Saturday, November 27, 2010

Unbelievable high open interest for December Silver/Massive problems for Europe/Spain/ More on Tropos and the Fed

Good morning Ladies and Gentlemen:

 

Before proceeding, there are no new entrants into the banking morgue.

 

Yesterday, the banking cartel orchestrated a fierce attack on silver and gold as this was the last day before the longs put their money to take possession of their metals.

Gold closed the week's session at $1364.00 down $8.90.  Silver was hit with massive amount of non backed paper and this metal finished the session at $26.72 down 82 cents on the day.

It seems that every rally for gold and silver was thwarted with new paper as the cartel did not wish to have these metals rise with so much turmoil throughout the world.

 

I would like to go straight to the comex trading and reveal what is going on here.

 

Let us first explore gold:

 

The total comex gold open interest closed the session at 607,664 down from Thursday's reading of 622,712 for a drop of a huge 15,048 contracts.  Gold closed slightly lower on Thursday but rebounded from severe selling pressure to regain most of its losses.  The extreme OI drop means we had marginal losses at the beginning from long liquidation but later, the banks were frightened by the rally and they covered some of their shorts.  The front December month in gold showed the OI dropping from 170,040 to 103,310 which is to be expected.  This is basis Wednesday night, so we will need today's data which he will get on Monday.  The volume at the comex today was a huge 255,157.  No doubt the real number will be huge higher.  The comex did not provide confirmed data for Thursday's trading.  The front options delivery month of November saw its OI remain at 20.

 

Now for the all important silver comex data:

 

The total comex silver open interest closed the session, Friday with a reading of 137,944 down  a huge  9741 contracts.  I do not believe we had any spec liquidation yesterday so it looks to me like the bankers got scared and covered some of their short positions. If you recall, silver had a stellar day and refused to buckle under the weight of the banker's supply of non backed paper. The front month of December saw a smallish roll of 14,000 contracts for a reading of 28,288 which is basis Wednesday night. This number is extremely high especially on the eve of the 2nd biggest holiday in the USA calendar .The front options exercised for a silver November contract saw its OI at 4.  The estimated volume today was a very high 108,424.  The volume on the front December month was an unbelievable 60,000 plus contracts. Nobody in their right frame of mind would day trade silver on the last day and nobody would be stupid enough to short sell and be caught offside. All I can tell you is this:  stay glued for Monday's readings.

 

Now we shall see what happened to our deliveries and inventory changes:

 

Here is a chart on the 26th of November for gold and silver comex inventory changes and deliveries.

 

 

Silver

Withdrawals from Dealers Inventory 

 zero

Withdrawals from customer Inventory 

1980 0z

Deposits to the dealer Inventory

 Zero

Deposits to the customer Inventory

zero oz

No of oz served  (contracts4

20,000 oz

No of notices to be served..zero

 oz

Gold

Withdrawals from Dealers Inventory 

zero oz

Withdrawals from customer Inventory 

 zero oz

Deposits to the dealer Inventory

 zero oz

Deposits to the customer Inventory

zero oz

No of oz served (contracts  2

 oz

No of oz to be served 20

 2000oz

Let us start with silver:

The tranquility in  silver  is very noticeable whereby the only transaction for both is a tiny withdrawal of silver of 1,980 oz.

Somehow the comex had 4 contracts exercised in their back pocket and they failed to notify the public on this.  On Friday, 4 notices were sent down for a total of 20,000 oz.

The number of notices left to be fulfilled is zero.  Thus the total number of silver oz standing in this non delivery month is as follows:

 

906 notices x 5000 oz equals 4.53 million oz.  I doubt if there will be any more silver standing.

 

And now for gold:

 

Absolutely zero on everything, non deposits, no  withdrawals and no adjustments.  However 2 notices were sent down for delivery for 200 oz.

There is still an open interest of 20 contracts that must be satisfied by Tuesday night midnight

The total number of notices sent down so far this month total 1149 or 114900 oz of gold.  Since 20 open interest contracts remain to be served, that equals 2000 oz.

Thus the total number of gold ounces that are standing to delivery in this non delivery month of November is as follows:

 

114900 oz + 2000 oz (to be served)  =   116900 oz or 3.4 tonnes of gold.

 

end.

 

In our physical news, here are the NAV's of all our ETF;s we have been following.  For the first time, I will be showing Sprott's silver fund:

 

First: the central fund of Canada  CEF.a:   premium to NAV  9.5% (basis November 26).

 

Second:  Sprott silver fund with its call letters PSLV:   7.64% premium to NAV

 

Third: Sprott gold fund: PHYS:2.64% positive to NAV

 

The SLV inventory remained the same at 344 million oz.  The GLD inventory remained constant at 1285.08 tonnes of gold.

 

From this day forth I will be reporting on these funds as to their premiums to NAV and the inventory levels at the SLV and GLD.

 

 

end.

 

Now we shall see the big stories of the day.

 

I thought that this Jim Sinclair commentary on the speech Nigel Farage gave to the European parliament was something out of the ordinary.  This will go down as one of the classic speeches anywhere on the shape of the global economy.   First Jim Sinclair comments and then the video.

 

 

 

Jim Sinclair's Commentary

This is a total Western world currency problem whose basis is still not fully discussed. The essence of the problem is as much overspending and debt, but media forgets, facilitated by the national OTC derivative camouflage.

QE will go to infinity and the race to the bottom is going to get UGLY. Although Nigel Farage is correct, he has no concept of what doing the right thing will result in immediately.

There is no practical way out of this. I have told you that for 8 years and nothing has changed.

Gold is the only currency that is going to survive this, defined as the preserving of buying power, as it always did throughout monetary history.

