Saturday, May 15, 2010

May 15.2010 commentary...extremely important..headiing for the ultimate showdown!

Good morning Ladies and Gentlemen:
 
Before heading into our regular commentary, I would like to announce that the SEC's chief executioner, Mary Schapiro has
 
welcomed with open arms 4 new banking failures into the morgue. Midwest is the largest bank failure with 3.17 billion in assets.
 
The loss to the FDIC is estimated at 301 million dollars.
 
.  The FDIC will report on the first quarter results in the 3rd week of May:
 
 

Bank Name

City

State

CERT #

 

 

New Liberty Bank Plymouth MI 35586
Southwest Community Bank Springfield MO 34255
Midwest Bank and Trust Company Elmwood Park IL 18117
Satilla Community Bank Saint Marys GA 35114
 
 
Here is an article from Bloomberg:
 
Bank-Failure Tally Grows to 72 for 2010
 
 

State regulators shuttered small banks in Illinois, Missouri, Georgia and Michigan, including a 23-branch community bank that failed despite having received an infusion from the government's Troubled Asset Relief Program.

So far this year, 72 banks have collapsed and the spate of failures is expected to continue throughout 2010. Although there are signs that the worst of the financial crisis may be over for the banking industry, financial institutions are still being battered by severe losses on mortgages and commercial real-estate loans.

In the largest of Friday's closures, Illinois regulators closed Midwest Bank & Trust Co. of Elmwood Park. FirstMerit Corp., based in Akron, Ohio, agreed to take over Midwest's 23 branches, $2.42 billion in deposits and essentially all of its $3.17 billion in assets.

Midwest had been warning for months that it was in dire financial straits. On Thursday, the bank said in a securities filing that it would likely be placed into receivership because it had been unable to raise fresh capital after a previous plan had been rejected by the Federal Reserve.

Its failure is a financial blow to the government, which had previously swapped the preferred shares that it held in Midwest for common shares. The government had received the preferred shares when it injected Midwest with $84.8 million of TARP funds. Common shareholders typically are wiped out when a bank fails.

FirstMerit, which has been a bidder on other failed banks, agreed to pay the Federal Deposit Insurance Corp. a premium of 0.4% for Midwest's deposits. FirstMerit also entered into a loss-sharing transaction on $2.27 billion of Midwest's assets.

As part of the deal, the FDIC will receive a so-called value appreciation instrument, which will provide the agency with additional money if FirstMerit's share price rises over a certain amount of time.

Midwest was the 11th bank to fail in Illinois so far this year.

Elsewhere, regulators in Georgia, Illinois and Michigan closed three one-branch banks.

In Georgia, state regulators seized Satilla Community Bank, of Saint Marys, Ga. Ameris Bank, based in Moultrie, Ga., agreed to assume all of the deposits and most of its assets. Satilla had $135.7 million in assets and $134 million in deposits at March 31.

Ameris, which is paying a premium of 0.19% to assume Satilla's deposits, also entered into a loss-sharing agreement with the FDIC. It was the eighth bank failure of the year in Georgia.

Michigan regulators closed Plymouth-based New Liberty Bank, which had roughly $109.1 million in assets and $101.8 million in deposits. Bank of Ann Arbor, based in Ann Arbor, assumed all of the deposits and agreed to buy nearly all of the assets. It didn't pay a premium for the deposits.

In Missouri, regulators closed Southwest Community Bank, based in Springfield. Its $96.6 million in assets and $102.5 million in deposits are being assumed by Simmons First National Bank, of Pine Bluff, Ark.

The FDIC estimated the four failures would cost $301.7 million to its deposit insurance fund.

Write to Robin Sidel at robin.sidel @wsj.com

 

OK lets start as there is a lot to cover today.

 

Gold closed the week at 1227.40 down 1.40.  Silver was down 20 cents to 19.20.

The open interest (OI ) for gold comex rose as promised to a final resting position close to 600,000 as one can imagine:

 

The gold open interest rose 10,952 contracts to 599,058.

 

This remember is basis Thursday as we are always 24 hours behind.  The bankers however get to see the OI immediately at closing Thursday as one does not need a PhD to add

 the number of open interests on the comex contracts.  The silver Oi rose a huge 4000 contracts and its final resting position is 127046:

The silver open interest also went up quite a bit, rising 3997 contracts to 127,046. 

 

The banking cartel on Thursday night knew that their raid had failed and they witnessed an onslaught of gold bulls enter the gold and silver arena.  They were not amused

The decision from headquarters was to raid again but not during the physical hours ( 9 am local est-12:00 pm).  The majority of gold and silver whacking occurred after the London afternoon fix

and 12 pm local est. when London actually closes and the physical metal markets are finally put to bed.

 

The estimated volume of gold trading yesterday was an astronomical 279000. There were no switches as the front month of June remained at 321,000.  It looks like these longs are quite resolute

in attacking our banker friends.  The front month of June goes off the board on May 26.2010 and it is also the day that options for a June contract expire.  However as I have mentioned many

times, the June gold contract can still trade.  Monday, the 31 of May will be first day notice where the longs pluck down all their money and stand for delivery. The option holders who exercise for gold

metal, receive a future contract on the 27th of May and then they decide if they wish to stand for actual delivery.  The silver option holders who exercise for June silver, stand for delivery.

Since June is not a silver delivery month, their totals are included in the next month of July which is a silver delivery month.

 

Last night, we also got the Committment of Traders Report on gold and silver. This is basis Tuesday, which is the cut off day.  The committment of traders reort breaks down

traders into 3 categories:  large speculators  (hedge funds),  commercials (mining companies plus banks)  and small speculators  (like me and you)

 

Here is the gold COT report issued last night (basis Tuesday night):

 

The gold COT report revealed…

*The large specs increased their longs by 10,864 contracts and increased shorts by 5,586.

