Saturday, October 16, 2010

Mortgage Mess Intensifies...Fed to engage in QEII..commentary Oct 16.2010

Good morning Ladies and Gentlemen;
 
Gold closed down by $5.60 Friday at comex closing time to rest the week at $137.10.  Silver also fell to the tune of 15 cents to 24.27.
 
The action on the comex was nothing short of being violent.  I pointed out to you yesterday that the bankers were going to have another of their midnight oil sessions due to the high open interest
 
on both gold and silver.  I thought that the Friday number (basis Thursday night) would be extremely high and would necessitate the bankers into action. They also knew that Bernanke was going
 
to speak to the Boston Fed at 9:30 am Friday morning.
 
As it turned out, the total open interest for the gold comex rose  by 10,953  to rest at 638,283  (basis Thursday night).  Initially they printed a figure of 651000 but that was later corrected.
 
The OI for the silver comex declined a fraction to 153,687 from the previous high of 155,661 .
 
For completeness here are the figures for the gold and silver comex:
 
 
As mentioned the total gold comex OI is 638,283
 
The December gold OI rests at an extremely high 444,544.
 
The October delivery OI month rests at 477
 
(The volume on the comex on Thursday was an astronomically high 390,562 without any switchs.
The volume on the comex on Friday is estimated at 222,419 which is also remarkable high. they threw everything
but the kitchen sink to quell gold and silver's advance)
 
 
 
The total silver comex OI as of Friday's reading is 153,657
 
The December silver comex which is the front month for the next delivery is 102,036  (still very high)
 
The October delivery month OI of which notices will be sent rests at 6.
 
The volume on friday was estimated at a huge 72,857.
 
 
At the conclusion of trading we got the COT report and it was uneventful. Most of the action occurred during the
 
Wednesday through Friday sessions and the COT report is basis Tuesday night.
 
Here is the gold COT report:  for Tuesday night:
 
Those large speculators that were long gold continued to pile it on adding to their positions by a large 3993 contracts.
 
Those large speculators that were short gold added to their short side by an amazing 7739 contracts and thus these guys supplied the paper.
 
And now for the all important commercial sector:
 
 
Those commercials that have been long lessened those positions by a smallish 1547 contracts.
Those commercials like JPMorgan and HSBC who have been perennially short lessened those positions by a tiny 1023.
 
 
The small speculators that have been long lessened by a tiny 332 contracts.
However those small speculators that have been short covered massively their positions as they were massively producing red ink
 
you can view the COT report at this link:
 
://news.goldseek.com/COT/1287171249.php
 
In silver:
 
those large speculators that have been long lessened those positions by a large 4066 contracts fearing that silver had runnup too fast.
those large speculators that  have been short lessened those positions by covering a small 935 contracts.
 
In the all important commercial category:
 
those commercials that have been long hardly moved, lessening those longs by a very tiny 124 contracts.
 
And those commercials that have been short all the time strangely lessened their shorts by covering 737 contracts.
 
Forget about the small specs in silver..they are not in the game.
 
 
I would now like to go straight to the inventory and notices to deliver at the comex:
 
 
comex:
Comex inventory changes and notices to delivery Oct 15.2010
Silver
Withdrawals from Dealers Inventory 10,180 oz
Withdrawals from customer Inventory 325,035 oz
Deposits to the dealer Inventory n/a oz
Deposits to the customer Inventory 12,261 oz
No of oz served (contracts 3only 15,000 oz
No of oz to be served  6 30,000 oz


Gold
Withdrawals from Dealers Inventory
zero oz
Withdrawals from customer Inventory 2897 oz
Deposits to the dealer Inventory zerooz
Deposits to the customer Inventory zerooz
No of oz served (contracts 81 8100 oz
No of oz to be served 477 47700 0z oz
First, lets explore the silver comex:
 
 
In silver we saw lot of activity.  We got a withdrawal from the dealer of 10,180 oz but this silver did not find its way into a registered vault.
 
However one customer decided to remove a massive 325,035 oz from the comex vaults to destinations unknown.
 
There was a tiny deposit from another customer of 12,261 oz of silver into a comex vault.
 
The  total number of notices sent down for servicing totalled 3 for a total of 15000 oz .  The total number of notices sent so far this month total  38
 
for a total of  190,000 oz of silver.
 