'The Euro Game Is Up! Who the hell do you think you are?' – Nigel Farage MEP

 

this important video is a must see.  click on the blue  below

 

http://www.youtube.com/watch?v=Fyq7WRr_GPg&feature=player_embedded

 

end.

 

The FDIC released the number of problem banks and they are increasing:

 

List of Problem Banks Grows Despite Solid Net Income

Published: Tuesday, 23 Nov 2010 | 10:25 AM ET

http://media.cnbc.com/i/CNBC/CNBC_Images/header/icon_textT.gifText Sizehttp://media.cnbc.com/i/CNBC/CNBC_Images/header/icon_text_minus.gifhttp://media.cnbc.com/i/CNBC/CNBC_Images/header/icon_text_plus.gif

By: Reuters with CNBC.com

 

The number of banks on the Federal Deposit Insurance Corp's confidential "problem" list grew over the summer even while the overall industry posted solid net income.

http://media.cnbc.com/i/CNBC/Sections/News_And_Analysis/__Story_Inserts/graphics/__ECONOMY/american_bank.jpg

The FDIC says its list of troubled banks rose to 860 in the July-September quarter from 829 in the previous quarter.

At the same time, the FDIC says banks earned $14.5 billion during the third quarter. That was a decrease from the previous quarter's result of $21.4 billion, but well above the $2 billion banks earned a year earlier.

The FDIC says banks set aside less money to cover future loan losses than at any time since the October-December quarter of 2007, before the financial crisis. Fewer borrowers were behind on payments for credit cards and construction loans.

U.S. bank industry earnings fell by almost $7 billion in the third quarter but were far better than a year ago as the industry continues to recover from the financial crisis.

"The industry continues making progress in recovering from the financial crisis," FDIC Chairman Sheila Bair said in a statement. "Credit performance has been improving, and we remain cautiously optimistic about the outlook."

The banking industry has been setting aside less money to guard against losses, helping to boost earnings.

The amount of bad loans, those 90 days or more past due, declined for the second consecutive quarter, the agency said in its latest quarterly report. The balances for these loans declined by 2.1 percent, or $8.3 billion, in the third quarter.

Nearly 19 percent of institutions were unprofitable in the third quarter, however, and almost 36 percent had lower quarterly earnings then a year ago. As of last Friday, 149 institutions had failed so far in 2010.

The number of banks on the agency's "problem list" grew from 829 to 860, which is the highest number since March of 1993 when there were 928 institutions on the list.

"As we continue to emerge from this devastating financial crisis, building capital must remain a priority for insured banks so that they can maintain ready access to funding and continue to serve as credit intermediaries even under adverse conditions," Bair said.

end.

 

This hit the street yesterday afternoon.  The author, Charles Penty of Bloomberg  is correct when he states that the Euro will be dead once the vigilantes attack Spain.  The bailout needed is just too large.

Here is this important article: (courtesy James Sinclair and Bloomberg.com)

 

European Banks 'Nearly Bust' If Euro Collapses, Evolution Says 
By Charles Penty – Nov 25, 2010 3:31 AM MT

The European banking system would be "nearly bust" if the euro were to be abandoned which means the 16-member currency "cannot and should not go," Evolution Securities Ltd. said.

"If the euro is abandoned, and we go back to the peseta, lira, escudo, drachma etc., devaluations would follow immediately," said Arturo de Frias, head of bank research at Evolution in a note to investors today, adding the industry is a "great buying opportunity." Devaluations mean write-offs "of a size that would render the whole European banking system completely insolvent."

Contagion from Europe's sovereign debt crisis is spreading to Spain, sparking concern that the European rescue fund set up in May isn't large enough. French, German and U.K. banks could lose 360 billion euros ($479 billion) if the euro collapsed, assuming a 30 percent devaluation in the wake of the restoration of national currencies, said de Frias.

The damage caused by the abandonment of the euro would be such that such an outcome is impossible and the "only way forward" for Europe is fiscal union, he said.

"It is simply too late," he wrote. "There are too many cross-border investments in Europe to go back to national currencies."

More…

 

end

 

This hit Thursday night where the politicians in Hungary has started to nationalize all private pensions. 

(courtesy of Jim Sinclair and Bloomberg.com)

 

Hungary Follows Argentina in `Nightmare' Pension-Fund Ultimatum 
By Zoltan Simon – Nov 25, 2010 4:37 AM MT

Hungary is giving its citizens an ultimatum: move your private-pension fund assets to the state or lose your state pension.

Economy Minister Gyorgy Matolcsy announced the policy yesterday, escalating a government drive to bring 3 trillion forint ($14.6 billion) of privately managed pension assets under state control to reduce the budget deficit and public debt. Workers who opt against returning to the state system stand to lose 70 percent of their pension claim.

"This is effectively a nationalization of private pension funds," David Nemeth, an economist at ING Groep NV in Budapest, said in a phone interview. "It's the nightmare scenario."

Hungary is rolling back pension changes implemented more than a decade ago as countries from Poland to Lithuania find themselves squeezed by policies designed to limit long-term liabilities by shifting workers into private funds. Now the cost is swelling debt and deficit levels at a time when the European Union is demanding greater fiscal discipline.

More…

 

end.

This report was received early today and it highlights the mess inside Spain.  The author is Harry Wilson of the UK Telegraph:

 

Spain could be forced to seek a bail-out within months, warns Barclays

 

The weight of bank debt needing refinancing next year could threaten Spain's solvency and force it to become the next European country to seek a bail-out, according to a report from the investment banking arm of Barclays.

 

  8:30AM GMT 27 Nov 2010

Comments

After Ireland was finally forced this week to ask for financial help from the European Union and International Monetary Fund, Barclays analysts now say it is possible that a similar fate could await Spain.

In the first four months of 2011, the Spanish government and the country's banks must raise about €70bn (£59.2bn) in the bond market, which Barclays said would be a "big test for investor appetite", adding that it was concerned with the "execution risk".