*The commercials increased longs by 16,631 contracts and increased shorts by 27,689.

*The small specs increased longs by 9,881 contracts and increased shorts by 4,101.

 

 

This is very interesting.  We witness that the large specs continue to pound the table and increase their longs by 10,800 contracts.

Those large specs who think that gold is too frothy, continue to increase their shorts by 5500 contracts but to a smaller extent to the long speculators.

The commercials are interesting. The miners are not players at all as they have stopped hedging.  The only commercials are the banks.

 

Here we have the intermediate and small bankers who really know the truth about what is going on, increased their longs by a mammoth 16631 contracts.

But look what JPMorgan and HSBC did on the short side, they increased their paper shorts by a huge moonshot:  27,689.

 

Please remember, that these results are from Tuesday night only.  You can bet the moon that the larger bankers increased their paper shorts by an

equivalent amount these past 3 days as we witness the OI climb from 560,000 to 599100 this past week.

 

In silver, a somewhat subdued COT report:

 

the large speculators in silver increased their positions by 561 contracts;  the large speculators who think that the silver market is frothy

added a huge 1631 contracts to their short positions. 

The commercials:   the intermediate bankers decided that it was time to lighten up on their longs so they removed:   1372 positions from their longs.

                            the large bankers however decided correctly that the price of silver was advancing a little too fast for them and they decided to get out of Dodge:

                            the result:   a removal of a mammoth 4242 contracts from their short positions.

 

the small specs: tiny moves.. they are not involved.

 

 

In summary, we see the gold and silver COT report taking a different attack.  In gold the large commercials banks continue to supply unbacked gold paper

and the large specs continue to gobble up the longs waiting for the eventual showdown.

 

In silver, large specs are adding to their positions but at a lower clip.  The large commercials shorts sense trouble and are beginning to exit.

The massive short positions must be hurting them in the pocket book.

 

Please remember in gold, the central banks generally have some gold to supply the bankers.  There is no above ground silver that the bankers can

use to quell their huge gorge of shorted silver contracts.

                          

OK lets go to the silver and gold inventory levels:

Here is a snapshot of yesterdays totals:

 

COMEX Warehouse Stocks May 14, 2010

SILVER

449,150 ozs deposited in the dealer’s (registered) inventory 
336,073 ozs deposited in the customer (eligible) inventory 
Total dealer inventory 51.77 Mozs 
Total customer inventory 64.57 Mozs 
Combined Total 116.34 Mozs

GOLD

100 ozs withdrawn from the dealers (registered) category 
100,382 ozs deposited in the customer (eligible) category 
Total dealer inventory 2.48 Mozs 
Total customer inventory 7.96 Mozs 
Combined Total 10.45 Mozs

 

 

This is what I would like to see.  Notice that 449150 oz of silver was deposited into the dealer warehouse.

From here it generally is removed from the dealer and enters the customer inventory.

Probably on Monday, we will see the exit of this silver.  (to satisfy holders of long comex silver.  they have been waiting quite a while for their metal)

We see a deposit on silver of 336000.  We do not know the whereabouts of this as this is a customer inventory.

However please note that May is a delivery month and we still are not witnessing any silver leave the warehouses.

In gold we see a minor withdrawal of 100 0z but a mammoth 100,382 oz  or 3 tonnes of gold

 

Lets go to the deliveries  First gold:

There were 14 delivery notices issued in the MAY gold contract. The MAY gold delivery notice total for the month is 1374 notices or 136,000 ozs.

 

Notes:  these are options exercised for gold in May.  The total number of oz standing is 136000 or 4.38 tonnes of gold.  This number is huge and is about 4 times the normal amt standing

in a non delivery month.  You can just imagine what will happen in gold when the second largest delivery month of the year, June approaches.

 

Lets go to silver:

 

There was 1 delivery notice issued in the MAY silver contract

 

Interestingly only one contract was served so the number of oz standing increased by 5000 oz.

The new total served:

the total delivery notices for the month in silver stand at 3824 or 19.1 Mozs.

 

How many are left to be served:

 

The open interest in silver for the MAY contract INCREASED to 301 contracts. This is 1.5 Mozs.

 

Thus the total number of oz standing in silver is as follows:

 

1.5 million  (left to be served) plus 19.1 million oz (already served)  plus the 2.43 million oz (previous month exercised options) =   23.03.

The number of oz of silver are rising.  Somebody wishes silver badly as the number standing is increasing.

 

We will now proceed to the big economic stories of yesterday.  However I would like to emphasize that we have no surpassed the alltime

record in open interest on the gold comex.  The previous record was 595,000 and that number included a huge number of calender spreads.

Those spreads have no receded in numbers greatly as they have no economic value to the holder of a long June gold and a short August gold.

 

In silver, the open interest record is still miles away.

The huge rise in gold demand is of course due to the deteriorating conditions in Europe and in the usa.

I promised you on Monday, that if you saw the Euro fall below  the 1.25 E/dollar market, you will see stock market turmoil.  That is exactly what happened

yesterday:  (from Bloomberg)

 

Euro Falls to Lowest Since Lehman as Breakup Concern Increases

By Ben Levisohn

May 15 (Bloomberg) -- The euro fell to its lowest level since the collapse of Lehman Brothers Holdings Inc. on concern that the 16-nation currency may be headed for disintegration.

The shared currency fell for a fourth week versus the dollar and a third week versus the yen, the longest losing streaks since February, as German Chancellor Angela Merkel said that Europe is in a “very, very serious situation” despite a rescue package for the region’s most indebted nations. European Central Bank Governing Council member Axel Weber speaks on financial-market regulation next week in Berlin.

