Wednesday, November 9, 2011

Italy in bond freefall/ Bond yield surpasses 7.3% on 10 yr/Jefferson county files for chapter ll

Good evening Ladies and Gentlemen: amended

Today was a wild day with the stock market falling by close to 400 points due to the continuing bond problems over in Italy.  Late this evening, Jefferson county filed for chapter 11.  I will be going over many stories on this front, plus the MF Global scandal but first let's head  to the comex and see how things fared over there today.  

The price of gold held relatively well despite the financial onslaught. Gold came within a whisker of 1800 dollars only to be repelled by many over by the criminal banking cartel.  The price ended the comex session at 
$1790.90 for a loss of $7.50.  Silver fell harder dropping  79 cents to $34.35.  Warning to all:  expect high volatility days like today for many trading days ahead.

The banking cartel decided to raid again in the access market where counterparties are very few and far between.  The bankers sell into this market without a profit motive.  Here is where they are trading at 6 pm:

Gold;  $1770.80
Silver:  $34.11

Gold and silver will attempt tomorrow to break 1800 dollar and 35.00 respectively.  The bankers will dig in the heels.  It will be a battle royale tomorrow.

The total gold comex OI rose by 5098 contracts as the bankers seem impervious to the new regulations set to begin on Jan 1.2012.  The bankers supplied massive non backed paper trying to quell demand and keep the yellow metal below 1800.00 dollars.  The front options expiry month of November saw its OI remain constant at 57.  Since we had 12 delivery notices yesterday, we thus gained 1200 oz of gold standing and lost nothing to cash settlements. The big December month saw it OI fall marginally from 259,166 to 256,637 as these boys rolled to an another future month.  The estimated volume today was light at 149,331.  The confirmed volume yesterday was marginally better at 160,102.

The total silver OI continues to gradually rise.  Today the OI sits at 111,841 a rise of 1784 contracts from yesterday. The front options expiry month of November saw its OI fall from 138 to 118 for a loss of 20 contracts.  We had a huge 90 delivery notices yesterday so we again gained a rather large 70 contracts of silver standing or  350,000 oz and no cash settlements.  As I mentioned to you earlier today, someone or some entity was badly in need of physical silver.  The next big delivery month for silver is December and here the OI dropped from 50,434 to 48,556 as we see these players roll to another future month.  The estimated volume today was a rather tame 57,768 and the confirmed volume yesterday was also only slightly better at 61,131.

nventory Movements and Delivery Notices for Gold: Nov 9.2011:

Withdrawals from Dealers Inventory in oz
Withdrawals from Customer Inventory in oz
707 (Manfra)
Deposits to the Dealer Inventory in oz

Deposits to the Customer Inventory, in oz
No of oz served (contracts) today
20 (2000 oz)
No of oz to be served (notices)
37 (3700)
Total monthly oz gold served (contracts) so far this month
431 (43,100)
Total accumulative withdrawal of gold from the Dealers inventory this month
Total accumulative withdrawal of gold from the Customer inventory this month

The CME is late today on movements of gold and silver into and out of vaults.

amended:  They brought out the movements in the early hours of the morning.
Again no gold was deposited to the dealer and no gold was withdrawn.
The only transaction was a withdrawal by the dealer of 707 oz from Manfra.

We also had a 299 oz lease from a customer to the dealer.
The registered gold is now raised to 2.3 million oz.

The CME reported to you that we had 20 notices filed for 2000 oz of gold. The total number of notices filed so far this month total 431 for 43100 oz.  To obtain what is left to be filed, I take the OI standing (57) and subtract the deliveries for today (20) which leaves us with 37 or 3700 oz.

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

43100 oz (served)  +  3700 (oz to be served)  =  46800 oz  or 1.45 tonnes of gold.  we gained 1200 oz from yesterday.

And now for silver 

First the chart: November 9th

Withdrawals from Dealers Inventorynil
Withdrawals fromCustomer Inventory32,000 (scotia)
Deposits to theDealer Inventorynil
Deposits to the Customer Inventorynil.
No of oz served (contracts)70  (350,000)
No of oz to be served (notices)48  (240,000)
Total monthly oz silver served (contracts)207 (1,035,000)
Total accumulative withdrawal of silver from the Dealersinventory this month308,850
Total accumulative withdrawal of silver from the Customer inventory this month1,461,321

I will report on the silver movements as soon as I receive them.

amended:  a

again no silver was deposited to the dealer and no silver was withdrawn.
The only transaction was a suspect  exact 32,000 oz withdrawal from Scotia
by the customer and this silver left all vaults. I am suspect because of the exact round number of withdrawal.