"Our view is that the challenges facing Spain remain substantial – with the likelihood of a positive outcome poor until at least the sovereign and the banks have successfully navigated their way over the funding hump facing them both in Spring 2011," said the analysts.

RELATED ARTICLES

The situation facing Spain is in some respects similar to that which led to the implosion of the Irish banking system, with international investors reluctant to buy the country's bonds as fears remain over the risks contained within the financial system.

While the Irish government repeatedly insisted it was fully-funded for the next year, the funding position of the Irish banks made the bail-out inevitable as they faced redemptions of €25bn in government-guaranteed debt they had issued.

"The funding crisis for the Irish sovereign was in fact a funding crisis for the Irish banks, triggered by a massive bank issuance calendar and renewed concerns over asset quality,

"Simply put, the Irish sovereign has been dismembered by its banking system," said Barclays.

Portugal and Italy each face similar issues. However, neither country faces the same huge refinancing schedule that Spain does, with bond redemptions more evenly spread out over the course of next year.

The Spanish government has set up an €99bn fund to help its banks, however only €12bn of this is pre-funded and €11bn has already been drawn down, meaning the country will have to borrow more from the bond market to fund the rest.

Spanish pensions funds could be leaned on to buy some of the bonds, but not enough to cover the entire amount the government will need to raise.

 

 

This caught my eye.  Today I noticed that gold rallied by dollars in the last 3 or 4 minutes before closing.  Then in the after-hours, the volatility on gold index plummeted.

Usually this means someone is unwinding a long volatility on Gold with a short on Gold.  The unwinding may signal that someone is standing for huge amounts of gold:..

 

from zero hedge:

 

Surge Of Inexplicable After Hours Selling Takes Gold Volatility Index To All Time Low

  

 

 

In addition to the rout in the ES, VIX and GC which we pointed out earlier, there were some additional fireworks behind the scenes in today's after hours session. TheCBOE Gold Volatility Index, the ^GVZ plunged by the most in over a year, as the index hit an all time low of 15.92 without the underlying making much of a notable move. The most curious aspect of the trade was that the entire dump occured in the AH session. Many were left scratching their heads over what caused this monstrous unwind in long vol positions: was this the unwind of a massive long ES/short GC arb? We don't know, although if rumors that a major fund is planning to stand for delivery of Dec gold turn out to be true, then obviously someone got confirmation today. Keep a close eye out on the GVZ. Should this price level persist on Monday, then the front futures contract will likely surge.

A trader whom we managed to reach late in the day had this to say on this stunning move:

Typical course of action for HFT and other commodity pranksters is to shake out new contract holders.  They did it with absolute gusto today, shorting thousand of contracts into thin markets.  That didn't work.  Gold held up.  Now, taking into account that peripheral EU spreads are hitting new highs, hedge funds are getting redemption requests etc, why would you go home long ES and short GC?  So what they did is they sold ES into and after the close.  After that ES/SPY close they can't run these 'start arb' HFT strategies any more that go long S&P and short Gold as well.  Gold's closing time is 1:45pm.  They had to cover shorts. 

If the short covering in paper persists, perhaps the world won't even need the Krieger/Keiser physical PM campaign to destroy Blythe Masters.

And a bonus observation of the gold curve is the Gold February contract, where in the last minute someone bought 2k contracts, which represents 200,000 ounces or about $272MM worth of gold. Not a bad purchase for the last trade on the slowest day of the year.

As usual, we welcome our readers' perspectives on this largely unexpected move.

4.666665

end.

 

 

The story that I released to you on Monday is getting more attention.  I can summarize the drama for you this way.  Tropos, an American company.   The elders who reside in Taiwan had accumulated great private wealth over the past several decades and collectively they decided that this money, denominated in USA dollars(, 700 billion  dollars), was to have the Chinese people as the beneficial owners.  Also there was great progress in starting the unification of Taiwan with Mainland China.  The elders decided to send the money through a trustee, Mr Hryniak to Tropos at the account at Wachovia.  Many large sums of money of this sort must travel through an ACAT which is an electronic transfer of funds.

The BIS, as central bank to all central banks provides the Clearing Payment and Settlement Systems that assists in the clearing of the funds as the sole Transfer Trustee.  In this case, it seems that the USA Federal Reserve kept the funds for themselves and called upon its ally, the BIS to state that the BIS function is not clearing but only of supervision.  There have been many lawyers on both sides of the border that have seen and verified that the ACAT was true and real.  The BIS and the Federal Reserve have had their lawyers call the Tropos lawyers but the Fed and BIS lawyers refuse to put in print what they discussed on the phone. You will see in one of the correspondence, a file number has been instituted by the American authorities.  The November 2nd letter to the BIS official, Corunna, is very interesting.  The letter to Obama in June 2010 describes in detail, the ACAT from Taiwan to NY and how the proceeds have been kept for their own use instead of the beneficiary's.

The above letters were widely distributed to members  of the G20 during their last meeting. Originally, Mainland China at various times accused Taiwan and the trustee with  malfeasance but have now realized that it was the UNITED STATES FEDERAL RESERVE who has  absconded with the money.  Here are the letters sent to the various parties and from the body of the letters you can deduce that the other side did engage in various conversations.

 

You can imagine what China would do if they found out what that the USA did something with their money.  Maybe buy up all of the gold and silver at the comex?

Anyway, he are the letters for you to read and I leave it up to you to decide.

 

Caruna Letter:

http://www.scribd.com/full/44175812?access_key=key-jpg1p2pxm5b0d0bjov4

 

Obama Letter:

http://www.scribd.com/full/44175687?access_key=key-1pji6a90pnuugjht4u4f

 

 

Well that wraps up the week.  I hope you have an enjoyable weekend and I will see you Monday night where we should see some fireworks.

