his euros will place his money through a Greek banker who contacts a London banker.

The London banker then will take instructions as to price.  Lets say the Greek investor wants 100 0z.  He will place that order for 100 0z at the morning fix, or at the afternoon fix if that is the order.  Depending on availability he may get filled or he may have to wait as many seek the tiny amounts coming from the mining sector and/or central bank above ground gold. He may stipulate a price and if the gold price is higher, he is out of luck.)

 

 

Lets go to gold deliveries.  The month of May is a non delivery month for gold, so it is only options exercised for metal that are served upon.

Here are the totals here:

 

There were 705 delivery notices issued in the MAY gold contract. The MAY gold delivery notice total for the month is 705 notices or 70,500 ozs.

 

end.

 

For the first day, almost 705 notices were issued or 70,500 oz.  2,27 tonnes of gold.  This is a little higher from the opening salvo 2 months ago.

end

Here is Bill Murphy of Lemetropolecafe on the potential silver squeeze:

 

Silver deliveries

3685 silver contracts were open as of yesterday, which means the holders of those contracts were funded and prepared to take delivery. That's 18.4 million ounces vs. 50.2 million in the "registered" - available for deliver/dealer - inventory. Not enough to cause short squeeze in physical UNLESS the fractional nature of the Comex is true. Also, some of those longs could certainly elect to tender for cash or SLV settlement.

My best guess is that BNS is taking physical delivery in order meet the demands of investors who watched the GATA/Harvey Organ events unfold.

 

end.

 

Lets go to economic news of the day:

The last day of the month is always the report on the GDP number.  It showed a gain of approximately 3.4% in the quarter a slowing down of the

5.6% pace the previous quarter.  However you must take these figures with a grain of salt:

 

Consumers shine despite slower-than-expected GDP

WASHINGTON (Reuters) - The economy grew at a slightly slower-than-expected pace in the first quarter, held back by inventories and exports, but resurgent consumer spending offered evidence of a sustainable recovery, a government report showed on Friday.

Gross domestic product expanded at a 3.2 percent pace, the Commerce Department said in its first estimate -- marking three straight quarters of growth as the economy climbs out of the worst recession since the 1930s.

Analysts polled by Reuters had forecast GDP, which measures total goods and services output within U.S. borders, growing at a 3.4 percent rate in the first three months of 2010 after a 5.6 percent growth pace in the fourth quarter.

Despite the slowdown from the prior quarter, details of the report were fairly upbeat, with consumer spending accelerating at a 3.6 percent rate, more than double the 1.6 percent pace in the fourth quarter. The first-quarter rise was the largest since the first quarter of 2007.

Consumer spending, which normally accounts for 70 percent of U.S. economic activity, added 2.55 percentage points to GDP last quarter, the biggest percentage contribution since the fourth quarter of 2006.

Business inventories increased $31.1 billion in the first quarter as businesses restocked to meet firming domestic demand, the first increase since the first quarter of 2008. Inventories contributed 1.57 percentage points to GDP, less than half the contribution in the last three months of 2009 when businesses became less aggressive in clearing their warehouses.

When businesses slow the rate at which they are liquidating inventories, manufacturers raise production and this boosts GDP. Inventories fell $19.7 billion in the last quarter of 2009.

Excluding inventories the economy expanded at a 1.6 percent rate following a 1`.7 percent pace in the fourth quarter.

Businesses continued to spend on software and equipment, though a bit less vigorously than in the prior quarter. Business investment rose at a 4.1 percent rate after a 5.3 percent pace in the fourth quarter.

New home construction, which showed some hesitancy early this year, was a drag on growth in the first quarter -- after two quarters of gains. Residential investment contracted at a 10.9 percent rate after growing at a 3.8 percent pace in the fourth quarter.

Spending on structures subtracted from GDP for a sixth straight quarter. Export growth slowed sharply to a 5.8 percent pace in the first quarter from a 22.8 percent rate in the prior period, while imports rose at an 8.9 percent rate. That left a trade deficit that chipped off 0.61 percentage point from first-quarter GDP.

 

end.

 

However this accompanied the report, a rise in employment costs from .5% to .6%.

 

8:30 Q1 Employment Cost Index 0.6% vs. consensus 0.5% Q4 figure was 0.5%. * * * * *

Q1 employment costs rise 0.6 percent

WASHINGTON, April 30 (Reuters) - Employment costs in the United States rose slightly more than expected in the first quarter, driven by benefits that recorded the biggest jump in almost three years, Labor Department data showed on Friday.