“We went through a massive liquidation trade in Europe and risk-taking positions were wiped out across the board,” said Sebastien Galy, a currency strategist at BN Paribas SA in New York. “The markets are trying to figure out what the consequences are for growth. There are massive uncertainties and that will keep the downward pressure on the euro.”

The euro fell 3.1 percent to $1.2358 this week, from $1.2755 on May 7. It traded as low as $1.2354 yesterday, the weakest since October 2008. Thecommon currency dropped 2.1 percent to 114.38 yen, from 116.81 last week. The dollar traded at 92.47 yen after gaining 1 percent last week, the first weekly gain since the five days ended April 23.

‘A Sham, A Chimera’

European policy makers last week unveiled a loan package worth almost $1 trillion and a program of bond purchases in an effort to contain a sovereign-debt crisis that has threatened to shatter confidence in the euro. ECB President Jean-Claude Trichet said the move wasn’t supported by all 22 of the bank’s Governing Council members.

The ECB said it will intervene in government and private bond markets “to ensure depth and liquidity in those market segments which are dysfunctional,” and central banks in Germany, Italy and France began buying government bonds yesterday. The ECB restarted a dollar-swap line with the Federal Reserve.

By resorting to what some economists have called the “nuclear option,” the ECB may open itself to the charge it’s undermining its independence by helping governments plug budget holes.

“The ECB’s supposed ‘independence’ has now been shown to be nothing more than a sham, a chimera, a will-o’-the-wisp,” Dennis Gartman, a Suffolk, Virginia-based economist and hedge- fund manager, said in his daily Gartman Letter on May 10. “In the end the ECB and the euro will be punished for this decision to stand down from what had previously been considered sacred.”

Success Not Guaranteed

The greenback rose against Australia’s dollar and Norway’s krone, as oil and commodities retreated, damping demand for currencies linked to growth.

The Aussie fell 0.2 percent to 88.64 U.S. cents and the krone declined 0.4 percent to 6.2465 per dollar on speculation investors reversed carry trades that had profited from Australia’s 4.5 percent central bank rate and Norway’s 2.115 one-month deposit rate.

The benchmark rate of zero to 0.25 percent in the U.S. makes the dollar a popular funding currency for such trades. Such strategies lose money as the funding currency gains because it costs more to repay the loan.

Crude oil for June delivery fell 4.1 percent last week and the Reuters/Jeffries CRB Index of 19 commodities fell 2.8 percent yesterday. Norway is the world’s sixth largest oil exporter. Australia is the world’s biggest iron ore exporter.

Gold for immediate delivery yesterday reached an all-time high of $1,249.40 an ounce in New York as investors sought to hedge against Europe’s debt crisis.

Merkel, speaking yesterday at a panel discussion by Phoenix television, said that success is not yet guaranteed. Asked about disagreements with European Union partners, she said that “some arguments are worth it,” without elaborating.

‘The Euro Is Doomed’

The German chancellor’s comments followed a report from El Pais that French President Nicolas Sarkozy threatened to pull out of the euro unless Merkel agreed to back the European Union’s bailout plan at a meeting last weekend in Brussels, citing comments Spain’s Prime Minister Jose Luis Rodriguez Zapatero made at a meeting of socialist politicians. The Madrid- based newspaper didn’t say how it obtained the information. Aides to Sarkozy, Merkel and Zapatero all denied the report.

“The euro is doomed,” said Andrew Wilkinson, senior market analyst at Interactive Brokers Group LLC in Greenwich, Connecticut. “It’s like a clown without its makeup. The strains among the partners are becoming clear and it’s becoming harder to see global growth not being threatened by this.”

‘Head Through Parity’

The euro has lost 9 percent this year, according to Bloomberg Correlation-Weighted Indices. The dollar has gained 7.2 percent and the yen has advanced 7.9 percent.

The euro “can easily head through parity” with the U.S. dollar under a “hard landing” recovery scenario from the European deficit crisis, according to Royal Bank of Scotland Group Plc.

The forecast for the shared currency was reduced to $1.14 for the middle of next year, Alan Ruskin, head of foreign- exchange strategy at RBS Securities in Stamford, Connecticut, wrote in a note on May 13. The euro could test the key level of $1.1650 by year-end, he said.

The pound slid 1.8 percent to $1.4536, its third weekly decline versus the dollar, amid speculation that the U.K.’s governing coalition may collapse by year-end.

The U.K.’s Prime Minister David Cameron and his coalition partner, Nick Clegg, will “have a major problem keeping the left wing of the Liberal Democrats and the right wing” of the Conservatives in line, and a new election may be called before year-end, former Bank of England member David Blanchflower wrote in a Bloomberg News column on May 13.

The pound has dropped 2.8 percent against the dollar since May 11, when the Conservatives and Liberal Democrats formed a coalition government five days after elections failed to provide a clear winner.

To contact the reporters on this story: Ben Levisohn in New York atblevisohn@bloomberg.net.

Last Updated: May 15, 2010 00:01 EDT 


end.

 

 

 

 

This story caused the Euro to collapse yesterday:

 

President Nicolas Sarkozy 'threatened to pull France out of euro'

 

The newspaper cited comments by Spanish Prime Minister Jose Luis Rodriguez Zapatero to members of his party on Wednesday as relayed by people present at that meeting.

A spokesman for the Spanish Prime Minister's office confirmed the meeting between Zapatero and other socialist party members on Wednesday, but could not immediately confirm what was said at the meeting.

