Saturday, June 5, 2010

commentary June 5.2010..very important.

Good morning Ladies and Gentlemen:
Here are the latest casaulties that have arrived in splendour to  our banking morgue:

Bank Failure - 2010 Bank Failures

June 4, 2010  Bank failures grow to 80 for the year. On Friday, Federal and State regulators closed 2 small banks, one located in Mississippi and the other in Illinois. Assets of the two failed banks totaled $77.4 million, and at a cost to the FDIC's DIF of $15.8 million. In May, the number of bank failures total 14, with assets totaling $6.25 billion and at a cost to the FDIC of $838.4 million, compared to April when there were 23 bank failures, with assets totaling $39.0 billion and at a cost to the FDIC of $9.42 billion.
FDIC Bank Failures
Year No. of Failed Banks Total Assets of Failed Banks Loss to FDIC's DIF
2007 3 $2,602,500,000 $113,000,000
2008 25 $373,588,780,000 $15,708,200,000
2009 140 $170,867,000,000 $36,432,500,000
2010 80 $68,171,000,000 $16,786,600,000
Total 248 $615,229,280,000 $69,040,300,000

Since the start of the financial crisis in 2007, there have been 248 bank failures with assets totaling a staggering $615.2 billionand deposits totaling $430.2 billion, and at a cost to the FDIC of $69.0 billion. 

In 2009, there were 140 bank failures with assets totaling $170.9 billion and at an estimated cost to the FDIC's DIF of $36.43 billion, the five largest bank failures being BankUnited with $12.8 billion in assets, Colonial Bank with $25 billion in assets, Guaranty Bank with $13 billion in assets, United Commercial Bank with $11.2 billion in assets, and AmTrust Bank with $12 billion in assets. 

In 2008, there were 25 bank failures with assets totaling $373.6 billion. Washington Mutual Bank, which failed Feb 2008 and with assets totaling $307 billion, is by far the largest US bank failure in recent history. Below is a list of bank failures, compiled from theFDIC's failed bank data - FDIC failed bank list. 

The collapse of the housing market, and the increase in mortgage delinquencies and home foreclosures, coupled with the credit crisis have all led to a dramatic increase in bank failures over the past few years. When banks fail, the FDIC is appointed as receiver. Depositors are protected up to the FDIC insurance limit. In most cases, the FDIC arranges for the branches and insured deposits to be transferred to another well capitalized bank, and banking services for the failed bank's customers generally continue uninterrupted. 

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Actually, there was a third bank to fail and it was one of the biggest banks in Nebraska. The FDIC reported this failure late last night.

TierOne Bank fails

By Steve Jordon

TierOne Corp. of Lincoln became the largest bank failure in Nebraska history Friday, crushed by hundreds of millions of dollars in bad loans on out-of-state real estate developments.

Great Western Bank bought TierOne's 69 branch offices — nine in Iowa, one in Kansas and 59 in Nebraska — and assumed all $2.2 billion of its deposits, then prepared to re-open the offices Saturday morning as Great Western locations.

The Federal Deposit Insurance Corp. took control of TierOne at the request of its federal regulator, the U.S. Office of Thrift Supervision, which had placed the Lincoln bank under tight supervision in January 2009 because of the bad loans in Florida, Nevada, Arizona and some other states.

Larry Marik, chairman of the Nebraska Bankers Association, said TierOne did a good job of financing residential construction in Nebraska and Iowa but was attracted to "hot" housing markets outside its home territory.

"Many banks have suffered the consequences of what happened there. Unfortunately the house of cards just crumbled, and they obviously are one of the casualties," he said of TierOne.

The failure should not reflect badly on other Nebraska banks, he said, and the good news is that the buyer is Great Western, a bank with extensive experience in Nebraska and Iowa.

TierOne's failure was the first in the state related to the housing market collapse, and other Nebraska banks have not played in the turbulent residential markets that were TierOne's downfall, Marik said.

At the bank's headquarters at 1235 N St. in Lincoln, many employees left work as usual at 5 p.m. but then returned before 6 p.m. for a meeting with FDIC and Great Western officials about the transition to the new owner.