The Employment Cost Index rose 0.6 percent in the three months ending in March, faster than the 0.5 percent that analysts polled by Reuters had expected and also above the previous quarter's 0.4 percent rise.

Wages and salaries, which make up about 70 percent of compensation costs, rose 0.4 percent, while benefits increased 1.1 percent. That was the biggest gain since the second quarter of 2007, a Labor Department official said.

For the 12-month period ending in March 2010, compensation costs rose 1.7 percent. That was below the prior 12-month reading of 2.1 percent, suggesting overall labor cost pressures remained contained.

 

end.

 

Employment costs are a drag on the economy and make exporting of goods costlier and also make workers seek increases in wages.

Spain, Portugal and Ireland has massive problems because of huge labour costs forcing production to leave these countries to lower cost regions like Germany.

end.

 

The economy seems to rolling along in the Midwest and confidence numbers are improving:

US Midwest business expands more than expected

CHICAGO, April 30 (Reuters) - Business activity in the United States expanded more than expected in April, a report showed on Friday.

The Institute for Supply Management-Chicago business barometer jumped to 63.8 in April, the highest since April 2005, from 58.8 in March.

Economists had forecast the index at 60. A reading above 50 indicates expansion in the regional economy.

The employment component of the index rose to 57.2 from 53.1 in March. New orders rose to 65.2 from 61.8.

-END-

09:55 Apr final Univ. of Michigan Confidence 72.2 vs. consensus 71.0 Apr preliminary reading was 69.5. * * * * *

 

 

end.

 

However, here is John Williams in his ShadowGovernmentStats as he throws into question the numbers the government releases:

 

Jim Sinclair's Commentary

John Williams is correct. Consider subscribing.

- GDP Growth Lacks Sustainability  
- Economic and Systemic Risks Intensify

"No. 294: First-Quarter GDP, Mounting Systemic Risks" 
http://www.shadowstats.com

 

Here is an important commentary from Jessie of Jessiecrossroadscafe.com:

 

29 APRIL 2010

When You Lie Down With Them Dept: Morgan Stanley Has 69% Tier 1 Capital Exposure to the PIIGS


That statistic about Morgan Stanley was an eye opener in terms of percent of capital exposure. No wonder Angie Merkel is playing hard to get, holding out for more than another back rub. Morgan Stanley looks like it done slipped in the pig wallow, don'cha know. 

Gentlemen, start your presses. 

Bloomberg
JPMorgan Has Biggest Exposure to Debt Risks in Europe

By Gavin Finch

April 29 (Bloomberg) -- JPMorgan Chase & Co., the second- biggest U.S. bank by assets, has a larger exposure than any of its peers to Portugal, Italy, Ireland, Greece and Spain, according to Wells Fargo & Co.

JPMorgan's exposure to the five so-called PIIGS countries is $36.3 billion, equating to 28 percent of the firm's Tier-1 capital, a measure of financial strength, Wells Fargo analysts including Matthew Burnell wrote today. Morgan Stanley holds $32.4 billion of debt in the region, which equates to 69 percent of its Tier 1 capital, Burnell wrote.

"Regulatory data suggests JPMorgan's exposure is largest in aggregate, but Morgan Stanley held the largest aggregate exposure to the PIIGS relative to Tier 1 capital," the analysts wrote. Overall U.S. bank "exposure to Greece is lower than exposure to
Ireland, Italy and Spain."

Bonds and stocks plunged across Europe in the past week on concern the Greek debt crisis is spreading across the euro area. Standard & Poor's this week cut Greece, Portugal and Spain's credit ratings as concern the nations may fail to meet their debt commitments increased.

U.S. banks held a total of $236.8 billion of exposure to the five nations, including $18.1 billion to Greece, Wells Fargo said. European banks have claims totaling $193.1 billion on Greece, according to the Bank for International Settlements, with another $832.2 billion of claims on Spain.

end.

Notes:  JPMorgan has the biggest exposure to defaults of the "PIIGS" nations. JPMorgan has 36.3 billion dollars of loans to these nations and it represents 28% of their tier 1 assets.

(Please understand...this is tier 1 (good assets) as compared to tier 3 which is toxic or worthless junk)

 

Morgan Stanley holds a lesser amt of 32.4 billion but this total represents 69% of its tier 1 assets.

Thus a default by these nations will bring down Morgan Stanley and most likely JPMorgan who would have other problems because of credit default swaps which is not included in these figures.