The number of OI and thus notices remaining to be served equats to 6 or 30,000 oz
 
The total number of silver standing in this non delivery month of October is as follows:
 
190,000 + 30,000 oz =  220,000 oz.  (as promised this number will rise a bit as the month of Oct closes).
 
 
And now for the all important gold comex notices and inventory changes:
 
Again we received zero oz entering into any vault from either a dealer or a customer.  This is very strange in a delivery month
 
not to receive any gold in the dealer category.
 
There was a tiny 2897 withdrawal from two customers..one customer got a bar of 100 oz and the other removal was for 2797 oz.
 
We received notices to deliver totalling 81 or 8100 0z of gold.
 
Strangely the number of notices remaining to be served remained at the exact same number as Thurday ie. 477 or 47700 oz of gold.
 
The total number of notices in gold sent down so far this month total 6179 or 617900 oz of gold.
 
Thus the total number of gold oz standing in this delivery month is as follows:
 
617900 oz (already served)  + 47700 oz (to be served0 + 70,800 oz (prev month options exercised) =  736,400 oz or 22.94 tonnes.
 
 
In other physical news, the ETFs remain strong to their NAV. 
 
The central fund of canada had a positive to its NAV of 7.4%.  Our PHYS retreated to 2.97%.
 
This is basis Thursday night.
 
Also strangely both the GLD and SLV added to their inventories.
 
The GLD responded to demand and added 19 tonnes.  John Brimelow:
 
 
The GLD ETF, however, got back on track, adding a large 19.14276 tonnes to 1,304.34236, almost back to the September highs and eradicating the recent losses which have disturbed some observers.
 
 
end.
 
 
 
Here is the latest in the silver SLV inventories:
 
 
 
 Ounces of Silver in Trust 328,710,808.000
 
a gain of over 2 million oz.
 
 
And now for the big economic stories of the day.
 
 
The following is the best summary of events in the mortgage scandal.  You can find it at the following link.  The author is Ellen Brown:
 

FORECLOSUREGATE:
TIME TO BREAK UP THE TOO-BIG-TO-FAIL BANKS?

Looming losses from the mortgage scandal dubbed “foreclosuregate” may qualify as the sort of systemic risk that, under the new financial reform bill, warrants the breakup of the too-big-to-fail banks. The Kanjorski amendment allows federal regulators to pre-emptively break up large financial institutions that—for any reason—pose a threat to U.S. financial or economic stability.

Although downplayed by most media accounts and popular financial analysts, crippling bank losses from foreclosure flaws appear to be imminent and unavoidable. The defects prompting the “RoboSigning Scandal” are not mere technicalities but are inherent to the securitization process. They cannot be cured. This deep-seated fraud is already explicitly outlined in publicly available lawsuits.

There is, however, no need to panic, no need for TARP II, and no need for legislation to further conceal the fraud and push the inevitable failure of the too-big-to-fail banks into the future.

Federal regulators now have the tools to take control and set things right. The Wall Street giants escaped the Volcker Rule, which would have limited their size, and the Brown-Kaufman amendment, which would have broken up the largest six banks outright; but the financial reform bill has us covered. The Kanjorski amendment—which slipped past lobbyists largely unnoticed—allows federal regulators to preemptively break up large financial institutions that pose a threat to U.S. financial or economic stability.

Rep. Grayson’s Call for a Moratorium

The new Financial Stability Oversight Council (FSOC) probably didn’t expect to have its authority called on quite so soon, but Rep. Alan Grayson (D-FL) has just put the amendment to the test. On October 7, in a letter addressed to Timothy Geithner, Shiela Bair, Ben Bernanke, Mary Schapiro, John Walsh (Acting Comptroller of the Currency), Gary Gensler, Ed DeMarco, and Debbie Matz (National Credit Union Administration), he asked for an emergency task force on foreclosure fraud. He said:

The liability here for the major banks is potentially enormous, and can lead to a systemic risk. Fortunately, the Dodd-Frank financial reform legislation includes a resolution process for these banks. More importantly, these foreclosures are devastating neighborhoods, families, and cities all over the country. Each foreclosure costs tens of thousands of dollars to a municipality, lowers property values, and makes bank failures more likely.

Grayson sought a foreclosure moratorium on all mortgages originated and securitized between 2005-2008, until such time as the FSOC task force was able to understand and mitigate the systemic risk posed by the foreclosure fraud crisis. But on Sunday, White House adviser David Axelrod downplayed the need for a national foreclosure moratorium, saying the Administration was pressing lenders to accelerate their reviews of foreclosures to determine which ones have flawed documentation. “Our hope is this moves rapidly and that this gets unwound very, very quickly,” he said.