 

Or how about this story from business insider where Paul Volcker is stating that the Euro is on the brink of extinction:

Volcker: The Euro Is On The Brink Of Extinction
Vincent Fernando, CFA <http://www.businessinsider.com/author/vincent-fernando-cfa> | May. 14, 2010, 4:44 AM


Paul Volcker has added his substantial intellectual weight to the chorus of professionals worried about a complete disintegration of the euro, in a London speech yesterday according to Bloomberg. <
http://www.bloomberg.com/apps/news?pid=20601087&sid=aASZ4SCDL3uQ&pos=4>

That's because “The essential element of discipline in economic policy and in fiscal policy that was hoped for” has “so far not been rewarded in some countries.”

Still, he remains a 'believer' in the currency and says that Europe would have been worse off without it.

“There is strong opinion to keep it going... That does require, I think, changes in the structure of European economic policy... If you didn’t have that common currency in Europe, they would have bigger problems than they have now.”

Ie. not all hope is lost, he appears to think there is a solution whereby the euro remains intact and sustainable. Yet he failed to elaborate on how this could be done, saying, “The nature of the problem does not lend itself to one-word sound bites.” Fair enough.

It seems extremely difficult to unwind the euro system now, it has come to far and exiting the euro would require substantial lead time and thus create massive market pressure on the economies involved <
http://www.businessinsider.com/greece-has-legal-ability-to-exit-the-euro-and-even-if-it-did-would-still-be-liable-for-its-massive-euro-debt-2010-5> . The Eurozone may be forced to undergo severe economic and political adjustments in order to manage a currency system they're stuck with. Many Europeans are suddenly realizing that they had no idea what they were agreeing to when they joined the Eurozone.


Read more: http://www.businessinsider.com/volcker-euro-dead-disintegration-2010-5#ixzz0nta13tN7

 

end.

 

The silver scandal is now reaching main street.  The very popular Huffington Post had this to say about the silver manipulation:

I urge you to read the entire article.The story has its origins from the March 25th hearings in Washington where we revealed Andrew Maquire

the whistleblower and then Jeffrey Christian stating that there is 100 x paper gold than real gold out there.

Here is the article written by Tom Pappalardo of the Huffington Post:

 

The Huffington Post

Tom Pappalardo

May 14, 2010 10:14 AMSilver and Gold Markets Are Being Manipulated. It's a Juicy Story You Should Know AboutThe case of Andrew Maguire a London precious metals trader is a very curious one that has profound implications for the world financial system. Hidden in this ugly matter is a possible windfall not only for the big time investors but also the smaller investors that rarely comes along, but more on this later…

-END-

 

For those keeping track, the following gold prices reached record levels yesterday:

 

GOLD PRICED IN STERLING HITS RECORD HIGH AT 852.02 
STG AN OUNCE-REUTERS DATA

GOLD PRICED IN SWISS FRANCS HITS RECORD HIGH AT 
1,388.66 FRANCS AN OUNCE-REUTERS DATA

GOLD PRICED IN EUROS HITS RECORD HIGH AT 989.34 
Gold in Canadian dollars hit a record 1289.00 per oz yesterday.

From Emily Kaiser, economist for the IMF:

 

High public debt may strain growth for years: IMF

By Emily Kaiser

WASHINGTON (Reuters) - Advanced economies face a herculean task to restore public debt to pre-crisis levels, and failure to do so will drive up borrowing costs and curb economic growth, the IMF warned on Friday.

If government debt is not reduced, potential growth in rich countries could decline by more than 0.5 percent annually, the International Monetary Fund said in its "Fiscal Monitor" report, which it launched last year.

In order to accomplish that, advanced economies will need to reverse current account deficits, which now average 4.9 percent, into an average surplus of 3.8 percent by 2020.

That will require a mix of spending cuts and tax increases, neither of which is popular, so mustering the political will to enact those changes may prove difficult…

  

 

end.

 

Bill Holter is on a roll, he continues with his rant on the massive Euro bailout:

 

Bill H:

Houston, we have a problem...a big one!

To all; the FOREX markets have voted a resounding NO to the $1 Trillion bailout by the ECB, IMF and The Fed. The Euro got virtually no bounce on Monday after the announcement and has been all downhill since which should certainly cause some sweaty palms over the weekend. One must ask themselves if $1 Trillion didn't do the trick maybe it just wasn't enough? Maybe they need to double down and announce an additional $2 Trillion over this coming weekend for a total of $3 Trillion? If that doesn't work then announce again the following weekend and so on.

But there is a problem that will surely surface and has already been sniffed out by the Gold market, the $1 Trillion is/was created purely out of thin air and is pure and unadulterated monetization! We have reached the dreaded inflection point that ALL fiat systems arrive at, in order to prevent deflation, debt and currency must be produced in massive amounts just to continue the game which will end in the destruction of ALL fiat values. It is math as sure as the Sun will rise tomorrow! As Richard Russell says, "inflate or die". We have reached that point where the system (amount of debt) is so large that the amount if inflating necessary will kill the underlying currencies but if they don't inflate then the system implodes. Mathematically, all fiat system sow the seeds of their own destruction the day they are created. This is pure math and it is amazing to me that the population worldwide could have been fooled into believing, using and saving in such a system.

This is a currency crisis, a debt crisis, and ultimately will become a production/distribution crisis because business cannot produce if their savings become wiped out and credit gets interrupted. As I have said, civil unrest will be the result. The global governments will be forced into creating new currencies and those currencies must have the confidence of the populace to be accepted. Gold will back these new currencies at some ratio ie. 10%, 25% or whatever. However, the world is so big and the amount of Gold so small that even with only a 10% backing, Gold will need to be "marked up" by multiples. THIS is what Gold is beginning to anticipate right now!