 

Note:  all the usa banks hold 236 billion dollars to these 5 nations.  This should wipe out most of the usa banks reserves.(credit default swaps are not included in this figure)

Note:  European banks hold 193 billion dollars on Greece alone...naturally this would wipe out all reserves at European banks.(credit default swaps are not included in this figure)

Note:  take a look at the total claims on Spain of 832 billion dollars. This is from the BIS and this figure  INCLUDES CREDIT DEFAULT SWAPS.

 

 

 

 

 

Ladies and Gentlemen:  from these figures you can see a systemic diaster waiting to unfold.

 

Rearding the CFTC hearings of which I participated in, is the following:

 

Gensler got 8000 comments on the position limits regs and they are now studying them. He says the market he covers is over $600 trillion with 50% in the US. Collins also asked if the CFTC was part of the Systemic Risk Council of Regulators, which is probably the Plunge Protection Team. Collins wanted to make sure he was on that Council. I wonder what she knows about it. Clearly Durbin and Collins as well as Bond and Cochran need to be educated..

How much money annually is being fleeced from customers in the rigged silver and gold markets and how much money are shareholders losing in the GLD/SLV ETF schemes? They quote Madoff as a $50 billion scheme and Stanford as a $7 billion scheme. Seems as if they like to look at a number and the bigger the better!

 

Note:  The senators mentioned above arre Senators, Collins, Durbin and Cochran.  They seem to sense problems of a systemic risk.

 

Also the IMF reported that a Greek bailout cost to USA citizenry through the IMF will be in the vicinity of 100 billion dollars.

That must be added to the Federal debt once implemented.

 

end.

 

Here is a story on the huge number of foreclosures in the Illinois area.  No wonder this state is in serious financial trouble:

 

More than 9,300 homeowners lost properties last quarter 
By Mary Ellen Podmolik, Tribune reporter 
April 29, 2010

More Chicago-area homeowners lost their homes to foreclosure in the first three months of the year than in any quarter in the past five years. This disturbing statistic raises doubts about the effectiveness of mortgage loan modification efforts and could put more downward pressure on property values.

Within the six-county Chicago region during the first quarter, 9,302 homes went through a court-ordered auction, the last step in the foreclosure process, and 95 percent of those properties were taken back by lenders. Within the city of Chicago, almost 3,500 homes went to auction, and 95 percent of those also became bank-owned, according to data to be released Thursday by Woodstock Institute, a Chicago-based think tank.

A portion of the increase in auctions can be attributed to various moratoriums lenders put in place during the holiday season and while they evaluated homeowners either for the federal government's Home Affordable Modification Program or their own internal programs. However, it appears clear lenders are now stepping up efforts to push properties through the foreclosure system as homeowners fail to qualify for loan modifications or default again.

More than half of all loan modifications fell 60 days or more past due by nine months after the initial modification, the federal Office of the Comptroller of the Currency said in a report last month on fourth-quarter mortgage performance.

Lenders "put a halt on the process, but did it help [borrowers] in the end?" said Geoff Smith, Woodstock Institute's senior vice president. "Are these foreclosure prevention programs working? If HAMP was working, you'd have less completed foreclosures. More people lost their homes. That's undisputed."

More…


end.

 

Many commented to me that I should balance the financial problems equally between European countries and the USA individual states.

You are so correct.  Here is a commentary that shows 33 out of 50 usa states are totally bankrupt: (from Jim Sinclair commentary.

The following discusses the huge problems in New York Sate with its budget deficit.

 

The author is Bon Hennelly of Western New York News Room:

 

Jim Sinclair's Commentary

33 states of the USA are headed for bankruptcy.

Ravitch: New York Deficit Could Swell to $15 Billion Next Year 
by Bob Hennelly

NEW YORK, NY April 29, 2010 —New York's $9.2 billion budget deficit is expected to balloon to $15 billion next year, according to Lt. Gov. Richard Ravitch.

Speaking to a midtown audience of real estate developers, Ravitch said he does not expect the state to reach a budget deal any time soon, despite the state's desperate fiscal situation. The budget is nearly one month late and Ravitch says there are no external triggers forcing lawmakers and the governor to act.

"States can't go into bankruptcy. They are not included in the bankruptcy code," he says.

Today's outlook is different from the city's fiscal crisis of the 1970s when the state couldn't find any lenders. Instead, he says, bankers are circling Albany with tempting offers.

"The financial community is ready to lend the state all kinds of money. They have 20-odd schemes they are suggesting about how the state can borrow money," Ravitch says.

More…

 

 

end.