The FDIC delayed its announcement of the closing until TierOne's offices in the Mountain Time Zone had closed.

"Nobody lost any money," said Edith Gray, an FDIC ombudsman from Dallas who is part of an FDIC crew overseeing the transition to Great Western. 

She was referring to depositors, whose money remains covered by FDIC deposit insurance.

In some bank failures, the purchasing bank doesn't take all the assets. Depositors may lose money in accounts over the limit of FDIC insurance.

Great Western's headquarters is in Sioux Falls, S.D., and its parent company is the National Australia Bank, although its history traces back to the former Douglas County Bank of Omaha.

The closure will cost the FDIC's deposit insurance fund an estimated $297.8 million. That money comes from premiums paid by federally insured financial institutions. Those premiums have been increasing, adding to expenses that banks make up through their charges to customers. So far this year, 81 FDIC-insured institutions have failed, including three on Friday.

Soon after the evening meeting with employees began, a trio of delivery vehicles from Valentino's Pizza arrived, with workers carting in several dozen pizzas. Many of the FDIC and bank employees would work through the night and over the weekend on the transition to Great Western ownership.

There was no immediate word from Great Western on how many of TierOne's 764 employees would keep their jobs.

"We haven't had a chance to really assess this," said Colin Anderson of Omaha, regional president for Great Western in Nebraska. "This all happened very quickly. We hope that over the next 30 days or so we are going to be able to determine what those plans might be."

In many such cases, workers at branch offices are offered positions with the new bank but those with central office functions lose their jobs. One TierOne employee was seen crying in her office and later leaving with her husband, who said she had worked for the bank for 26 years.

Nebraska State Patrol officers were on hand, but there were no problems outside the headquarters.

Before the takeover, there was little overlap in where TierOne and Great Western operate branch banks. Both had offices only in O'Neill, Neb.; Red Oak, Iowa; and Omaha. 

Great Western has 20 Omaha offices and TierOne eight.

Ironically, Great Western had agreed last year to acquire 32 of TierOne's offices, but federal authorities rejected that plan. Friday, Anderson said, "Obviously we're delighted that we're ending up with all 69."

He said the former TierOne offices would open Saturday at their regular times with the former TierOne staff members on duty, plus a Great Western employee at each office. The offices would conduct "business as usual," he said.

While the meetings were going on Friday evening, one man came to use the ATM and apparently completed his transaction with no problems.

The regulators said TierOne had $556.6 million in bad loans, nearly 20 percent of its $2.8 billion in assets. The Lincoln bank had been working for more than a year and a half to resolve the loan problems, and as recently as Tuesday had agreed to come up with a new plan to raise more capital.

But TierOne had lost money in 10 of the last 11 quarters and did not submit an acceptable plan to recover, the Office of Thrift Supervision said. 

The bank's failure had been widely expected because its loan problems were the subject of public documents, including $300 million in losses last year that depleted much of its capital. The losses continued this year, prompting the Office of Thrift Supervision to say this week that TierOne's financial problems "are unlikely to be able to be resolved successfully without federal intervention and the appointment of a conservator or receiver."

Since the bank didn't have enough capital to back up its loans, the Office of Thrift Supervision declared it insolvent, and the FDIC arranged the sale to Great Western.

Great Western paid a $33 premium for TierOne's deposits and agreed to work with the FDIC to resolve $1.9 billion of TierOne's troubled assets. Typically under such agreements the FDIC takes 80 percent of any losses and the bank 20 percent.

The FDIC handled two other bank closings Friday, one in Rosedale, Miss., and the other in Arcola, Ill. The Mississippi bank had a buyer, but the Illinois bank did not. Its depositors are to receive checks from the FDIC for their insured accounts.

Nebraska's most recent bank closing, that of the Sherman County Bank in Loup City in February 2009, resulted from improper commodity trading.

World-Herald Staff Writer Martha Stoddard contributed to this report.