 

all the best

Harvey

Wednesday, November 24, 2010

silver remains explosive..December open interest remains high

Good evening Ladies and Gentlemen:

 

Gold closed down today to the tune of $4.60 to $1372.90.   The star of today was silver which refused to buckle under the weight of further banking cartel shorting.  Silver was down by only 3 cents to $27.54 even though it was down earlier in the session to $27.16.

 

I would like to present today's data and it is quite earth-shaking.  Let us go to gold first:

 

The total comex gold open interest fell slightly by only 496 contracts to 622,712.  The front December month which is the strongest delivery month in the calender saw its OI  contract by a tiny margin from 208,429 to 170,040.  These open positions must either roll or stan.  If  the owner of the long stands, then he must deposit money into his account by 4 pm Friday night as Monday is first day notice.  The front options delivery month of November strangely saw its open interest rise to 26 from 20.  I will give an explanation on this when I come to deliveries.  The estimated volume at the gold comex today was 247,276.  The confirmed volume yesterday was an astronomical 371,224 contracts.

 

And now for the silver comex:
The total silver comex open interest actually rose by  1471 contracts to 147,685.  Silver put on a road show yesterday so this was quite understandable. We are not sure if any bank covering started to hit home yesterday.  We must wait until Friday's COT report to get some confirmation on that. The front delivery month of December saw its OI hardly fall.  The new OI stands at 42,175 a fall of only  4218.  The March contract rose by 5000 contracts so all of these are rolls.  The front options delivery month of November saw its OI fall to 20 from 61 exactly as I had predicted.  The estimated volume on the silver comex today was a rather fierce 80,093 and the confirmed volume for yesterday was a thunderstruck 150,027 contracts.

 

Let us see how this affected our inventory changes and deliveries:

 

Here is a chart on the 24th of November for gold and silver comex inventory changes and deliveries.

 

 

Silver

Withdrawals from Dealers Inventory 

 zero

Withdrawals from customer Inventory 

n/a

Deposits to the dealer Inventory

 Zero

Deposits to the customer Inventory

352,504 oz

No of oz served  (contracts20

100,000 oz

No of notices to be served..zero

 oz

Gold

Withdrawals from Dealers Inventory 

zero oz

Withdrawals from customer Inventory 

 zero oz

Deposits to the dealer Inventory

 zero oz

Deposits to the customer Inventory

zero oz

No of oz served (contracts  6

600 oz

No of oz to be served 20

 2000oz

Let us start with silver:

Actually there were two big entries today to give a net 352,504 oz.  The first transaction was a deposit by a customer of 582,764 and this was followed by two withdrawals of 226,150 and 4110 oz to give the net 352,504.  The comex folk notified us that 20 notices were sent down for a total of 100,000 oz of silver.  That should complete the month. The total number of notices sent down this month totalled 902 notices or 4,510,000.  Since no silver notices are left to be sent down, this should be the final number of silver oz that is standing for the options delivery month of November.  This is some total.  You could just imagine the quantity that will stand in December.  It should break the bank!!

And now for gold;

We are heading into the busiest delivery month of the year and look at all of those zeros.  No withdrawal and no deposits.  There was  another of those  famous transfers.  This time a huge 30,056 oz of gold left a dealer to the customer for a repayment of a lease or some prior liability.  I believe that GLD paper might be involved here in the settling process.

The total number of notices sent down today was 6 or 600 oz of gold.  The number of notices sent down so far this month total 1147 or 114700 oz of gold. The number of notices left to be serviced total 20 or 2000 oz of gold.  As November goes off the board tonight these 20 must be serviced somehow!!

The total number of gold oz standing in this non delivery month of November is as follows:

114700 oz (already served) + 2000 oz (to be served)  =  116700 oz or 3.63 tonnes.  (this looks like the final number and I will use this in my deliveries for December for gold)

end.

This is Dave Kranzler's take on the open interest for the front month of December in silver and gold:

silver o/i shocker

Gold o/i dropped yesterday by 496. 
But get this: silver o/i jumped 1,471
This is huge. The Dec o/i dropped 4218 down to 42,175 - this is still a big number given that anyone not standing for delivery needs to be out of their position by Friday's access close. The Mar o/i, March being the next front-month, increased by 5,549. This is very very bullish. It will be interesting to see how many contracts for Dec are still alive Monday morning.

***

end.

Yesterday, our two ETF's performed reasonably well with good premiums to NAV.  Both GLD and SLV remained the same inventory.  Here is John Brimelow:

CEF slipped to a premium to NAV of 7.5% (8.1%) and PHYS to 3.67% (3.99%).

END.

Over in Viet Nam and China, we still are getting  huge premiums to world gold price.  (courtesy of John Brimelow)

Early on Wednesday morning local Vietnam gold stood at a $32.32 premium to world gold of $1,376.76 (Tuesday $36.70/$1,363.20).

Shanghai gold closed at a $7.52 premium to world gold of $1,377.93 on volume equivalent to 5,365 NY lots (Tuesday $12.80/$1,362.94). Th

end.

The usa released a set of rather good numbers.  The releases have been all from Reuters:

First:  USA consumer sentiment:

U.S. Nov consumer sentiment hits highest since June

NEW YORK, Nov 24 (Reuters) - U.S. consumer sentiment rose to its highest level since June on tentative signs of improved job conditions and early discounts from retailers, a survey showed on Friday.

The Thomson Reuters/University of Michigan's final November reading on the overall index on consumer sentiment was 71.6, up from 67.7 in October and also above November's preliminary reading of 69.3.

The median forecast among economists polled by Reuters was for a reading of 69.5. November's reading was the highest since June's level of 76.0.