 

I am surprised that CNN covered this:

 

Protesters descend on Wall Street, New York City banks 
By the CNN Wire Staff 
April 30, 2010 12:48 a.m. EDT

New York (CNN) — Protesters rallied in downtown New York City Thursday to voice their anger over what they perceive as the roles Wall Street and big banks played in America's economic crisis.

Marching from City Hall to Wall Street, the protesters chanted "good jobs for all," and held signs with messages including "Hold banks accountable," "Make Wall Street Pay," and "Reclaim America."

Marching from City Hall to Wall Street, the protesters chanted "good jobs for all," and held signs with messages including "Hold banks accountable," "Make Wall Street Pay," and "Reclaim America."

The AFL-CIO organized the rally, and union President Richard Trumka addressed the crowd, saying, "How long will we allow the spirit of greed to continue to drive us into economic holes?"

The National Action Network, a group that was involved in organizing the protest, said in a news release that demonstrators represented unemployed workers, foreclosure victims and community activists.

Protester Gerard Pettine said he just wants Wall Street to be held accountable for its involvement in the economic collapse.

More…

 
 
I know many of you have heard the GM commercials stating that they have paid back their loans to the government in full
The total loans from the Government has been 49 billion but only 6.7 billion was repaid and it was from TARP money and not from
earnings.
 
 
Here is this story:
 

GM Under Fire for 'Misleading' Bailout Ad 
GM CEO Boasts TARP Repayment in TV Commercial; Critics Say Money Came From Other Bailout Funds 
By MATTHEW JAFFE and ALICE GOMSTYN 
April 30, 2010

The Obama administration is concerned about a new General Motors commercial in which the bailed-out automaker touts last week's repayment of the remaining $4.7 billion that it owed to the government from funds it received under the Troubled Asset Relief Program.

In the commercial, the automaker's CEO, Ed Whitacre, boasts that it has repaid its "government loan in full, with interest, five years ahead of the original schedule."

That sounds great, but that's not exactly true, warned Sen. Susan Collins, R-Maine, Thursday.

At a Senate subcommittee hearing, Collins told Treasury Secretary Timothy Geithner that the ad seems "very misleading," citing bailout watchdog Neil Barofsky's comments that GM had simply used one pot of bailout money to repay another.

More…

 
 
Well that is all for today. I wish you all a grand weekend and I will report on Monday.
We are now entering a phase where we have huge demand for physical gold and silver coming in contact with the issuing of a huge number of paper claims.
Something has got to give.
 
bye for now
Harvey.

Thursday, April 29, 2010

April 29.21010 commentary...important.

Good evening Ladies and Gentlemen:
 
Before going into the metals, due to the many questions that are thrown my way on the Greek, Spanish , Irish , Portugese problems,
I would like to offer the differences so you can understand the financial mess that these authorities will try and unravel in the next few days
and eventually fail.
 
The Greek problem is not an illiquidity problem.  It is an insolvency problem.
The Greeks have a huge 365 billion Euros worth of debt and a GDP of about 300 billion Euros or a Debt/GDP of 120%.
It's economy is run by the unions and over 50% of the GDP is thus governed by these unions.
 
French banks have over 75 billion euros loaned to Greece, followed by Germany with about 60 billion euros.
A default by Greece will have severe repercutions to France and quite impossibly cause its implosion.
 
The granting of loans will solve little to this heavily unionized nation.
Its chief income producer is its shipping, followed by tourism and then finally olives.
 
The granting of loans will not help this nation.  They must lower their costs of operation and produce more goods and export.
 
In other words, this nation is hoplessly bankrupt and no new additional dollars will help them.
 
This nation has the largest credit default swaps written on it.  This is simply a bet on its survival.  The underwriters are basically American with AIG the largest followed by JPMorgan.
We do not know the exact amt underwritten but it shares a huge chunk of the 60 trillion dollars of total swaps.  Our bet: over 2-3 trillion dollars underwritten.
 
 
Portugal and Spain are a little different.
 
Spain has a population in excess of 40 million citizens and it is the 4 largest in Europe.( The largest is Germany, followed by France and Italy.) Its GDP is around 565 billlion Euros.
Portugal's GDP is 126 billion Euros, and this  nation which shares its border with Spain,  has a population less than Greece at around 9 million plus citizens.
 
Spain and Portugal took advantage of the cheap euro and overbuilt.  There are many cities of empty buildings.
This serves as collateral to the banks. 

Thus problem no 1:  Spain and Portugal have a huge banking problem similar to Iceland.
 