OK let us begin with todays physical gold and silver comments:
Gold closed yesterday up by $7.90. Its final resting price at 1:30 Friday was  $1216.20.  It continued to rally in the access market closing at $1220.00
Silver closed down 63 cents to $17.92 as the banking cartel continue to press and control the pricing of this metal.
The gold comex OI fell by 4243  contracts to 548,614 which is a small drop despite a massive assault of shorting by the banking cartel.
The silver comex Oi went up by 362 contracts.  In other words, the silver long holders did not budge from their positions and accepted the lower silver price and accumulated at those lower levels.
Before going into the physical gold and silver inventories, lets review the COT report which was released at 3:30 yesterday:
In gold, here are the standings of the various holders of a gold comex contract basis last Tuesday:

The gold COT report revealed…

*The large specs decreased longs by 4615 contracts and decreased shorts by 1470.

*The commercials increased longs by 5,339 contracts and increased shorts by 4,643.

*The small specs decreased longs by 2,339 and decreased shorts by 4,728.


As you can see, the large speculators reduced their long positions by a rather large 4600 contracts but also reduced their shorts

by 1470 contracts.


The fun begins in the commercial sector where the small and intermediate bankers increased their longs by a large 5339 contracts, but their larger

cousins, the JPMorgans of the world increased their shorts again by 4643.


The small specs are really not involved.


The story with silver is identical to gold COT, with the large commercials continually adding to their short positions, a task that they have been doing every day 5 times a week.


Let us now go to the gold and silver physical inventories at the comex:


COMEX Warehouse Stocks June 4, 2010


ZERO ozs withdrawn from the dealer's (registered) inventory 
574,293 ozs deposited in the customer (eligible) inventory 
Total dealer inventory 52.46 Mozs 
Total customer inventory 65.46 Mozs 
Combined Total 117.92 Mozs


ZERO ozs withdrawn from the dealers (registered) category 
ZERO ozs withdrawn from the customer (eligible) category 
Total dealer inventory 3.24 Mozs 
Total customer inventory 7.49 Mozs 
Combined Total 10.74 Mozs




Notes:  June is a delivery month and to see no movement into or out of dealer/customer inventories.  It is truly amazing.

In silver we saw a deposit of 574,293 oz but this deposit did not come from a dealer inventory. We still do not see any

delivery action in silver on the two big delivery months of March( 22 million oz) and May (24 million oz)


We shall now go to the delivery notices:

In gold:


There were 118 delivery notices issued in the JUN gold contract. The JUN gold delivery notice total for the month is 18,428 notices or 1,842,800 ozs.


There were 118 delivery notices issued which represents 11800 oz of gold.  The new total of delivery slips served equates to 1,842,800 oz of gold


What is left?


The open interest in JUN gold is 3,555 contracts or 0.36 Mozs.


this total represents 355,000 oz of gold.


The total of gold standing for this delivery month is as follows:


1,842800  (delivery slips served)  +  355,000 (oz to be served ..have not found the gold yet) +  204,000 oz (options exercised in May for gold which stand in June, a delivery month) =


24,018,800 oz.,  This 24 million oz is a touch higher than Thursday's reading as probably a little more of June options were exercised for gold metal.  The 24 million oz in tonnes translates to 77.4 tonnes of gold.


Let's go to silver:

There were 5 delivery notices issued in the JUN silver contract. The total delivery notices for the month in silver stand at 11.


The total number of oz in this non delivery month equates to  55,000 oz.

The action is clearly in the gold arena.


As for our two major physical ETF's, the Central Fund of Canada and PHYS, here are their premiums to NAV:


The CEF bullion vehicle closed with a 6.8% premium to NAV (Wednesday 8.9%) and PHYS at a premium of 10.711% (Wednesday 10.971%).


The following news release has us completely bewildered.  The gold ETF on Thursday night reported a huge increase of 21 tonnes of gold right after the slamming of gold at the comex:

The addition of 21.3 tonnes sets a new record for this entity.


The GLD ETF added a very large 21.300511 tonnes (1.68%) to a new record high of 1,289.83926 tonnes.


It is rather strange that the two physical etf's mentioned above have been having great difficulty in finding gold and silver metal.  Yet the GLD and SLV entities are having no trouble.

Everyday this week, the GLD added to its inventory.