If you have already prepared yourselves, sit back and don't try to be cute by trading. Hold your core position and stand fast because volatility will be unlike anything we have ever seen before. Don't second guess yourself and do not panic, you are right and will be rewarded for your patience. Enjoy your weekend and stay alert, regards, Bill H.

 

end

 

 

For those of you who think that only Europe is in trouble guess again:

Here is a commentary from Jim Sinclair on the state of affairs on Illinois.  This state will have a deficit this year of 6 billion dollars

instead of a balanced year.  This July, they forecast a budget deficit of 13 billion dollars.  The state cannot pay for bullets for guardsmen at

the correction centres.  State legislators are getting eviction notices as the state cannot pay for their rent.  State telephone bills are unpaid.

This state is bankrupt and in worse shape than California.  I also feel that California is a basket case.

 

Anyway here is this important article: (for the complete article press on "more".

The author is Christopher Wills from the Associated Press.  The article appeared in MSNBC

 

Jim Sinclair’s Commentary

The bailout of US states is coming. 33 are in trouble.

Illinois deep in debt, doesn’t pay bills 
Crisis pushes businesses, organizations to edge of bankruptcy 
By CHRISTOPHER WILLS 
updated 1:43 p.m. MT, Thurs., May 13, 2010

SPRINGFIELD, Ill. – For 35 years, frail senior citizens in southern Illinois could turn to the Shawnee Development Council for help cleaning the house, buying groceries or any of the chores that make the difference between living at home or moving to an institution.

No more. The council shut down the program Thursday because of a budget crisis created by the state of Illinois’ failure to pay its bills.

Paralyzed by the worst deficit in its history, the state has fallen months behind in paying what it owes to businesses and organizations, pushing some of them to the edge of bankruptcy.

Illinois isn’t bothering with the formality of issuing IOUs, as California did last year. It simply doesn’t pay.

Plenty of states face major deficits as the recession continues. They’re cutting services or raising taxes or expanding gambling to close the gap. But Illinois is taking the extra step of ignoring bills.

More…

 

 

 

Here are some economic numbers released on Friday:

 

U.S. retail sales rise 0.4 percent in April

WASHINGTON, May 14 (Reuters) - Sales at U.S. retailers rose more than expected in April, lifted by a surprise gain in motor vehicle purchases, government data showed on Friday.

The Commerce Department said total retail sales rose 0.4 percent following an upwardly revised 2.1 percent surge in March. Sales in March were previously reported to have increased 1.9 percent. Retail sales have now increased for seven straight months.

Analysts polled by Reuters had forecast retail sales rising 0.2 percent last month. Compared to April last year, sales were 8.8 percent higher.

Motor vehicle and parts purchases unexpectedly rose 0.5 percent after increasing 6.7 percent in March. Analysts had expected auto sales to fall in April, after automakers reported a decline in unit sales.

Excluding autos, sales rose 0.4 percent last month after rising 1.2 percent in March. April's rise was in line with market expectations.

Households are now participating in the economy's recovery, encouraged by an improving labor market. Economic growth resumed in the second half of 2009 following the worst recession since the Great Depression and continued into the first quarter of this year…

-END-

Dave Kranzlers comments on these numbers:

 

Friday, May 14, 2010

A Couple of Friday Morning Observations...

"Advance" retails sales estimates for April were released by the Commerce Department today. The "adjusted" headline number showed a .4% "seasonally adjusted" increase in total retail sales over March and an 8.8% "adjusted" increase over April 2009. Looking at the unadjusted numbers, however, April sales took a drop from March (maybe because April has one less day), and if you strip out the gain in building materials/hardware, April sales plunged vs. March. I suspect a large part of the building materials gains were price increases.

How realistic are the "adjustments" and are they to be trusted? Doubtful. Here's what the Census Bureau says about the adjustments:

Adjustment of estimates is an approximation based on current and past experiences. Therefore the adjustments could become less precise if current competitive pressures, changes in consumer buying patterns during holiday periods, and other elements introduce significant changes in seasonal, trading-day and holiday patterns.

They give us a table of the adjustment factors but do not go into detail about how the factors are derived. You can explore the issue with this link: Orwell Smiles. Here's the full blown Census Bureau retail sales reports: Orwell Giggles. You decide.

As for the price action in gold and silver, today is the second trading day in the last 6 that we've had a disconnect between the action in the stock futures and gold/silver. This is extraordinarily significant. Historically during this bull market in metals, when I would wake up to see the SPX, Dow and oil futures all getting hammered, I would have expected to see gold down $20 and silver down 50 cents. But not today and not last Thursday. The world is finally starting to understand the true nature of real currency vs. fiat paper and this view is being expressed in today's price action (and last Thursday's). As this disconnect becomes more frequent, look out above for the metals. And on a gold/XAU or HUI ratio basis, the mining stocks have room to at least double vs. gold here. 

If the dollar starts to rollover, we are going to see a very violent and extended move higher in gold, silver and the mining stocks that make believers out of all but the very worst charlatans on CNBC and Bloomberg. And the junior mining stocks will rip off 300-1000% gains. Got gold? Orwell is laughing uncontrollably now.

 

***

 

John Williams comments on this and other numbers:

 

John Williams ofShadowstats has given an update on figures released recently.  These are quite revealing:

note:  retail gains indistinguishable from contraction

trade deficit remains economic negative

budget deficit widens.

 

JimSinclair’s Commentary

Please support John’s excellent service.

- Retail Gain Statistically Indistinguishable from Contraction 
- Revisions Enhance Production Reporting 
- Trade Deficit Remains Economic Negative 
- Budget Deficit Widens Despite Gimmicks

"No. 296: Retail Sales, Production and the Deficits " 
http://www.shadowstats.com

 

 

Finally, we see production numbers increase:

U.S. industrial production heats up in April

WASHINGTON, May 14 (Reuters) - U.S. industrial production forged ahead even more strongly than expected in April in further evidence that some sectors of the economy are humming along despite persistently high unemployment.