But if gets worse.  As the boom occurred in those two countries wages skyrocketed to such a level that all input costs rose faster and
 greater than Germany and France. Thus, all production of goods move to the lower cost sector
and that is why Germany flourished. Their unit cost of production is much lower than Spain, Portugal and Ireland.
 
Germany benefited by the EU experiment simply because they did not have to worry about weaker countries devaluing their currency and taking over production.
Most of Europe was on the Euro so Germany benefited most from this. However greater input costs forces major unemployment as workers are laid off in the high cost zones
 
This is why the unemployment in Spain is now over 22% for the entire country and over 48% for the youth.
 
Now governments in Spain and Portugal are seeing their central government revenues plummet and their social benefit costs rise exponentally.
Spain gives its workers 2 years of unemployment benefits.  We first started to tell you of Spain in late 2008 and now these benefits will run out shortly.
 
I feel that Spain is the bigger problem than Greece.
 
Spain and Portugal both have debt to GDP at around 60% but rising to 85% this year.
By next year, these two nations will be bust.
 
Ireland has a GDP of 120% the highest in the Euro zone but this Debt/GDP ratio has been around this level for a few years.
 
It too, overbuilt and thus they have a big banking crisis.  The country has a lot of youth, but there are no jobs.
 
You can expect a lot of civil unrest in these latter 3 countries.
They are not insolvent yet, but their banks are certainly bust.
The sovereign nations of Greece, Spain, Ireland, and Portugal do not have the capability to cover all of the citizens deposits at the banks when these banks implode.
 
I hope that gives you a little summary for what will be in store for these 4 nations.
 
 
Lets start with the gold and silver prices:
 
Gold closed down by 3.30 to 1168.40.  Silver had a stellar day rising by a huge 45 cents to 18.54.
 
Silver reacted to the closing of the options expiry and tomorrow will be the official delivery day as notices will be issued to all of those standing
at the conclusion of trading today.  All players must deposit all of their money into their accounts by tonight.
 
The gold comex OI continues to rise, adding another 277 contracts to rest at 539,368.  The banking cartel are not at all amused.
The silver OI dropped another 1090 contracts to 123067 as the intermediate bankers exited not liking what they saw with respect to silver demand.
 
The GLD added another 6 tonnes of gold to set another record.(1152 tonnes)  There is certaintly smoke over there at the Bank of England:
 
 

MarketVane’s Bullish Consensus for gold added a point to 75% but the HGNSI was unchanged. Continuing its new lively style, the GLD ETF added 6.08815 tonnes to 1,152.91342 tonnes, a new record.

 
I will now give you the final figures for the month of April with respect to gold and silver:
 

COMEX Warehouse Stocks April 29, 2010

SILVER

86,053 ozs withdrawn from the dealer’s (registered) inventory 
9,164 ozs withdrawn from the customer (eligible) inventory 
Total dealer inventory 51.16 Mozs 
Total customer inventory 63.83 Mozs 
Combined Total 114.99 Mozs

GOLD

4,587 ozs withdrawn from the dealers (registered) category 
129 ozs withdrawn from the customer (eligible) category 
Total dealer inventory 2.45 Mozs 
Total customer inventory 7.70 Mozs 
Combined Total 10.15 Mozs

 

Notes:

 

No 1.  86053 oz was withdrawn from the dealer inventory but this inventory did not enter the customer inventory. Strange indeed.

No 2. another 9164 oz of silver was withdrawn from the customer inventory

No. 3   4587 oz of gold was withdrawn from the dealer and 129 oz from customer.  Since all bars must be 100 oz how come the 29 oz.

.

It is obvious by these withdrawals and no deposits that many are fleeing a sunken ship.

Lets go to the delivery side of things:

 

First gold

The APR contract is now off the board. The APR gold delivery notice total for the month was13,440 notices which is a whopping 1,344,000 ozs.

Silver ends officially at .074  plus 1.344  equals  1.42 million oz of gold

 

Now silver:

 

some late minute options exercised drove the final total to 2.43 million oz of silver.  I will add this to official totals for next month.

Note 4:  the open interest for the front month of May totals 8059.  The drop was a little heavier than I would have thought so lets see how many

            stand for tomorrow.  Also remember that options expiry gives new contracts to those standing.The 8059 contracts represents 40 million oz.

The total delivery notices for the month in silver stand at 486 or 2.43 Mozs.

 

Lets go to  economic news:

 

Today, we heard from the jobless numbers are they were pretty well on line with estimates. We still are having a "jobless recovery"

 

Jobless claims underscore fragile labor market

WASHINGTON (Reuters) -The number of U.S. workers filing new applications for unemployment insurance fell slightly less than expected last week, government data showed on Thursday, implying only a gradual labor market improvement.