The GLD authorities have entered into an agreement with the Bank of England whereby they swap dollars for gold.  The Bank of England  is a foreign depository for gold.  Not only does it store gold

for itself but it stores for Arab interests, other foreign nations and other big private entities. Catherine Fitts has discovered in their indentures that the GLD can receive swapped gold in return for cash.

Reg Howe has determined that the BIS data confirms that the forwards sold short match the gold received by GLD.


The deal is simple:  GLD swaps dollars it receives from shareholders thinking they are buying gold and the Bank of England moves gold from one cupboard at the Bank to another cupboard called GLD.

Dollars are sent to the bank as collateral as the Bank of England will at one point wish to get this private/sovereign gold back.  The bank will return dollars back to the GLD custodians once private holders ask for their gold back.

However you can now see the problem.  The dollars on deposit at the bank have not increased in price as gold has increased.  When the day of reckoning comes, they will be not only dollar short

on the amount of gold holdings it is suppose to have (and thus cannot repay shareholders), but will be short actual gold metal if these custodial bozos settled GLD gold at the comex and LBMA!

(and cannot repay metal back to the Bank of England as it has been encumbered)


With the turmoil in the Euro, it is not inconceivable to see  private interests ask for their gold and move it onto their domain for safekeeping.

At that point we will have our "Houston, we have a problem"!


Here is a story written by James Turk.  It shows how the German citzenry have basically bought gold with their Euros thinking a collapse of the Euro is imminent:


James Turk: Germans are voting with their pocketbook

Submitted by cpowell on 07:25AM ET Friday, June 4, 2010. Section: Daily Dispatches

7:21a PT Friday, June 4, 2010
Dear Friend of GATA and Gold:

GoldMoney founder James Turk observed yesterday that Germans are voting on currencies, exchanging their euros for real gold. Turk, editor of the Freemarket Gold & Money Report and consultant to GATA, says the European Central Bank, in buying government bonds, "is now controlled by politicians." Turk's commentary is headlined "Germans Are Voting with their Pocketbook" and you can find it at the FGMR Internet site here:





Let us now go to the big economic story of the day and that is the jobs number.

The payroll numbers increased by 431,000.  However as I pointed out to you on Thursday, the usa hired 411,000 census workers for May.

These workers will be let go at the end of this month.  If you subtract the 411,000 census workers you have got a gain of only 20,000 workers.

The fictictious B/D plug figure however came was a ridiculous" gain " of  215,000 jobs.  If you lose your job (Death) the BLS thinks you become an entrepreneur and you start a new business (Birth)

This is nothing but pure fiction. In actuality the usa lost over 100,000 jobs.


Here is the official report on the jobs front from the BLS:


U.S. economic news:

08:31 May average hourly earnings m/m 0.3% vs. consensus 0.1%; average weekly hours 34.2 vs. consensus 34.1

* Apr average hourly earnings m/M revised to 0.1% from 0.0% * average weekly hours unrevised from 34.0
* * * * *

U.S. nonfarm payrolls hit 10-year high on Census

* Nonfarm payrolls grow 431,000, fastest since March 2000

* Private hiring rises 41,000, census jobs 411,000

* Unemployment rate dips to 9.7 pct from 9.9 pct in April

* Average workweek 34.2 hours from 34.1 hours

WASHINGTON, June 4 (Reuters) - U.S. nonfarm payrolls grew at their fastest pace in 10 years in May, buoyed by recruitment for the decennial census, but private hiring slowed sharply as businesses opted to increase hours rather than hire new workers.

The Labor Department said on Friday payrolls rose 431,000 as the government hired 411,000 workers to conduct the population count. That was the largest monthly increase since March 2000 and marked a fifth straight month of gains.

Private employment, a barometer of labor market strength, increased just 41,000 after rising 218,000 in April. Employers did increase hours, however, and the average workweek increased to 34.2 hours from 34.1 hours in April.

Payrolls data for March and April was revised to show 22,000 fewer jobs created than previously reported. May's hefty employment gain lowered the unemployment rate to 9.7 percent from 9.9 percent in April.

Analysts polled by Reuters had expected non-farm payrolls to rise 513,000 and private businesses to create 190,000 jobs. The jobless rate had been seen dipping to 9.8 percent.