According to Brian Moynihan, chief executive of Bank of America, “The amount of work required is a matter of a few weeks. A few weeks we'll be through the process of double checking the pieces of paper we need to double check."

“Absurd,” say critics such as Max Gardner III of Shelby, North Carolina. Gardner is considered one of the country’s top consumer bankruptcy attorneys. "This is not an oops. This is not a technical problem. This is not even sloppiness," he says. The problem is endemic, and its effects will be felt for years.

Rep. Grayson makes similar allegations. He writes:

The banks didn’t keep good records, and there is good reason to believe in many if not virtually all cases during this period, failed to transfer the notes, which is the borrower IOUs in accordance with the requirements of their own pooling and servicing agreements. As a result, the notes may be put out of eligibility for the trust under New York law, which governs these securitizations. Potential cures for the note may, according to certain legal experts, be contrary to IRS rules governing REMICs. As a result, loan servicers and trusts simply lack standing to foreclose. The remedy has been foreclosure fraud, including the widespread fabrication of documents.

There are now trillions of dollars of securitizations of these loans in the hands of investors. The trusts holding these loans are in a legal gray area, as the mortgage titles were never officially transferred to the trusts. The result of this is foreclosure fraud on a massive scale, including foreclosures on people without mortgages or who are on time with their payments. [Emphasis added.]

Why Wasn’t It Done Right in the First Place?

That raises the question, why were the notes not assigned? Grayson says the banks were not interested in repayment; they were just churning loans as fast as they could in order to generate fees. Financial blogger Karl Denninger says, “I believe a big part of why it was not done is that if it had been done the original paperwork would have been available to the trustee and ultimately the MBS owners, who would have immediately discovered that the representations and warranties as to the quality of the conveyed paper were being wantonly violated.” He says, “You can’t audit what you don’t have.”

Both are probably right, yet these explanations seem insufficient. If it were just a matter of negligence or covering up dubious collateral, surely some of the assignments by some of the banks would have been done properly. Why would they all be defective?

The reason the mortgage notes were never assigned may be that there was no party legally capable of accepting the assignments. Securitization was originally set up as a tax dodge; and to qualify for the tax exemption, the conduits between the original lender and the investors could own nothing. The conduits are “special purpose vehicles” set up by the banks, a form of Mortgage Backed Security called REMICs (Real Estate Mortgage Investment Conduits). They hold commercial and residential mortgages in trust for the investors. They don’t own them; they are just trustees.

The problem was nailed in a class action lawsuit recently filed in Kentucky, titled Foster v. MERS, GMAC, et al. (USDC, Western District of Kentucky). The suit claims that MERS and the banks violated the Racketeer Influenced and Corrupt Organizations Act, a law originally passed to pursue organized crime. Bloomberg quotes Heather Boone McKeever, a Lexington, Ky.-based lawyer for the homeowners, who said in a phone interview, “RICO comes in because the fraud didn’t just happen piecemeal. This is organized crime by people in suits, but it is still organized crime. They created a very thorough plan.”

The complaint alleges:

53. The “Trusts” coming to Court are actually Mortgage Backed Securities (“MBS”). The Servicers, like GMAC, are merely administrative entities which collect the mortgage payments and escrow funds. The MBS have signed themselves up under oath with the Securities and Exchange Commission (“SEC,”) and the Internal Revenue Service (“IRS,”) as mortgage asset “pass through” entities wherein they can never own the mortgage loan assets in the MBS. This allows them to qualify as a Real Estate Mortgage Investment Conduit (“REMIC”) rather than an ordinary Real Estate Investment Trust (“REIT”). As long as the MBS is a qualified REMIC, no income tax will be charged to the MBS. For purposes of this action, “Trust” and MBS are interchangeable. . . .

56. REMICS were newly invented in 1987 as a tax avoidance measure by Investment Banks. To file as a REMIC, and in order to avoid one hundred percent (100%) taxation by the IRS and the Kentucky Revenue Cabinet, an MBS REMIC could not engage in any prohibited action. The “Trustee” can not own the assets of the REMIC. A REMIC Trustee could never claim it owned a mortgage loan. Hence, it can never be the owner of a mortgage loan.