Initial claims for state unemployment benefits dropped 11,000 to a seasonally adjusted 448,000 in the week ended April 24, the Labor Department said.

Analysts polled by Reuters had expected claims to fall to 445,000 from the previously reported 456,000, which was modestly revised up to 459,000 in Thursday's report.

The four-week moving average of new claims, which irons out week-to-week volatility, rose 1,500 to 462,500, increasing for a fourth straight week.

Though initial claims have resumed their downward trend interrupted by the Easter holiday, analysts worry the pace is too slow and underscores the fragility of private hiring.

Private hiring last month handed the economy its largest jobs gain in three years. Both claims and the four-week average remain perched above 400,000, a level that analysts associate with labor market stability. Employers are still believed to have added jobs this month.

The number of people still receiving benefits after an initial week of aid fell 18,000 to 4.65 million in the week ended April 17, the Labor Department said. This was a touch above market expectations for 4.62 million.

The so-called continuing claims data covered the household survey week from which the national unemployment rate is derived. Analysts anticipate data will show the unemployment rate was unchanged at 9.7 percent in April.

The insured unemployment rate, which measures the percentage of the insured labor force that is jobless,was unchanged at 3.6 percent in the week ended April 17, the Labor Department said.

-END-

 

 

Commercial paper rebounded a bit last week. Nothing to get excited about:

 

US commercial paper market expands a 2nd week -Fed

NEW YORK, April 29 (Reuters) - The U.S. commercial paper market grew for a second straight week after a string of recent declines, Federal Reserve data showed on Thursday.

For the week to April 28, the U.S. commercial paper market, a vital source of short-term funding for companies' day-to-day operations, expanded by $32.9 billion to about $1.109 trillion outstanding from $1.076 trillion the previous week.

 

 

Also today was the last leg of the 4 days of bond auctions:

 

3:03 7-yr note auction yields 3.2%, with 93.61% allotted at the high

* Bid/cover 2.82 vs. avg of past 10 auctions 2.76 * Indirect participation 59.5% vs. avg of past 10 auctions 55.2% * In reaction: * * * * *

 

 

Note:  bid/cover poor.  almost 93.6% allottted to the highest interest rate  (nobody bidding) and indirect rising to 59.5%.

the financial analysts were not too impressed with todays performance but the Dow was up 122 points for no reason so nobody looked to see who bought this garbage.

(The Fed has been buying all paper especially longer than 3 yrs as nobody wants usa debt)

 

Ok lets go to the big stories of the day:

 

The office of the Comptroller released the figures for the usa banks and the derivatives or risk that they hold.  The BIS always picks up on this data:

 

The 4Q '09 report from the Office of the Comptroller of the Currency reports that "The notional value of derivatives held by U.S. commercial banks increased $8.5 trillion in the fourth quarter, or 4.2%, to $212.8 trillion." J.P. Morgan alone has a total derivatives exposure that is larger than world GDP. Granted, a great deal of these derivatves are based on interest rates, which are largely under the nominal control of Wall Street's creature, the Fed, at least for now.

 

Note that in derivatives the pie never shrinks.  It only expands until the bubble eventually is pricked.  The total derivatives of the usa banks stand at 212.8 trillion dollars with JPMorgan the lions share.

 

Almost 75% of the derivatives are in interest rates and the second largest is the credit default swaps at around 60 trillion dollars.  This is a neutron bomb waiting to explode.

 

Many of you have commented that the stock market continues to rise and also rises on bad news.

This is why I do not comment much on the Dow. It is totally manipulation from the opening to closing bell.

Here is Jessie of  jessiecrossroadscafe.blogspot.com  explaining why this is happening:

 

29 April 2010

The Economic Policy Error Behind the Stock Market Rally

"The 20th century has been characterized by three developments of great political importance: The growth of democracy, the growth of corporate power, and the growth of corporate propaganda as a means of protecting corporate power against democracy." Alex Carey

The strategy of the Bernanke Federal Reserve and of the Obama Administration's economic team is fairly clear: prevent the bank failures of the 1930's by propping up the biggest banks with huge infusions of publicly subsidized capital, and hope that they start lending again as the economy recovers.

Failure number one of course is that the banks that they chose to support are not responsible banks engaged primarily in lending to small business and localized activity. Those banks are the local and regional banks and they are failing in record numbers. The banks they chose to save are those who have heavily contributed to the campaign coffers and job prospects of Washington politicians. Goldman Sachs, for example, is a glorified hedge fund dedicated to speculation and enormous amounts of leverage. One only has to look at the source of their profits to understand what it is that they do.