The economy has now grown for three straight quarters and the recovery from the worst recession since the Great Depression of the 1930s is broadening out.

The jobless rate is a drag on President Barack Obama's popularity and could cost the Democratic Party dearly in November's congressional elections, with voters in an anti-incumbent and anti-Washington mood.

Unemployment will probably remain high through the year as the millions of people who lost their jobs during the recession seek work.

The firming jobs market may encourage those who dropped out of the labor force to resume their search, which could keep the jobless rate elevated because workers are counted as unemployed only if they are actively looking for work.

Outside the census, hiring slowed significantly from the prior months. The dominant services sector, saw payrolls increase 37,000 after surging 156,000 in April. The goods producing sector created only 4,000 new jobs following 62,000 jobs in April. This was as construction employment fell 35,000 after gaining 14,000 in April.

Recruitment for the population count saw government employment rising 390,000, overshadowing the drag from jobs cuts in cash-strapped states and localities.

Job growth is critical to sustain a rebound in consumer spending, especially now that recovery in Europe is under threat from government spending cuts to bring down huge budget deficits.

The debt crisis, stemming from Greece's fiscal problems, has hammered global stock markets, but analysts so far see a limited impact on the U.S. economy.



Here is a great report on the jobs number from Dave Kranzler:


Dave from Denver…

Friday, June 4, 2010

WHOOPS! I Thought Obama Said To Expect A Strong Employment Report

Based on today's true picture of the economy and employment, what we can expect is a massive new stimulus Bill to make its way through Congress, to be followed by an even more massive Quantitative Easing (aka printing press/helicopter drop operation) to be announced by the Fed. Obviously this will be hugely bullish for gold and silver and is probably why gold is currently up the day despite the bloodbath in the stock market.

Let's look at the facts and figures. The headline number reported that U.S. payrolls rose by 431,000 in May. BUT, 411,000 of that number was from the temporary employment of Census workers. I know someone who took a Census job and his work is finished and he can't find a private sector job to save his life.

The Government is reporting that the private sector added 41,000 jobs. Hmmm...By now everyone probably at least has heard about the nefarious Birth/Death model of jobs creation used by the BLS. This fraudulent metric is used to calculate the number jobs they THINK has been created by new businesses formed during the month less businesses that closed during the month. Interesting theory to say the least. The Birth/Death model for the month of May estimates that 215,000 net new jobs were created by new business start-ups. Anyone know of anyone who has started a new business and hired people? I don't.

Here's a sampling of the business sectors which the Govt purports to have created the most jobs based on new business formation: 78k in Leisure and Hospitality (medical marijuana shops and liquor stores?), 27k in Business and Professional Services (prostitutes maybe?), and 41k in Construction (???). Go figure. For accounting purposes, it's not accurate just to subtract the 215k birth/death jobs from the headline number to figure out the real jobs picture. But what we can say with 100% certainty is that, given the fantasy number of 215k birth/death jobs, the private sector absolutely did not create 41k payroll jobs. In fact, we can generalize that if you subtract the 411k census jobs from 431k total jobs, the private sector payroll actually declined, probably by about 100k (I will assume some new jobs actually were created by existing and new businesses). Here's a link to the Birth/Death data: Govt Fantasy.

The unemployment rate is another matter altogether. The Govt claims that the jobless rate fell to 9.7% from 9.9% the month before. BUT, the overall labor force declined by 322k. What that number represents is people who want jobs but have given up looking. If you go by the Govt "U6" report, which shows the number of people who are working part-time but want to work full-time or who stopped looking but want to work, the unemployment rate is more like 17%. If you use the method of unemployment calculation used when Clinton was President - a number that John Williams of calculates, the jobless rate is more like 22%.

Two days ago Obama gave a speech at Carnegie Mellon in which he proudly proclaimed that we should expect a strong jobs report today: HUH? I didn't know Obama had any economics classes in college or grad school. But does anyone consider today's jobs report to be strong? We better HOPE and pray that Obama can CHANGE course and become the leader and reformer that he marketed himself to be during his campaign. If he's no better as a President than he is as an economist, we're screwed.





John Williams of reports:


Jim Sinclair's Commentary

We cannot do without John William's, a by subscription service.