57. Additionally, and important to the issues presented with this particular action, is the fact that in order to keep its tax status and to fund the “Trust” and legally collect money from investors, who bought into the REMIC, the “Trustee” or the more properly named, Custodian of the REMIC, had to have possession of ALL the original blue ink Promissory Notes and original allonges and assignments of the Notes, showing a complete paper chain of title.

58. Most importantly for this action, the “Trustee”/Custodian MUST have the mortgages recorded in the investors name as the beneficiaries of a MBS in the year the MBS “closed.” [Emphasis added.]

Only the beneficiaries—the investors who advanced the funds—can claim ownership. And the mortgages had to have been recorded in the name of the beneficiaries the year the MBS closed. The problem is, who ARE the beneficiaries who advanced the funds? In the securitization market, they come and go. Properties get sold and resold daily. They can be sliced up and sold to multiple investors at the same time. Which investors could be said to have put up the money for a particular home that goes into foreclosure? MBS are divided into “tranches” according to level of risk, typically from AAA to BBB. The BBB investors take the first losses, on up to the AAAs. But when the REMIC is set up, no one knows which homes will default first. The losses are taken collectively by the pool as they hit; the BBBs simply don’t get paid. But the “pool” is the trust; and to qualify as a REMIC trust, it can own nothing.

The lenders were trying to have it both ways; and to conceal what was going on, they dropped an electronic curtain over their sleight of hand, called Mortgage Electronic Registration Systems or “MERS.” MERS is simply an electronic data base. On its website and in assorted court pleadings, it too declares that it owns nothing. It was set up that way so that it would be “bankruptcy-remote,” something required by the credit rating agencies in order to turn the mortgages passing through it into highly rated securities that could be sold to investors. According to the MERS website, it was also set up that way to save on recording fees, which means dodging state statutes requiring a fee to be paid to establish a formal record each time title changes hands.

The arrangement satisfied the ratings agencies, but it has not satisfied the courts. Real estate law dating back hundreds of years requires that to foreclose on real property, the foreclosing party must produce signed documentation establishing a chain of title to the property; and that has not been done. Increasingly, judges are holding that if MERS owns nothing, it cannot foreclose, and it cannot convey title by assignment so that the trustee for the investors can foreclose. MERS breaks the chain of title so that no one has standing to foreclose.

Sixty-two million mortgages are now held in the name of MERS, a ploy that the banks have realized won’t work; so Plan B has been to try to fabricate documents to cure the defect. Enter the RoboSigners, a small group of people signing thousands of documents a month, admittedly without knowing what was in them. Interestingly, it wasn’t just one bank engaging in this pattern of coverup and fraud but many banks, suggesting the sort of “organized crime” that would qualify under the RICO statute.

However, that ploy won’t work either, because it’s too late to assign properties to trusts that have already been set up without violating the tax code for REMICs, and the trusts themselves aren’t allowed to own anything under the tax code. If the trusts violate the tax laws, the banks setting them up will owe millions of dollars in back taxes. Whether the banks are out the real estate or the taxes, they could well be looking at insolvency, posing the sort of serious systemic risk that would bring them under the purview of the new Financial Stability Oversight Council.

No need for disaster

As comedian Jon Stewart said in an insightful segment called “Foreclosure Crisis” on October 7, "We're back to square one." While we’re working it all out, an extended foreclosure moratorium probably is in the works. But this needn’t be the economic disaster that some are predicting – not if the FSOC is allowed to do its job. We’ve been here before, and not just in 2008.

In 1934, Congress enacted the Frazier–Lemke Farm Bankruptcy Act to enable the nation’s debt-ridden farmers to scale down their mortgages. The act delayed foreclosure of a bankrupt farmer's property for five years, during which time the farmer made rental payments. The farmer could then buy back the property at its currently appraised value over six years at 1 percent interest, or remain in possession as a paying tenant. Interestingly, according to Marian McKenna in Franklin Roosevelt and the Great Constitutional War (2002), “The federal government was empowered to buy up farm mortgages and issue non-interest-bearing treasury notes in exchange.” Non-interest-bearing treasury notes are what President Lincoln issued during the Civil War, when they were called “Greenbacks.”