Bernanke has (so he thinks) cleverly tied up much of the liquidity with which he has infused the banks as reserves which are paying riskless returns thanks to his innovation in sustained a floor under the ZIRP. But if you look at what he is doing, all Bernanke has done, even in his buying a trillion dollars of bad mortgage debt, is rescue creditors who engaged in reckless speculation during a housing mania that the Greenspan Federal Reserve had fostered.

http://jessescrossroadscafe.blogspot.com/2010/04/policy-failure-if-stock-market-crashes.html

 

Here is more news of the attempt to get an audit of the Fed:

 

Submitted by cpowell on 06:34PM ET Wednesday, April 28, 2010. Section: Daily Dispatches

By Ryan Grim 
The Huffington Post, New York 
Tuesday, April 27, 2010

http://www.huffingtonpost.com/2010/04/27/broad-bipartisan-coalitio_n_553...

As unusual a coalition as can be crafted in the Senate plans to fight for an amendment to the Wall Street reform bill that would open the Federal Reserve to a serious audit by the Government Accountability Office. Sponsored by Sen. Bernie Sanders, I-Vermont, the language is modeled after an amendment that passed the House, sponsored by Reps. Alan Grayson, D-Fla., and Ron Paul, R-Texas.

Sanders is joined by four Republicans of varying politics: John McCain of Arizona, Jim DeMint of South Carolina, David Vitter of Louisiana, and Sam Brownback of Kansas. If Democrats in the Senate back the measure, it would have at least 63 votes, but Banking Committee Chairman Chris Dodd, D-Connecticut, is opposed and has argued against a broad audit.

The chairman of the Judiciary Committee, Sen. Pat Leahy, D-Vermont, is also a cosponsor, as is Sen. Russ Feingold, D-Wisconsin. he group is actively gathering cosponsors as the Senate continues to vote to break a Republican filibuster that is preventing debate from beginning.

... Dispatch continues below ...

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"For nearly nine decades, the GAO has a proven track record of conducting objective, fact-based, nonpartisan, non-ideological, fair, and balanced audits. Through these audits, the GAO helped save the American taxpayers $50 billion last year alone by rooting out waste, fraud, and abuse in the federal government," reads a letter circulated by Sanders. "Let's not equate independence with secrecy. We cannot let the Fed operate in secrecy any longer. There is simply too much money at stake."

The letter reads as follows:

"The American people have a right to know who received over $2 trillion in financial assistance from the Federal Reserve.

"Since the beginning of the financial crisis, the Federal Reserve has provided over $2 trillion in taxpayer-backed loans and other financial assistance to some of the largest financial institutions and corporations in the world. Unfortunately, the Fed is still refusing to tell the American people or the Congress who received most of this assistance, how much they received or what they are doing with this money. This money does not belong to the Federal Reserve; it belongs to the American people, and the American people have a right to know where their taxpayer dollars are going.

"Therefore, during the consideration of the financial reform bill, we will offer an amendment to increase transparency at the Federal Reserve. Specifically, our amendment:

"-- Requires the non-partisan Government Accountability Office (GAO) to conduct an independent and comprehensive audit of the Federal Reserve within one year after the date of enactment of the financial reform bill.

"-- Requires the GAO to submit a report to Congress detailing its findings and conclusion of their independent audit of the Fed within 3 months.

"-- Requires the Federal Reserve within one month after the date of enactment to disclose the names of the financial institutions and foreign central banks that received financial assistance from the Fed since the start of the recession, how much they received, and the exact terms of this taxpayer assistance.

"-- Does not interfere with or dictate the monetary policies or decisions of the Federal Reserve.

"Fifty-nine Senators, 320 members of Congress, and two federal courts have called on the Federal Reserve to become more transparent.

"Our amendment is similar to an amendment that was offered to last year's budget resolution that passed the Senate on a bipartisan vote of 59-39 on April 1, 2009; S604, the Federal Reserve Sunshine Act, which now has 33 bipartisan co-sponsors; and the Federal Reserve Transparency Act (HR1207), which has 320 bipartisan co-sponsors (a version of which passed the House Financial Services Committee by a vote of 43-28 and was incorporated into the financial reform bill that passed the House last December).

"In August 2009, the U.S. District Court for the Southern District of New York also ordered the Fed to disclose the recipients of this taxpayer assistance as a result of a Freedom of Information Act lawsuit filed by Bloomberg News. This decision was upheld by the U.S. Court of Appeals in Manhattan on March 19, 2010.