Output for the U.S. industrial sector, which accounts for a relatively small portion of the largely service-driven economy, rose 0.8 percent last month after a 0.2 percent increase in March, the Federal Reserve said on Friday.

Economists in a Reuters poll had on median predicted a 0.6 percent gain.

Capacity utilization, a closely watched measure of how fully the economy is employing its productive potential, rose to 73.7 percent, the highest since November 2008, from a revised 73.1 percent in March. April's reading, however, was still 6.9 percentage points below the 1972-2009 average.

The Fed -- the U.S. central bank -- has listed resource use among factors it is monitoring to determine when to begin raising benchmark interest rates, which stand effectively at zero.

The report showed manufacturing output expanded 1 percent, and mining 1.4 percent. Utilities, a volatile category, dropped 1.3 percent.

-END-

Looks like the teachers have got some problems.  Obama may come to the rescue with a 23 billion bailout:

Obama Administration Backs $23B Bill to Save Teacher Jobs 
Up to 300,000 Public School Teachers May Lose Their Jobs This Year Due to Local Budget Cuts
 
By MARY BRUCE 
May 14, 2010

The Obama administration came out Thursday in support of emergency education funding legislation that would provide $23 billion to preserve teacher jobs in the face of massive impending layoffs across the country.

"We are gravely concerned that ongoing state and local budget challenges are threatening hundreds of thousands of teacher jobs for the upcoming school year, with estimates ranging from 100,000 to 300,000 education jobs at risk," Education Secretary Arne Duncan wrote in a letter to House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev.

"Without swift action, millions of children will experience these budget cuts in one way or another through reductions in class time; cuts to early childhood programs, extracurricular activities, and summer school; and reduced course offerings as teachers are laid off," the letter continued.

Duncan’s letter, which received White House support, urged Congress to include the emergency funding in an upcoming supplemental spending bill to fund military operations and other expenses.

"We know that economic prosperity and educational success go hand in hand, which is why the Obama administration is concerned by looming state and local budget cuts that threaten the jobs of hundreds of thousands of teachers across the country," Domestic Policy Director Melody Barnes wrote in a blog posted yesterday to the White House website.

More…

 I will leave you today with this cartoon:

clip_image002

 

and this recap of the weeks events from Greg Hunter of  USA watchDog.

Recent headlines coming out of the financial world have been jaw dropping.  Here are a few: US faces same problems as Greece, says Bank of England (The Telegraph), World markets rattled by Goldman fraud (The Economic Times), Goldman Sachs faces criminal investigation (Guardian UK), Government Probe into Wall Street Sales Widening (Fox Business), SEC expects early findings on dramatic, 1,000 point market drop next week (The Hill), Feds probing JPMorgan trades in silver pit (NY Post), Federal Reserve lends bucket to EU bailout (Politico),and NY AG investigates if banks misled ratings agencies (WABC).   

My favorite headline is Major Wall Street firms face criminal probe (Reuters), because the article goes on to name all of the big players.  The Reuters story says, “. . . preliminary criminal probe is being conducted with U.S. securities regulators and involves JPMorgan Chase, Citigroup, Deutsche Bank, UBS, Morgan Stanley and Goldman Sachs Group Inc.  The person said the investigation included mortgage-bond deals, that it was in an early stage and that it might not necessarily lead to criminal charges against all of the firms. The person spoke anonymously because the probe is ongoing.”

None of the financial institutions named above have been convicted of any wrongdoing. They all basically say they did nothing wrong.  Can all this negative press just be a big overblown mistake?  Mind you, the above headlines are recent, as in the past week or so.  I say when you put all the headlines together, it sure looks to me like the financial system is corrupt.  The financial markets are a rigged game.  The game is played to enrich the big fat cat trader and rip-off the little guy of his hard earned savings.

Rigged games are doomed to fail.  Eventually, everybody realizes the only money walking out the door is in the pockets of the house.  In this case, the house is the big Wall Street banks.  In my mind, the negative headlines all point to one thing–the rigged game is coming to an end.

Printing money out of thin air to bailout every bank and country in the Western World is increasing risk according to NYU Professor of Risk Engineering, Nassim Taleb.  Taleb said this week, “The problem is debt, and you don’t cure debt with debt.”  Taleb, who wrote the runaway best seller, “The Black Swan,” says he’s worried about a “failed (Treasury) auction.”  He thinks the government will eventually be forced to buy its own Treasuries because no one else will buy them.  He is also worried about “hyperinflation” caused by all the government money printing for bailouts.    Please watch this very informative video below.  It doesn’t get interesting until about a third of the way in:

Link to full article on USAWatchdog.com…

ShareThis

 

 

See you all next week

Harvey


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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From Emily Kaiser, economist for the IMF:

 

High public debt may strain growth for years: IMF

By Emily Kaiser

WASHINGTON (Reuters) - Advanced economies face a herculean task to restore public debt to pre-crisis levels, and failure to do so will drive up borrowing costs and curb economic growth, the IMF warned on Friday.

If government debt is not reduced, potential growth in rich countries could decline by more than 0.5 percent annually, the International Monetary Fund said in its "Fiscal Monitor" report, which it launched last year.

In order to accomplish that, advanced economies will need to reverse current account deficits, which now average 4.9 percent, into an average surplus of 3.8 percent by 2020.

That will require a mix of spending cuts and tax increases, neither of which is popular, so mustering the political will to enact those changes may prove difficult…

  

 

end.

 

Bill Holter is on a roll, he continues with his rant on the massive Euro bailout:

 

Bill H:

Houston, we have a problem...a big one!