The 1934 Act was subsequently challenged by secured creditors as violating the Fifth Amendment’s due process guarantee of just compensation, a fundamental right of mortgage holders. (Note that this would probably not be a valid challenge today, since there don’t seem to be legitimate mortgage holders in these securitization cases. There are just investors with unsecured claims for relief in equity for money damages.) The Supreme Court voided the 1934 Act, and Congress responded with the "Farm Mortgage Moratorium Act" in 1935. The terms were modified, limiting the moratorium to a three-year period, and the revision gave secured creditors the opportunity to force a public sale, with the proviso that the farmer could redeem the property by paying the sale amount. The act was renewed four times until 1949, when it expired. During the 15 years the act was in place, farm prices stabilized and the economy took off, retooling it for its role as a global industrial power during the remainder of the century.

We’ve come full circle again. We didn’t get it right in 2008, but with the newly empowered Financial Stability Oversight Council, we already have the ready-made vehicle to avoid another taxpayer bailout, and to put too-big-to-fail behind us as well.. end

 

 

end.

 

Yesterday at 9:30 am Ben Bernanke gave a speech to the Boston Fed and decided that he was going to communicate his intentions better.

 

Here is a reuters report on what they believe he said:

 

Bernanke says sees case for more Fed easing

WASHINGTON, Oct 15 (Reuters) - U.S. Federal Reserve Chairman Ben Bernanke said on Friday high unemployment and low inflation point to a need for a further easing of U.S. monetary policy, but said policymakers were still weighing how aggressive they should be.

"There would appear -- all else being equal -- to be a case for further action," Bernanke said in remarks prepared for delivery to a conference sponsored by the Boston Federal Reserve Bank.

Bernanke said a prolonged period of high unemployment could pose a risk to the recovery's sustainability and said the low level of inflation meant the risk of a dangerous downward slide in prices was greater than desirable.

-END-

 

 

The consumer is 70% of the GDP. This does not look good:

 

 

U.S. consumer sentiment dips in early October-UMich

NEW YORK, Oct 15 (Reuters) - U.S. consumer sentiment unexpectedly dipped in early October to its weakest level since July, with buying plans on the decline, a survey released Friday showed.

Also, consumers' assessments of government economic policies fell to the lowest level since U.S. President Barack Obama took office, it showed.

The Thomson Reuters/University of Michigan's preliminary October reading on the overall index on consumer sentiment came in at 67.9, down from 68.2 in September and below the 69.0 median forecast among economists polled by Reuters.

The survey's barometer of current economic conditions was at the lowest level since November 2009. The index was at 73 in early October, compared with 79.6 in September and 79.8 forecast by analysts.

Consumer spending typically accounts for about two-thirds of U.S. economic activity and is considered critical to the recovery. It's especially watched in the months ahead of the U.S. holidays, a key period for retailers.

"Personal financial expectations were near their all-time low, and the steep decline in buying plans was related to uncertainty about consumers' future income prospects," the survey's director Richard Curtin said in a statement.

The survey's gauge of consumer expectations rose to 64.6, above last month's 60.9 reading and a forecast for 61.5.

The measure on consumers' 12-month economic outlook rose to 70 compared with 61 in September.

The survey's one-year inflation expectations measure rose to 2.6 percent from 2.2 percent in September, while its five-to-10-year inflation outlook index was unchanged from September at 2.7 percent.

-END-

 

 

Markets initially jumped on this news:

 

-END-

U.S. Sept retail sales up more than expected

WASHINGTON, Oct 15 (Reuters) - Sales at U.S. retailers rose a stronger-than-expected 0.6 percent in September, lifted by big-ticket items including autos, electronics and appliances, Commerce Department figures showed on Friday.

Analysts polled by Reuters had expected an increase of 0.4 percent for September, after an upwardly revised 0.7 percent gain in August. Excluding autos, September sales were up 0.4 percent, matching analysts' expectations.

The figures suggest consumption may have been a bit stronger than economists had anticipated in the third quarter. Consumer spending accounts for roughly 70 percent of the U.S. economy, so a strong reading bodes well for third-quarter gross domestic product.

Sales at motor vehicles and parts dealers rose 1.6 percent last month. Electronics and appliances stores saw a 1.5 percent gain. With the exception of clothing and department stores, every other major retail category showed gains for the month.