"The Senate Financial Reform Bill does not do enough to make the Fed more transparent.

"While the Senate financial reform bill attempts to address the lack of transparency at the Fed, as currently drafted, much of the information regarding the details of who received this financial assistance could be kept secret forever.

"As long as the Federal Reserve is allowed to keep the information on their loans secret, we may never know the true financial condition of the banking system. The lack of transparency at the Fed could lead to an even bigger crisis in the future.

"We now know that the lack of transparency in credit default swaps led to the $182 billion taxpayer bailout of AIG; the collapse of Lehman Brothers and precipitated the worst financial crisis since the Great Depression.

"We know who received TARP funding.

"Anyone with access to the Internet can go onto the Treasury Department's Website and find out exactly who received a bailout from the $700 billion TARP program. The American people have a right to know the same information from the Fed.

"The Sanders Amendment does not undermine the Fed's independence.

"This amendment does not take away the 'independence' of the Fed and it does not put monetary policy into the hands of Congress.

"This amendment does not tell the Federal Reserve when to cut short-term interest rates or when to raise them. It does not tell the Federal Reserve what banks to lend money to and what banks not to lend money to. It does not tell the Federal Reserve what foreign central banks they can do business with and which ones it cannot do business with. It does not impose any new regulations on the Federal Reserve nor does it take any regulatory authority away from the Fed.

"This amendment simply requires the GAO to conduct an independent audit of the Fed and requires the Fed to release the names of the recipients of more than $2 trillion in taxpayer-backed assistance.

"For nearly nine decades, the GAO has a proven track record of conducting objective, fact-based, nonpartisan, non-ideological, fair, and balanced audits. Through these audits, the GAO helped save the American taxpayers $50 billion last year alone by rooting out waste, fraud, and abuse in the federal government.

"Let's not equate independence with secrecy. We cannot let the Fed operate in secrecy any longer. There is simply too much money at stake."

-END-

 

 

We are now closing in on the 99 weeks of benefits running out in the usa..  Here is a story on this front.

the author is Brian Faler of Bloomberg news:

 

More Than a Million May Lose Jobless Aid Due to Deficit Concern 
By Brian Faler

April 29 (Bloomberg) — Since the U.S. recession began in December 2007, Congress has extended the duration of weekly unemployment benefits for the jobless three times. Now, the lawmakers may have reached their limit.

They are quietly drawing the line at 99 weeks of aid, a mark that hundreds of thousands of Americans have already reached. In coming months, the number of those who will receive their final government check is projected to top 1 million.

It’s a deadline that has rarely been mentioned in recent debates over jobless benefits, in which Republicans have delayed aid because of cost concerns. The deadline hasn’t been lost on Teauna Stephney, a 39-year-old single mother from Bothell, Washington, who said she could become homeless once her $407 weekly checks stop in June.

“What are people like me supposed to do?” said Stephney, who said almost two years of benefits haven’t proved long enough for her to find work after she lost her last job in August 2008. Referring to lawmakers, she said, “I would like them to come and talk to me and spend a day in my shoes.”

Democrats who have pushed through the past extensions agree there’s insufficient backing to go beyond 99 weeks, largely because of mounting concern over the federal deficit, projected to reach $1.5 trillion this year.

More…

 
Here is Jim Sinclair's thought for the day.  I thought it was pretty good:
 
 

Thoughts For The Day:

God help us if we have to listen to Frau Merkel, the mercurial political antics on the subject of Spain, Portugal and Italy.

She woke up yesterday and realized that German banks are loaded with all this debt and did her reverse moon walk. The MOPE is maddening.

If you need solid proof that gold is the ultimate currency, then yesterday’s action was it. Yesterday the physical market for gold kicked the ass of the CRIMEX. This trend has been demonstrated as the spot price moves closer to the cash contract on the CRIMEX. That means Gold is the major currency and when push comes to shove, the CRIMEX will get shoved.

I actually heard a major personality in the legislative say that the old derivatives could be fixed by new legislation. That it total world class crap. These guys making laws do not have a clue what they are doing. No standards means there cannot be a fix. An OTC derivative that is listed is no longer and OTC derivative, it is a listed derivative. What these guys do not know could fill a massive void of space.

 

Well I guess that about does it.  I will say goodbye to you and I hope you all have a grand weekend.

 
I will give a more comprehensive review on Saturday as we explore the COT report released tomorrow night
and of course, our first good prediction as to the number of oz of silver that will stand.
 
Good night all;
 
Harvey.


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