- May Nonfarm Payrolls Rose 20,000 Net of 411,000 Temporary Census Hires and Fell by 31,000 after Revisions and Birth-Death Model Shenanigans  
- May Household-Survey Employment Fell by 35,000 
Irrespective of Census Hires  
- Unemployment Rates Were Artificially Low Due to Census Effects: 9.7% (U.3), 16.9% (U.6), 21.7% (SGS)  
- M3 Signal for Double-Dip Downturn Intensifies

No. 300: May Employment and Unemployment"





Robert Reich is the former Labour secretary in the Clinton administration and is a professor at Berkeley.  He latest commentary is quite the piece.

Reich correctly addresses the average length of unemployment rising to 34.4 weeks from 33 weeks. He correctly states that the consumer is tapped out,

and that many Americans are discouraged looking for a job as businesses simply do not hire.  Banks continue not to loan to anybody as they park their excess reserves

at the Fed.  In Reich's opinion, the usa is falling into a double dip recession:


Robert Reich

Former Secretary of Labor, Professor at Berkeley

Posted: June 4, 2010 10:17 AM

>Why We're Falling Into a Double-Dip Recession

We're falling into a double-dip recession.

The Labor Department reports this morning that the private sector added a measly 41,000 net new jobs in May. But at least 100,000 new jobs are needed every month just to keep up with population growth.

In other words, the labor market continues to deteriorate.

The average length of unemployment continues to rise -- now up to 34.4 weeks (up from 33 weeks in April). That's another record.

More Americans are too discouraged to look for a job than last year at this time (1.1 million in May, an increase of 291,000 from a year earlier).

Of the small number of jobs created by the private sector in May, many came from temporary help services.

Which is one reason why the median wage continues to drop.

Why are we having such a hard time getting free of the Great Recession? Because consumers, who constitute 70 percent of the economy, don't have the dough. They can't any longer treat their homes as ATMs, as they did before the Great Recession.

Businesses won't rehire if there's not enough demand for their goods and services.

The only reason the economy isn't in a double-dip recession already is because of three temporary boosts: the federal stimulus (of which 75 percent has been spent), near-zero interest rates (which can't continue much longer without igniting speculative bubbles), and replacements (consumers have had to replace worn-out cars and appliances, and businesses had to replace worn-down inventories). Oh, and, yes, all those Census workers (who will be out on their ears in a month or so).

But all these boosts will end soon. Then we're in the dip.

Retail sales are already down.

So what's the answer? In the short term, more stimulus -- especially extended unemployment benefits and aid to state and local governments that are whacking schools and social services because they can't run deficits.

But the deficit crazies in the Senate, who can't seem to differentiate between short-term stimulus (necessary) and long-term debt (bad) last week shot it down.

In the longer term, we need a new New Deal that will bolster America's floundering middle class. Expand the Earned Income Tax Credit and extend it up through the middle class. Finance that extension through higher marginal income taxes on the wealthy, who have never had it so good.

This post originally appeared at






The jobs report was so negative it had a damaging effect on the Dow. It fell by 324 points yesterday.

The euro broke below the resistance line of 1.22 Euros /dollar to close at 1.1964 Euros/day.  That had a destabilizing effect globally on all markets.


I would like to point out that the low Euro value is not good for the usa as they cannot compete on major bidding such as airplanes.  Airbus will win out hands down.

The usa trade deficit will rise exponentially which will also have a dampening effect on the usa budgetary deficit.  As I reported to you yesterday, the usa surpassed the 13 trillion dollar market

in Federal debt and thus its Debt/GDP stands at 93%.  Anything over 90% and you have havoc in your markets.  Just ask Greece and Hungary.


Here are two stories on this. First from Garfield Reynolds/Wes Goodman of Bloomberg, and the second from Bill Holter


U.S.'s $13 Trillion Debt Poised to Overtake GDP: Chart of Day 
By Garfield Reynolds and Wes Goodman


June 4 (Bloomberg) — President Barack Obama is poised to increase the U.S. debt to a level that exceeds the value of the nation's annual economic output, a step toward what Bill Gross called a "debt super cycle."