"The economic news heard by consumers grew significantly more favorable in November. Net references to job gains improved by 17 percentage points in November, rising to its highest level since June," the survey's director Richard Curtin said in a statement.

The survey's barometer of current economic conditions was 82.1 in November, up from 76.6 in October and above the preliminary reading of 79.7. Expectations were for a reading of 79.9.

The survey's gauge of consumer expectations also rose and ended November at 64.8, compared with 61.9 in October and 62.7 in early November. Expectations were for a reading of 63.0.

These were also the highest readings since June.

The survey's one-year inflation expectations measure also rose, hitting 3.0 percent, its highest since May. It ended October at 2.7 percent.

-END-

 

Second, the jobless rate tumbles because many are removed from the rolls:

U.S. jobless claims tumble in latest week

WASHINGTON, Nov 24 (Reuters) - New U.S. claims for unemployment benefits dipped more than expected last week, a government report showed on Wednesday, signaling continuing amelioration of the struggling labor market.

Initial claims for state unemployment benefits fell 34,000 to a seasonally adjusted 407,000 in the week ending Nov. 20, the Labor Department said. It was the lowest since the week ending July 19, 2008 just before the financial crisis intensified.

Economists polled by Reuters had forecast a modest decline in claims to 435,000.

-END-

Thirdly, the consumer spending is up with inflation supposedly at record lows:

October consumer spending up, inflation at record low

WASHINGTON (Reuters) - U.S. consumer spending rose for a fourth straight month in October and a key inflation gauge was at a record low, a government report showed on Wednesday, strengthening the Federal Reserve's defense of its decision to loosen monetary policy further.

The Commerce Department said on Wednesday spending rose 0.4 percent after climbing by an upwardly revised 0.3 percent in September.

Economists had expected spending, which accounts for about 70 percent of U.S. economic activity, to increase 0.5 percent last month after a previously reported 0.2 percent gain in September.

The Federal Reserve's preferred measure of consumer inflation -- the personal consumption expenditures price index, excluding food and energy - was flat for a second straight month.

But in the 12 months through October, the core PCE index rose 0.9 percent, the smallest since records started in 1960 and well below the U.S. central bank's 1.7 percent to 2 percent comfort zone.

Though spending rose last month, it was still not robust. Concerns about low inflation and slow economic growth prompted the Fed this month to pump more money into the economy through additional purchases of $600 billion worth of government debt.

The asset purchasing program, also known as quantitative easing in financial markets, is intended to drive already ultra low interest rates further down and boost domestic demand.

Spending was lifted by a 0.5 percent rise in incomes after being flat in September. The rise incomes, which was flagged by October's employment report, was a touch above market expectations for a 0.4 percent gain.

Spending adjusted for inflation increased 0.3 percent after rising 0.2 percent in September. The sixth straight month of gains suggested consumers would continue to support the economy in the fourth quarter as the boost from inventory growth earlier in the year wanes.

Spending grew at a 2.8 percent annual pace in the third quarter, the fastest rate since the fourth quarter of 2006.

With real disposable income rebounding 0.3 percent, the saving rate edged up to 5.7 percent from 5.6 percent in September. Savings rose to an annual rate of $651.1 billion.

-END-

Durable goods orders plummeted last month:

Durable goods orders fall sharply in Oct

WASHINGTON (Reuters) - New orders for long-lasting U.S. manufactured goods unexpectedly fell in October to post their largest decline in nearly two years and business capital spending plans dropped, according to a government report on Wednesday that pointed to a slowdown in factory activity.

The Commerce Department said durable goods orders tumbled 3.3 percent, the largest decline since January 2009, after surging by a revised 5 percent. Economists had expected orders to be flat in October after a previously reported 3.5 percent jump.

Excluding transportation, orders dropped 2.7 percent, the biggest fall since March 2009, after a revised 1.3 percent increase in September, which was previously reported as a 0.4 percent. Economists had expected orders excluding transportation to rise 0.6 percent in October.

The drop in orders last month was almost across the board, with hefty declines in bookings for machinery, computers, communications equipment and defense aircraft.

Durable goods orders are a leading indicator of manufacturing and the report suggested factory activity could be faltering. Manufacturing has led the economy's recovery from the worst recession since the 1930s.

The Commerce Department report showed non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, dropped 4.5 percent in October after rising by a revised 1.9 percent in September.

Markets had expected a 1 percent increase.

-END-

 

However this number  is what bankesr really pay attention to and that is new home sales,  They were down last month:

U.S. new home sales unexpectedly fall in Oct

WASHINGTON, Nov 24 (Reuters) - New U.S. single-family home sales fell unexpectedly in October and prices dropped to a seven-year low, a government report showed on Wednesday, pointing sustained weakness in the housing market following the end of a home-buyer tax credit.

The Commerce Department said sales dropped 8.1 percent to a 283,000 unit annual rate after an upwardly revised 308,000 unit pace in September.

Analysts polled by Reuters had forecast new home sales rising to a 310,000 unit pace in October. Compared to October last year, sales were down 28.5 percent.

Housing remains one of the weak spots in the economy, which is showing some strength. With unemployment stuck at an uncomfortably high 9.6 percent, homeowners are struggling to hang on to their houses, keeping the foreclosure wave high and stifling the sector's recovery. Data on Tuesday showed a drop in the sales of previously owned homes last month.

October's weak sales pace pushed up the supply of new homes on the market to 8.6 months' worth from 7.9 months' worth in September. However, there were 202,000 new homes available for sale in October, the lowest since June 1968.

The median sale price for a new home dropped a record 13.9 percent last month from September to $194,900, the lowest since October 2003. Compared to October last year, the median price fell 9.4 percent, the largest drop since July 2009.