To all; the FOREX markets have voted a resounding NO to the $1 Trillion bailout by the ECB, IMF and The Fed. The Euro got virtually no bounce on Monday after the announcement and has been all downhill since which should certainly cause some sweaty palms over the weekend. One must ask themselves if $1 Trillion didn't do the trick maybe it just wasn't enough? Maybe they need to double down and announce an additional $2 Trillion over this coming weekend for a total of $3 Trillion? If that doesn't work then announce again the following weekend and so on.

But there is a problem that will surely surface and has already been sniffed out by the Gold market, the $1 Trillion is/was created purely out of thin air and is pure and unadulterated monetization! We have reached the dreaded inflection point that ALL fiat systems arrive at, in order to prevent deflation, debt and currency must be produced in massive amounts just to continue the game which will end in the destruction of ALL fiat values. It is math as sure as the Sun will rise tomorrow! As Richard Russell says, "inflate or die". We have reached that point where the system (amount of debt) is so large that the amount if inflating necessary will kill the underlying currencies but if they don't inflate then the system implodes. Mathematically, all fiat system sow the seeds of their own destruction the day they are created. This is pure math and it is amazing to me that the population worldwide could have been fooled into believing, using and saving in such a system.

This is a currency crisis, a debt crisis, and ultimately will become a production/distribution crisis because business cannot produce if their savings become wiped out and credit gets interrupted. As I have said, civil unrest will be the result. The global governments will be forced into creating new currencies and those currencies must have the confidence of the populace to be accepted. Gold will back these new currencies at some ratio ie. 10%, 25% or whatever. However, the world is so big and the amount of Gold so small that even with only a 10% backing, Gold will need to be "marked up" by multiples. THIS is what Gold is beginning to anticipate right now!

If you have already prepared yourselves, sit back and don't try to be cute by trading. Hold your core position and stand fast because volatility will be unlike anything we have ever seen before. Don't second guess yourself and do not panic, you are right and will be rewarded for your patience. Enjoy your weekend and stay alert, regards, Bill H.

 

end

 

Here are some economic numbers released on Friday:

 

U.S. retail sales rise 0.4 percent in April

WASHINGTON, May 14 (Reuters) - Sales at U.S. retailers rose more than expected in April, lifted by a surprise gain in motor vehicle purchases, government data showed on Friday.

The Commerce Department said total retail sales rose 0.4 percent following an upwardly revised 2.1 percent surge in March. Sales in March were previously reported to have increased 1.9 percent. Retail sales have now increased for seven straight months.

Analysts polled by Reuters had forecast retail sales rising 0.2 percent last month. Compared to April last year, sales were 8.8 percent higher.

Motor vehicle and parts purchases unexpectedly rose 0.5 percent after increasing 6.7 percent in March. Analysts had expected auto sales to fall in April, after automakers reported a decline in unit sales.

Excluding autos, sales rose 0.4 percent last month after rising 1.2 percent in March. April's rise was in line with market expectations.

Households are now participating in the economy's recovery, encouraged by an improving labor market. Economic growth resumed in the second half of 2009 following the worst recession since the Great Depression and continued into the first quarter of this year…

-END-

Dave Kranzlers comments on these numbers:

 

Friday, May 14, 2010

A Couple of Friday Morning Observations...

"Advance" retails sales estimates for April were released by the Commerce Department today. The "adjusted" headline number showed a .4% "seasonally adjusted" increase in total retail sales over March and an 8.8% "adjusted" increase over April 2009. Looking at the unadjusted numbers, however, April sales took a drop from March (maybe because April has one less day), and if you strip out the gain in building materials/hardware, April sales plunged vs. March. I suspect a large part of the building materials gains were price increases.

How realistic are the "adjustments" and are they to be trusted? Doubtful. Here's what the Census Bureau says about the adjustments:

Adjustment of estimates is an approximation based on current and past experiences. Therefore the adjustments could become less precise if current competitive pressures, changes in consumer buying patterns during holiday periods, and other elements introduce significant changes in seasonal, trading-day and holiday patterns.

They give us a table of the adjustment factors but do not go into detail about how the factors are derived. You can explore the issue with this link: Orwell Smiles. Here's the full blown Census Bureau retail sales reports: Orwell Giggles. You decide.

As for the price action in gold and silver, today is the second trading day in the last 6 that we've had a disconnect between the action in the stock futures and gold/silver. This is extraordinarily significant. Historically during this bull market in metals, when I would wake up to see the SPX, Dow and oil futures all getting hammered, I would have expected to see gold down $20 and silver down 50 cents. But not today and not last Thursday. The world is finally starting to understand the true nature of real currency vs. fiat paper and this view is being expressed in today's price action (and last Thursday's). As this disconnect becomes more frequent, look out above for the metals. And on a gold/XAU or HUI ratio basis, the mining stocks have room to at least double vs. gold here. 

If the dollar starts to rollover, we are going to see a very violent and extended move higher in gold, silver and the mining stocks that make believers out of all but the very worst charlatans on CNBC and Bloomberg. And the junior mining stocks will rip off 300-1000% gains. Got gold? Orwell is laughing uncontrollably now.

 

***

 

John Williams comments on this and other numbers:

 

John Williams os Shadowstats has given an update on figures released recently.  These are quite revealing:

note:  retail gains indistinguishable from contraction

trade deficit remains economic negative

budget deficit widens.

 

Jm Sinclair’s Commentary

Please support John’s excellent service.