The CHART OF THE DAY tracks U.S. gross domestic product and the government's total debt, which rose past $13 trillion for the first time this month. The amount owed will surpass GDP in 2012, based on forecasts by the International Monetary Fund. The lower panel shows U.S. annual GDP growth as tracked by the IMF, which projects the world's largest economy to expand at a slower pace than the 3.2 percent average during the past five decades.

"Over the long term, interest rates on government debt will likely have to rise to attract investors," said Hiroki Shimazu, a market economist in Tokyo at Nikko Cordial Securities Inc., a unit of Japan's third-largest publicly traded bank. "That will be a big burden on the government and the people."

Gross, who runs the world's largest mutual fund at Pacific Investment Management Co. in Newport Beach, California, said in his June outlook report that "the debt super cycle trend" suggests U.S. economic growth won't be enough to support the borrowings "if real interest rates were ever to go up instead of down."

Dan Fuss, who manages the Loomis Sayles Bond Fund, which beat 94 percent of competitors the past year, said last week that he sold all of his Treasury bonds because of prospects interest rates will rise as the U.S. borrows unprecedented amounts. Obama is borrowing record amounts to fund spending programs to help the economy recover from its longest recession since the 1930s.



Bill Holter reports;  (take note of rumours that Societe General..the 2nd biggest bank in France may have huge derivative problems)


Bill H:

What, no bounce?

To all; by all rights the stock market should be bouncing from its oversold condition. So should the Euro, it/they are not. This morning the employment news was poor and rumors are swirling that Societe General has big derivatives losses. As mentioned last week, economic numbers that come in weak or negative should be expected as M3 has been plummeting and is an early indicator of market action and the economy. As for SoGen, all I have to say is "if not them then who?". It really doesn't matter "who" because it WILL be someone. With over $1 Quadrillion outstanding in derivatives and the current deflationary environment along with the volatility, is surely will be someone that goes upside down and dies a quick death.

Derivatives will blow up without a doubt and the ripple/domino effect will take the system with it. It is the same thing with sovereign governments, now Hungary has a problem out of the blue, who'd a thunk it? It doesn't matter "who" goes first, Greece, Spain, Hungary blah blah blah, it just doesn't matter because they will basically all go. The mathematics at this point virtually assure a massive monetization worldwide to save the fiat system which in fact will be the final nails in the fiat coffin.

Today's action was not lost on Gold, down early and up nearly $10 in response to the further cracking of the Euro. I believe the markets are looking at this 1.21 area on the Euro, 10,000 on the Dow and casting its vote for the safety of Gold. Today's action has just the whiff of "loss of control" because as I said these things should be bouncing and even with intervention they are not. This is the stuff that panics are made of! Panics come about when an "oversold" market continues down and does not bounce. The "pros" read their tea leaves (call their connected buddies) and when the intervention (read...manipulation) fails, panic ensues and this is what could be setting up here and now. If not now, it will happen out ahead with the only question being when.

Another area beginning to panic are the credit markets. The spreads are really blowing out today in weaker sovereigns and junk which means credit is drying up in a nutshell. It also means that anything that needs to be rolled will be difficult if not impossible. We are rapidly approaching the exact same situation that existed in late 2008 when Lehman Bros. collapsed with one giant caveat. This time it is not only about the banks, this is about governments going belly up and bankrupt. There is one and ONLY ONE safe haven when governments in a fiat system go broke. Yes here comes the broken record again,...GOLD! When everything else goes tits up, an ounce of Gold will still be an ounce of Gold, it will not have defaulted because it cannot and value from broken entities far and wide will accrue to it. You will either own it here or you will financially die because there is no other safe place to hide when all is said and done.

But, but the Dollar is rising and acting like a safe haven right? For now, yes. Against Gold, no. The day will come (I can't believe it hasn't already) when you will wake up one morning and the Dollar will be cascading like grease out of a goose and go splat. It is coming as sure as the Sun will rise tomorrow morning. Be prepared as best you can because this will be so complicated that even a lifetime "survivalist" will surely forget one thing or another. Think it through and prepare for the worst because we are entering uncharted territory in human history. Regards, Bill H.