-END-

The ECRI showed consecutive weeks of growth.  From Reuters:

US econ growth gauge rises to 27-week high - ECRI

NEW YORK, Nov 24 (Reuters) - A measure of future U.S. economic growth rose to a 27-week high in the latest week, while the growth rate rose to a 25-week high, a research group said on Wednesday.

The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index rose to 126.4 in the week ended Nov. 19 from 124.2 the previous week.

That was the highest level since May 14, when it stood at 127.0.

The index's annualized growth rate rose to minus 3.1 percent from minus 4.5 percent a week earlier. That was the highest since 28, when it stood at 0.1 percent.

-END-

On the negative scale we have been witnessing the fall in the stock of Bank of America despite the Dow rising.  Today it fell again.  The fall of this bank will have severe domino repercussions to the economy. The following commentary is very important for you to read.  The author is Dave Kranzler and you can see it on his website at the Golden Truth:. http://truthingold.blogspot.com/

Ssssssss...They're Slowly Letting All The Air Out Of Bank Of America

Here's the chart:

http://www.lemetropolecafe.com/img2010/Midas/Midas1124A.png

BAC had another ugly day today on very large volumn relative to its average volumn over the past 30/90 days. Some of the biggest holders have folded their tent and it sounds like more are following. Right now BAC's price is being "managed" lower in that neatly defined downtrend channel above. Check out the TRIX indicator, a momentum indicator which "slows" down the direction the trend oscillations. It's good to use when looking for clues to longer term trends.

BAC is now solidly below its 50 and 200 day moving averages. That is also very bearish. Fundamentally it would appear as if this fraud-riddled carcas is getting ready to be snuffed. They ("they" being Geithner and Bernanke and Henry Paulson) stuffed Countrywide and Merrill Lynch - two hugely fraudulent Wall Street creations - into BAC in order to shift the burden of monetizing the fraud onto the Government. Now they'll go in for the kill and bury all the evidence, just like so many before it: Enron, Refco, Amaranth, Lehman, and Bear Stearns. Of course, first they'll let the Pimpcos of the world flip fraudulent mortagage paper back into BAC as per the terms of the mortgaging servicing agreements under which BAC is liable.

I am playing this using May 2011 8-strike puts. If you are invested in any mutual funds which list BAC in the top-10 holdings, you should get rid of those funds now - the managers do not know what they are doing.

***

end.

This next story is the biggest story we have been following for days..the continual degradation of Europe:

The author is Neil Unmack and he is a Reuters's London writer:

BREAKINGVIEWS-Contagion may force ECB to get its hands dirty

The author is a Reuters Breakingviews columnist. The opinions expressed are his own –

By Neil Unmack

LONDON, Nov 24 (Reuters Breakingviews) - There are worrying signs of contagion from Ireland to the euro zone. Spanish government bond spreads are at euro-life highs, Italian bond yields are at a 2010 peak and credit default swaps are soaring.

The European Union and International Monetary Fund may be focused on the Irish bailout. But restoring calm across the euro zone may be a job for the European Central Bank.

The European Financial Stability Facility established in May could bail out Ireland, Portugal and, theoretically, Spain too.

But as it is currently designed, its resources would then be depleted. The market is understandably nervous about how Europe may handle a wider crisis.

As the crisis has intensified, the ECB has only offered limited support. ECB council member Yves Mersch noted on Wednesday that the EFSF was there to manage sovereign bailouts, so there less need for "extraordinary measures". He even talked of the ECB continuing its policy of gradually removing special liquidity support for the banking sector. Crisis? What crisis?

But it may be hard for the ECB to maintain this purist approach given it has powers to stabilise the situation. For starters, it could jack back up its liquidity support for the banks. That would be a u-turn from the stated policy of exiting the measures, but it wouldn't be the first.

The really radical option would be to attempt to bring in sovereigns spreads by making outright purchases of government bonds. At the very least, this might give time for Spain to show the market it is recovering. It could even buy time for euro zone politicians, with the IMF, to expand the EFSF. Still, this would be anathema to hawkish ECB members, such as Bundesbank chief Axel Weber. Such buying would violate the principle that it is not the central bank's job to orchestrate large-scale fiscal transfers between European member states. That would be a matter for politicians accountable to taxpayers.

But that principle has already been chiselled away. The ECB began buying bonds in May when the EFSF was born, to ensure that government bond markets functioned properly. While the purchases later slowed to a trickle, they have picked up in recent days, albeit confined to the debt of weaker countries like Ireland and Portugal.

The question is whether ECB could buy sovereign debt in large quantities and mop up Spanish debt. If done in sufficient size and with conviction, such purchases could lure investors back to the market. But supporting the Spanish bond market might require some very large purchases. Spain must borrow 95 billion euros next year, and 101 billion euros in 2012.

The ECB is loath to embark on such a large monetary adventure. For one, the sight of large purchases of Spanish debt might spook investors, who could view it as a sign that Spain is in deep trouble. There could also be practical obstacles; the ECB might need to expand its balance sheet. It would also have to find a way to sterilize the purchases by removing excess 
liquidity from the banking sector to avoid fuelling inflation. That could be tricky for large-scale purchases.

The situation isn't critical enough for the ECB to step in just yet. At roughly 2 percentage points over Euribor, Spanish three-year spreads are still over 1 percentage point lower than the rate the country would pay if it tapped the EFSF. The storm may pass. But if the contagion spreads, the ECB may find that it has to put pragmatism over principle.

European Central Bank governing council member Yves Mersch said Nov. 24 the presence of the euro zone's rescue fund meant the need for its government bond buying programme was not as acute as it was when the programme was announced, on May 10.

-- "When we stepped in (with the bond buying programme) it was in a moment of institutional vacuum inside the (European) Union in terms of crisis management and crisis resolution. In the meantime we have seen the set up of the European Financial Stability Fund," Mersch said in an interview with CNBC.