 

Here is John Williams assessment of the gain in retail sales: (courtesy of James Sinclair)

 

im Sinclair’s Commentary

The truth comes at a modest fee that gets you a subscription to http://www.shadowstats.com/

- Dollar Debasement Fears Mount 
- September Consumer Inflation: 1.1% (CPI-U), 8.5% (SGS) 
- Retail Sales Gain Reflected Seasonal Distortions from Year-Ago Clunkers More Than It Did a Happier Consumer 
- August Trade Deficit Took 0.5% from Third-Quarter GDP

www.ShadowStats.com

 

 

 

Looks like trouble is brewing in France:

 

Fuel supply to Paris airports cut amid pension strikes
15 October 2010 Last updated at 11:12 ET

Fuel supplies to Paris’s main airports through a major pipeline have been cut off amid strikes over pension reforms.

The company that operates the pipeline told French media that the capital’s main airport, Charles de Gaulle, could run out of fuel as early as next week.

There are fears of fuel shortages as all of France’s 12 oil refineries have been hit by strikes, and many oil depots remain blockaded.

Unions are opposed to government plans to raise the retirement age.

Trapil, the firm that operates the pipeline to Paris’s airports, said supplies had been cut off on Friday.

More…

 

 

 

end.

 

I found the following article terrific as it shows the various events occuring all at once to break the global-usa economic structure.

It highlights how QEII will come and basically be useless to help in the recovery of the usa markets.

It highlights the usa mortgage scandal and its effect on the bankers.

It highlights the currency wars and the race to the bottom..all aspects that I have covered for you on previous commentaries.

 

Here is this  article courtesy of James sinclair and the author is Bo Peng:

 

 

 

Another Perfect Storm Brewing for Markets and the Economy
by: Bo Peng October 15, 2010

A few major factors/events have conspired recently to meet up at a singular point in time.

1. Either QE2 disappointment or death of USD

It’s been a textbook case of "bad news is good news" in the past few weeks, entirely driven by QE2 expectations. The expectations are so high that inflation is finally being priced in (see 30-yr bonds, commodities, and gold), and Bernanke would have to do it even if he had a change of religion tonight, or else. The only question is when and how much. While I don’t know the answer, I’m sure it lies somewhere between a dog and a fire hydrant. If QE2 is not big enough to cause another 10% drop in the dollar index, it’ll snap back 10% along with equities/gold/commodities crashing through a significant correction. If it is big enough to meet the markets’ insane expectations, it will most likely kick the currency war into full speed and start the sequence that leads to the dollar’s death as the international reserve currency.

Of course, theoretically it’s possible to stand a pencil on its point. I just don’t think it’s financially wise to bet on it.

Funny thing is, despite the overwhelming cry for QE2 and the markets’ seeming enthusiasm, few expect it to produce meaningful real growth. In other words, the Sept rally in equities has been driven by depreciating dollar and expectation of inflation, not necessarily growth. This is truly a nightmare scenario.

More…

 

I hope you all enjoy your weekend.  I promise you next week will be very volatile on the silver and gold comex.

 

Bye for now

Harvey

AAendnother Perfect Storm Brewing for Markets and the Economy

Another Perfect Storm Brewing for Markets and the Economy
by: Bo Peng October 15, 2010

AI think few major factors/events have conspired recently to meet up at a singular point in time.

1. Either QE2 disappointment or death of USD

It’s been a textbook case of "bad news is good news" in the past few weeks, entirely driven by QE2 expectations. The expectations are so high that inflation is finally being priced in (see 30-yr bonds, commodities, and gold), and Bernanke would have to do it even if he had a change of religion tonight, or else. The only question is when and how much. While I don’t know the answer, I’m sure it lies somewhere between a dog and a fire hydrant. If QE2 is not big enough to cause another 10% drop in the dollar index, it’ll snap back 10% along with equities/gold/commodities crashing through a significant correction. If it is big enough to meet the markets’ insane expectations, it will most likely kick the currency war into full speed and start the sequence that leads to the dollar’s death as the international reserve currency.

Of course, theoretically it’s possible to stand a pencil on its point. I just don’t think it’s financially wise to bet on it.

Funny thing is, despite the overwhelming cry for QE2 and the markets’ seeming enthusiasm, few expect it to produce meaningful real growth. In other words, the Sept rally in equities has been driven by depreciating dollar and expectation of inflation, not necessarily growth. This is truly a nightmare scenario.

Another Perfect Storm Brewing for Markets and the Economy
by: Bo Peng October 15, 2010

A few major factors/events have conspired recently to meet up at a singular point in time.