For those of you who think that the only problems are over in Europe, guess again:


Connecticut Bond Rating Cut by Fitch as It Accumulates Debt 
June 03, 2010, 7:22 PM EDT 
By Michael McDonald

June 3 (Bloomberg) — Connecticut, the wealthiest U.S. state, had its bond rating lowered one level to AA by Fitch Ratings after it borrowed money to cover budget deficits as tax collections fell following the recession.

The state has $13.7 billion of bonds outstanding, according to New York-based Fitch. It is preparing to borrow $600 million this month, according to data compiled by Bloomberg. Standard & Poor's yesterday rated Connecticut AA, which is two steps below the top level, and Moody's Investors Service ranked it an equivalent Aa2 on May 27. All three companies assigned a stable outlook to the credit.

"The downgrade reflects the state's reduced financial flexibility, illustrated by its reliance on sizable debt issuances during the current biennium to close operating gaps in the context of already high liabilities," Fitch analysts Doug Offerman and Laura Porter wrote in a press release. A biennium refers to Connecticut's two-year budget cycle.

Connecticut is the richest state as measured by per capita income, according to Fitch. It had the highest per capita personal income in 2009 Department of Commerce data, at $54,397.


This must surely bother the ECB bankers:

Europe Default Insurance Jumps 

LONDON—The cost of insuring debt issued by European sovereign borrowers rose Friday as a weaker euro, speculation in the market about losses at French banks and concerns about Hungary added to persisting doubts over economic recovery in Europe.

While Spain has taken a beating lately, investors also appear to be taking their frustration out on stronger euro members like Italy and even France—Europe's second-biggest economy after Germany. French banking giant Société Générale SA on Friday was hit by rumors of losses tied to derivatives, which has sent its stock plummeting.

Budget deficits in France and Italy are small compared with …


I agree with Jim Sinclair on this:

Jim Sinclair's Commentary

What a bag of crap this is.

If you want to see another Great Depression, the Fed can deliver.

Increasingly Hawkish Fed Ponders Raising Rates 
Friday, 4 Jun 2010 | 3:43 AM ET

Three top Federal Reserve officials said on Thursday it may soon be time to begin raising interest rates as the economic recovery in the United States gathers momentum, despite persistently high unemployment.

Thomas Hoenig, president of the Kansas City Fed, argued the U.S. central bank should raise benchmark borrowing costs from near zero to 1 percent by the end of summer.

The head of the Atlanta Fed, Dennis Lockhart, said policymakers should soon begin thinking about tightening monetary policy, though he stopped short of calling for an imminent move.

And Dallas Fed President Richard Fisher said that while economic conditions do not call for tightening, "we need to be ready and we need to be ready to move fairly quickly".

Their comments suggest that firmer growth in the United States is making some policymakers nervous about keeping rates too low for too long, even as uncertainty mounts regarding European debt markets.

"Based on the current outlook consensus, it seems reasonable that the economy would be well-positioned to accept this modest increase in the funds rate," Hoenig said in remarks to a business lunch in Bartlesville, Oklahoma, expounding on his view on raising the benchmark federal funds lending rate to 1 percent.



I thought you might like this commentary from Marla Singer of Zero Hedge . It is now in vogue for new governments to say that former governments have been lying about their figures:

Radio Zero: Lies, Damn Lies and Hungarian Economic Statistics

Marla Singer's picture

It's not like anyone believed the data anyhow, right?  I mean, seriously.  Everyone was doing it.  Greece... Hungary... several other unindicted co-conspiring jurisdictions.  Punishment by the market will be swift and merciless now that the open secret that governments outright lie about their economic data on a routine basis is out.  (That is, unless a short selling ban is instituted to protect the lying liars who lied about lying).  We ask you.  What is there to have confidence in anymore if even the Hungarian government is full of it?  Well, how about Radio Zero?

Connection details:

Or just connect direct:

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.  There is a G20 meeting this weekend, and I looks like the plan to rescue the Euro:
** G20 to endorse euro rescue deal **
Finance ministers from the G20 are expected to endorse EU plans to stem the eurozone debt crisis as they meet in South Korea.
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I think that wraps up the week.  I hope you all have a grand weekend and I will report on Monday.

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