- Retail Gain Statistically Indistinguishable from Contraction 
- Revisions Enhance Production Reporting 
- Trade Deficit Remains Economic Negative 
- Budget Deficit Widens Despite Gimmicks

"No. 296: Retail Sales, Production and the Deficits " 
http://www.shadowstats.com

 

 

Finally, we see production numbers increase:

U.S. industrial production heats up in April

WASHINGTON, May 14 (Reuters) - U.S. industrial production forged ahead even more strongly than expected in April in further evidence that some sectors of the economy are humming along despite persistently high unemployment.

Output for the U.S. industrial sector, which accounts for a relatively small portion of the largely service-driven economy, rose 0.8 percent last month after a 0.2 percent increase in March, the Federal Reserve said on Friday.

Economists in a Reuters poll had on median predicted a 0.6 percent gain.

Capacity utilization, a closely watched measure of how fully the economy is employing its productive potential, rose to 73.7 percent, the highest since November 2008, from a revised 73.1 percent in March. April's reading, however, was still 6.9 percentage points below the 1972-2009 average.

The Fed -- the U.S. central bank -- has listed resource use among factors it is monitoring to determine when to begin raising benchmark interest rates, which stand effectively at zero.

The report showed manufacturing output expanded 1 percent, and mining 1.4 percent. Utilities, a volatile category, dropped 1.3 percent.

-END-

Looks like the teachers have got some problems.  Obama may come to the rescue with a 23 billion bailout:

Obama Administration Backs $23B Bill to Save Teacher Jobs 
Up to 300,000 Public School Teachers May Lose Their Jobs This Year Due to Local Budget Cuts
 
By MARY BRUCE 
May 14, 2010

The Obama administration came out Thursday in support of emergency education funding legislation that would provide $23 billion to preserve teacher jobs in the face of massive impending layoffs across the country.

"We are gravely concerned that ongoing state and local budget challenges are threatening hundreds of thousands of teacher jobs for the upcoming school year, with estimates ranging from 100,000 to 300,000 education jobs at risk," Education Secretary Arne Duncan wrote in a letter to House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev.

"Without swift action, millions of children will experience these budget cuts in one way or another through reductions in class time; cuts to early childhood programs, extracurricular activities, and summer school; and reduced course offerings as teachers are laid off," the letter continued.

Duncan’s letter, which received White House support, urged Congress to include the emergency funding in an upcoming supplemental spending bill to fund military operations and other expenses.

"We know that economic prosperity and educational success go hand in hand, which is why the Obama administration is concerned by looming state and local budget cuts that threaten the jobs of hundreds of thousands of teachers across the country," Domestic Policy Director Melody Barnes wrote in a blog posted yesterday to the White House website.

More…

 I will leave you today with this cartoon:

clip_image002

 

and this recap of the weeks events from Greg Hunter of  USA watchDog.

end.

 

end.

 

Or how about this story from business insider where Paul Volcker is stating that the Euro is on the brink of extinction:

Volcker: The Euro Is On The Brink Of Extinction
Vincent Fernando, CFA <http://www.businessinsider.com/author/vincent-fernando-cfa> | May. 14, 2010, 4:44 AM


Paul Volcker has added his substantial intellectual weight to the chorus of professionals worried about a complete disintegration of the euro, in a London speech yesterday according to Bloomberg. <
http://www.bloomberg.com/apps/news?pid=20601087&sid=aASZ4SCDL3uQ&pos=4>

That's because “The essential element of discipline in economic policy and in fiscal policy that was hoped for” has “so far not been rewarded in some countries.”

Still, he remains a 'believer' in the currency and says that Europe would have been worse off without it.

“There is strong opinion to keep it going... That does require, I think, changes in the structure of European economic policy... If you didn’t have that common currency in Europe, they would have bigger problems than they have now.”

Ie. not all hope is lost, he appears to think there is a solution whereby the euro remains intact and sustainable. Yet he failed to elaborate on how this could be done, saying, “The nature of the problem does not lend itself to one-word sound bites.” Fair enough.

It seems extremely difficult to unwind the euro system now, it has come to far and exiting the euro would require substantial lead time and thus create massive market pressure on the economies involved <
http://www.businessinsider.com/greece-has-legal-ability-to-exit-the-euro-and-even-if-it-did-would-still-be-liable-for-its-massive-euro-debt-2010-5> . The Eurozone may be forced to undergo severe economic and political adjustments in order to manage a currency system they're stuck with. Many Europeans are suddenly realizing that they had no idea what they were agreeing to when they joined the Eurozone.


Read more: http://www.businessinsider.com/volcker-euro-dead-disintegration-2010-5#ixzz0nta13tN7

 

end.

 

The silver scandal is now reaching main street.  The very popular Huffington Post had this to say about the silver manipulation:

I urge you to read the entire article.The story has its origins from the March 25th hearings in Washington where we revealed Andrew Maquire

the whistleblower and then Jeffrey Christian stating that there is 100 x paper gold than real gold out there.

Here is the article written by Tom Pappalardo of the Huffington Post:

 

The Huffington Post

Tom Pappalardo

May 14, 2010 10:14 AM

Silver and Gold Markets Are Being Manipulated. It's a Juicy Story You Should Know About

The case of Andrew Maguire a London precious metals trader is a very curious one that has profound implications for the world financial system. Hidden in this ugly matter is a possible windfall not only for the big time investors but also the smaller investors that rarely comes along, but more on this later…

-END-

 

For those keeping track, the following gold prices reached record levels yesterday:

 

GOLD PRICED IN STERLING HITS RECORD HIGH AT 852.02 
STG AN OUNCE-REUTERS DATA

GOLD PRICED IN SWISS FRANCS HITS RECORD HIGH AT 
1,388.66 FRANCS AN OUNCE-REUTERS DATA

GOLD PRICED IN EUROS HITS RECORD HIGH AT 989.34 

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