1. Either QE2 disappointment or death of USD

It’s been a textbook case of "bad news is good news" in the past few weeks, entirely driven by QE2 expectations. The expectations are so high that inflation is finally being priced in (see 30-yr bonds, commodities, and gold), and Bernanke would have to do it even if he had a change of religion tonight, or else. The only question is when and how much. While I don’t know the answer, I’m sure it lies somewhere between a dog and a fire hydrant. If QE2 is not big enough to cause another 10% drop in the dollar index, it’ll snap back 10% along with equities/gold/commodities crashing through a significant correction. If it is big enough to meet the markets’ insane expectations, it will most likely kick the currency war into full speed and start the sequence that leads to the dollar’s death as the international reserve currency.

Of course, theoretically it’s possible to stand a pencil on its point. I just don’t think it’s financially wise to bet on it.

Funny thing is, despite the overwhelming cry for QE2 and the markets’ seeming enthusiasm, few expect it to produce meaningful real growth. In other words, the Sept rally in equities has been driven by depreciating dollar and expectation of inflation, not necessarily growth. This is truly a nightmare scenario.

More

nother Perfect Storm Brewing for Markets and the Economy
by: Bo Peng October 15, 2010

A few major factors/events have conspired recently to meet up at a singular point in time.

1. Either QE2 disappointment or death of USD

It’s been a textbook case of "bad news is good news" in the past few weeks, entirely driven by QE2 expectations. The expectations are so high that inflation is finally being priced in (see 30-yr bonds, commodities, and gold), and Bernanke would have to do it even if he had a change of religion tonight, or else. The only question is when and how much. While I don’t know the answer, I’m sure it lies somewhere between a dog and a fire hydrant. If QE2 is not big enough to cause another 10% drop in the dollar index, it’ll snap back 10% along with equities/gold/commodities crashing through a significant correction. If it is big enough to meet the markets’ insane expectations, it will most likely kick the currency war into full speed and start the sequence that leads to the dollar’s death as the international reserve currency.

Of course, theoretically it’s possible to stand a pencil on its point. I just don’t think it’s financially wise to bet on it.

Funny thing is, despite the overwhelming cry for QE2 and the markets’ seeming enthusiasm, few expect it to produce meaningful real growth. In other words, the Sept rally in equities has been driven by depreciating dollar and expectation of inflation, not necessarily growth. This is truly a nightmare scenario.

Mor

TendIneeeeeeeeeeSpeculators

end.\\\\\\\\\\\\\\\\\Silverong

Short

Spreading

Long

Short

ssssLong

Short

59,615

14,263

33,687

29,899

91,403

123,201

139,353

-4,066

-935

1,518

-124

-747

-2,672

-164

Traders

98

42

36

36

38

152

100

 

Small Speculators

 

 

 

 

Long

Short

Open Interest

 

 

 

30,769

14,617

153,970

 

 

 

546

-1,962

-2,126

 

 

 

non reportable positions

Change from the previous reporting period

 

COT Silver Report - Positions as of

Tuesday, October 12, 2010

Commercial

-124

Silver COT Report - Futures

Large Speculators

Commercial

Total

Long

Short

Spreading

Long

Short

Long

Short

59,615

14,263

33,687

29,899

91,403

123,201

139,353

-4,066

-935

1,518

-124

-747

-2,672

-164

Traders

98

42

36

36

38

152

100

 

Small Speculators

 

 

 

 

Long

Short

Open Interest

 

 

 

30,769

14,617

153,970

 

 

 

546

-1,962

-2,126

 

 

 

non reportable positions

Change from the previous reporting period

 

COT Silver Report - Positions as of

Tuesday, October 12, 2010

-747

-2,672

-164

Traders

98

Silver COT Report - Futures

Large Speculators

Commercial

Total

Long

Short

Spreading

Long

Short

Long

Short

59,615

14,263

33,687

29,899

91,403

123,201

139,353

-4,066

-935

1,518

-124

-747

-2,672

-164

Traders

98

42

36

36

38

152

100

 

Small Speculators

 

 

 

 

Long

Short

Open Interest

 

 

 

30,769

14,617

153,970

 

 

 

546

-1,962

-2,126

 

 

 

non reportable positions

Change from the previous reporting period

 

COT Silver Report - Positions as of

Tuesday, October 12, 2010

42

36

36

38

152

100

 

Small Speculators

 

 

 

 

546

-1,962

-2,126

 

Search This Blog

Loading...