-- "We are in a whole different environment now than when the SMP (bond buy programme) was set up and we have to take into account this change."

-- "This does not mean the SMP will have to be scrapped altogether, only that it is not at present in the same functioning mode as it has been six months ago," Mersch added.

The European Central Bank began buying government bonds as part of a broader euro zone rescue package announced May 10.

It has so far bought 66 billion euros of bonds.

ECB statement on May 10: 
http://www.ecb.int/press/pr/date/2010/html/pr100510.en.html

-END-

.This came in late last night from Bloomberg:  (the story speaks for itself)

Bankers Rigging Municipal Contract Bids Admit to Cover-Up Lies

In rooms in Manhattan federal court, the Justice Department is having more success establishing that many of the same banks fleeced taxpayers by investing, at below-market rates, some of the $400 billion of bond proceeds raised each year. Details of the scope and depth of this nationwide financial conspiracy are coming to light almost without notice, as one defendant after another appears to face justice.

It was see no evil and hear no evil by everybody involved," he says.

"It was a conspiracy of silence."

"That money, instead of going to citizens, goes to Wall Street banks," he says.

Some of the top derivatives traders at the world’s largest banks stood to gain because their bonuses grew larger as they won more bids.

Hiding Kickbacks

Derivatives are financial contracts used to hedge risks or for speculation. They’re derived from stocks, bonds, loans, currencies and commodities, or linked to specific events such as changes in the weather or interest rates.

http://www.bloomberg.com/news/2010-11-24/bankers-rigging-municipal-contract-bids-admit-to-lying-to-cover-up-tracks.html

-END-

 

Yesterday, the USA released GDP  3rd quarter and it was better than expected at 2.5%.  Here is John Williams's version of the GDP numbers, the weaker durable goods number and home sales weekness (courtesy of Jim Sinclair)

Jim Sinclair’s Commentary

You must give serious consideration to subscribing to John’s service.

I would not be without it.

The recently labelled good economic reports are constructs of statistical "adjustments."

- GDP at 2.5% But "Equivalent" GDI at 1.6% 
- Weaker Durable Goods Orders Reflect Stressed Consumer 
- Home Sales Weakness Intensified by Systemic-Solvency Issues

"No. 335: GDP Revision, October Durable Goods Orders and Home Sales" 
www.shadowstats.com

end.

This next story is a dandy. China and Russia apparently are abandoning the dollar  (courtesy Jim Sinclair and the story is from China Daily)
China, Russia quit dollar 
By Su Qiang and Li Xiaokun (China Daily) 
Updated: 2010-11-24 08:02

St. Petersburg, Russia – China and Russia have decided to renounce the US dollar and resort to using their own currencies for bilateral trade, Premier Wen Jiabao and his Russian counterpart Vladimir Putin announced late on Tuesday.

Chinese experts said the move reflected closer relations between Beijing and Moscow and is not aimed at challenging the dollar, but to protect their domestic economies.

"About trade settlement, we have decided to use our own currencies," Putin said at a joint news conference with Wen in St. Petersburg.

The two countries were accustomed to using other currencies, especially the dollar, for bilateral trade. Since the financial crisis, however, high-ranking officials on both sides began to explore other possibilities.

The yuan has now started trading against the Russian rouble in the Chinese interbank market, while the renminbi will soon be allowed to trade against the rouble in Russia, Putin said.

"That has forged an important step in bilateral trade and it is a result of the consolidated financial systems of world countries," he said.

Putin made his remarks after a meeting with Wen. They also officiated at a signing ceremony for 12 documents, including energy cooperation.

The documents covered cooperation on aviation, railroad construction, customs, protecting intellectual property, culture and a joint communiqu. Details of the documents have yet to be released.

More…

end.

Many of you have asked me what happens in the end. I believe that this next video by the NIA states quite accurately what will happen.  I have provided the link for you:

http://www.zerohedge.com/article/day-dollar-died

If that fails, google  zero hedge and type in the day the dollar died.  The video is 7 minutes and it is well worth the view.

end.

I will leave you with this important paper written by Econophile of zero hedge.  The title of his paper is Dazed and Confused:  The Fed's Clouded Vision of the Future:

Dazed and Confused: The Fed’s Clouded Vision Of The Future

This article originally appeared in The Daily Capitalist.

If you are looking for guidance and clarity from the Federal Reserve, your trust will be misplaced. The recently released minutes of the Federal Reserve Open Market Committee's (FOMC) November meeting reveal a deeply divided Fed with no clear consensus on the effectiveness of their policies.

Their review of recent (publicly available) data and their assessment of the current state of the economy reveals their concern and frustration with their inability to effect the course of the economy. Their current projections are:

... Fed policy makers projected a fourth- quarter 2011 unemployment rate of 8.9 percent to 9.1 percent, compared with 8.3 percent to 8.7 percent in their previous forecast in June [2011]. For 2012, the jobless rate will be 7.7 percent to 8.2 percent, up from prior projections of 7.1 percent to 7.5 percent. The rate was 9.6 percent in October, marking 18 months at 9.4 percent or higher.

 

Officials said the economy will expand by 3 percent to 3.6 percent next year, down from [their] 3.5 percent to 4.2 percent projection in June [2010]; the 2012 forecasts of 3.6 percent to 4.5 percent growth compare with the prior projections of 3.5 percent to 4.5 percent. ...

 

Policy makers left forecasts for inflation, excluding food and energy, little changed for the next two years, indicating price increases may lag behind the long-run projection of 1.6 percent to 2 percent for at least two years.

 

Fed officials gave their first forecasts for 2013, projecting growth of 3.5 percent to 4.6 percent, a fourth- quarter jobless rate of 6.9 percent to 7.4 percent and core inflation of 1.1 percent to 2 percent.

Their discussion of policy solutions were all over the board, although "most" of the members supported their quantitative easing policy (QE2):

Most participants judged that a program of purchasing additional longer-term securities would put downward pressure on longer-term interest rates and boost asset prices; some observed that it could also lead to a reduction in the foreign exchange value of the dollar. Most expected these changes in financial conditions to help promote a somewhat stronger recovery in output and employment while also helping return inflation, over time, to levels consistent with the Committee's mandate. In addition, several participants argued that the stimulus provided by additional securities purchases would help protect against further disinflation and the small probability that the U.S. economy could fall into persistent deflation--an outcome that they thought would be very costly.

The lone nay vote on affirming their policy was Federal Reserve Bank of Kansas City President Thomas Hoenig:

Mr. Hoenig dissented because he judged that additional accommodation would do little to accelerate the economy's continuing, gradual recovery. In his assessment, the risks of additional purchases of Treasury securities outweighed the benefits. Mr. Hoenig believed that additional purchases would risk a further misallocation of resources and future financial imbalances that could destabilize the economy. He also saw a potential for additional purchases to undermine the Federal Reserve's independence and cause long-term inflation expectations to rise.

Mr. Hoenig is correct.

They agreed to expand their balance sheet up to $2.6 trillion by March, 2011. They will target maturities in the 2 to 10 range. They also discussed the possibility of purchasing "longer-term Treasury securities." According to the Wall Street Journal article:

In the 1940s and 1950s, the Fed pinned long-term rates below 2.5%. Though the Fed didn't take action in this direction, the discussion suggests the notion could come up later if the economy worsens.

The minutes reveal that is exactly what they plan to do:

The Committee directs the Desk to execute purchases of longer-term Treasury securities by the end of June 2011 in order to increase the total face value of domestic securities held in the System Open Market Account to approximately $2.6 trillion.

This is not additional QE; they are shifting maturity targets in order, in my belief, to "stabilize" long-term rates which, subsequent to their announcement of QE2, have climbed. Also, by extending maturities, they have less pressure to continually roll over their portfolio, as they do with shorter maturities.

Also, as noted by Bloomberg, they discussed adopting what is known as the Taylor Rule, which is to target an inflation level but "decided to retain the policy of giving policy makers’ long-run inflation projections."

I think it is wise to ignore their forecasts and instead focus on what they are doing. What they are doing is monetizing federal debt. They have no idea where their policy of QE is heading and that is because (1) they have been mostly wrong so far, and (2) their internal "vigorous" debate demonstrates that they have serious questions about what they should do.

Inflation is a tricky thing for the Fed because they don't know what it is. They confuse "inflation" with increases in prices, a view held by most economists. And that is one of the main reasons their forecasts have been so wrong and their policies so ineffective. As well, most economists conflate increases in prices with supply and demand factors. For example, the common view is that if oil goes to $150bbl, the CPI will go up. Which is incorrect. It is a simple demonstration of supply and demand: if we have fewer dollars to spend on things other than gasoline then prices on those other things decline.

They do not see that inflation is actually an increase in the supply of money without a corresponding demand for money. Rising prices are one of the impacts of monetary inflation. Other serious effects occur which are even more damaging to the economy than price increases. Some of those impacts are a creation of the boom-bust cycle and the destruction of real capital (wealth created from production, not from money printing).

When the Fed says they wish to create "inflation" through printing money to spur the economy and prevent "deflation" they actually are saying that they wish to trick the citizenry into believing that rising prices are really a result of strong economic activity when it isn't. They believe that wiping out capital, punishing savers, and seeding the ground for a new destructive business cycle is a positive for economic growth.

There is a lot of discussion now about the "psychology" of inflation and how the Fed can make inflation work. Most of it is stuff mainstream economists dream up to explain why their theories don't work. For example, the advantage of "surprise" they had hoped for that would allow them to pump more money into the economy to spur growth without people catching on to what they are doing. I don't really know why mainstream economists say such things, but they do. The psychological anticipation of higher prices is all quite true as price inflation starts taking off. As people anticipate that prices will continue to rise, they will adjust their goals and demand higher returns. Or they will reduce their demand for money and start buying goods that appear to "appreciate." But that "psychology" has to start somewhere and that "somewhere" is with a central bank which likes to print money as the solution to their country's problems. You can't have inflation without it.

I would side with Mr. Hoenig who does understand something about the dangers of inflation. Inflation as a solution hasn't worked here or anywhere and it won't work now.

The markets already sense this. Recall that 30% of the buyers are foreign sovereigns, banks, and investment companies whose countries have rich traditions of destroying their economies through inflation. Perhaps even U.S. based investors understand this lesson as well. The almost instantaneous jump in Treasury rates, especially the long bond, was counterproductive to the Fed's plans to keep interest rates low and make borrowing attractive to businesses. The bond vigilantes know better. So, initially the Fed's QE hopes have somewhat diminished.

When they start discussing a whole new way at looking at how they control money supply (the Taylor Rule) or which maturities they should target in the future, you know they don't have a clue where this is going. The dissension among the members of the FOMC is a rather stark example of why mainstream economics has failed us time and again. Their ordinary tools have failed them and they are desperate, in my opinion, to find something that will work. Thus the wide disparity of opinion between the Fed's anti-deflationists and the anti-inflationists.

I think that they will pump in enough money to create some inflation, even though it may not be that apparent with powerful ongoing deleveraging forces. You can't "helicopter" $2.6 trillion into the economy and have no effect. The result in my view will be stagflation.

5

end.

Well that wraps up the week.  I will not give a commentary tomorrow.  I want to wish all our American friends a happy Thanksgiving holiday weekend. I will give a commentary on Saturday where I will report on the COT numbers and the open interest on the gold and silver contracts going into first day notice.

all the best

Harvey

 

 

 

 

 

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