We had an adjustment of a huge 731,315 oz as a lease from the customer to the dealer.
The registered silver is now represented by 31.863 million oz and all the silver is now 107.973 million oz.

The CME notified us that we had 70 delivery notices filed today for 350,000 oz. This is the second day in a row where we had huge deliveries on silver.  The total number of notices filed so far this month total 207 for 1,035,000 oz.  To obtain what is left to be served upon, I take the OI standing (118) and subtract out today's deliveries (70) which leaves us with 48 delivery notices identical to yesterday.  Thus as I explained earlier someone was in urgent need of silver and they robbed the cookie jar.  The 48 delivery notices translates to 240,000 oz.

Thus the total number of silver oz standing in this non delivery month is as follows:

1,035,000 (oz served)  +  240,000 oz (to be served)  =  1,275,000 a gain of 350,000 oz from yesterday.
It kind of shows you when they whack silver they are hitting the paper silver price not the real silver price as the bankers desperately try and round up as much silver as they can to satisfy global demand!


Let us now proceed to our ETF's SLV and GLD and then our physical gold and silver funds:

Sprott and Central Fund of Canada.

The two ETF's that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.
There is now evidence that the GLD and SLV are paper settling on the comex.

Thus a default at either of the LBMA, or Comex will trigger a catastrophic event.

Nov 9.2011:

Total Gold in Trust



Value US$:72,650,277,354.89

Nov 8.2011:




Value US$:72,924,586,482.03

NOV 7.2011:




Value US$:71,911,603,075.94

 we gained another  11.5 tonnes of gold into the GLD.  My goodness, these guys are good at getting gold in quantity. The GLD inventory has increased for each of the last 3 days.  This gold i belongs to the Bank of England and the GLD obtains the gold through a swap.   The bank receives cash and the GLD receives the gold.  The problem is that this must be unwound at the whim of the B. o E.
What is more frightening as that this gold does not belong to the Bank of England but to investors who deposit their gold at the bank like you and I would deposit cash to our bank.  This no doubt will be a catastrophic event similar to the MF Global mess.                                 

And now for the SLV for Nov 9;2011

Ounces of Silver in Trust314,553,561.600
Tonnes of Silver in Trust Tonnes of Silver in Trust9,783.71
Nov 8.2011:

Ounces of Silver in Trust313,726,506.500
Tonnes of Silver in Trust Tonnes of Silver in Trust9,757.99

Nov 7.2011:
Ounces of Silver in Trust314,115,724.100
Tonnes of Silver in Trust Tonnes of Silver in Trust9,770.09
we lost: 827,000 silver oz out of the SLV.
Again we are witnessing massive volumes of silver leave London for foreign destinations.  They see the global financial mess and thus acquire the physical metal in London and then run.

And now for our premiums to NAV for the funds I follow:

1. Central Fund of Canada: traded to a positive 2/5 percent to NAV in usa funds and a positive  2/9% to NAV for Cdn funds. ( Nov9.2011).
2. Sprott silver fund (PSLV): Premium to NAV rose to a   positive 17.95%to NAV Nov 9/2011
3. Sprott gold fund (PHYS): premium to NAV lowered to a 3.04% to NAV Nov 9.2011).

it looks like central fund of Canada is finally seeing positives to their NAV.
The Sprott funds continue to demonstrate strong positives in silver and good NAV's with respect to gold. They held up pretty good today despite the raid.


The stock market fell today by close to 400 points sparked by the rise in bond yields in Italy.  Here is this important comment from Zero Hedge on the financial meltdown today.

Some terms for you:  XLF is an ETF measuring the banking sector in the S and P 500.
HYG/HY are ETF's which track high yielding bonds (similar to junk bonds)

Italy Sparks Market Bloodbath: Financial Stocks Collapse

Tyler Durden's picture

So much for the US decoupling. Following 5 days of persistent refusals to deal with reality, the real world finally came back with a bang, and while the overall market tumbled the most in two months, it is really financial stocks that took the brunt of today's beating. As the chart below shows, the XLF has literally collapsed with most major banks on the ropes, and the broker dealer index down 6.45% the most since August 10. The reason? Italy of course, and the fear that once the country is forced to write down its debt, the bank failures will proceed in waves: first Italian banks, then French, and then everyone else, especially those that have already been in the market's crosshairs for their exposure. And if today was ugly, tomorrow promises to be an absolute bloodbath with Italy deciding to proceed with the issuance of €5 billion in 1 year Bills into what may well be a bidless market.

Unable to scramble back to VWAP, the buy-the-dippers faced some uncomfortable reality today in equities as we closed near the lows of the day in ES (on heavy volume). Financials dropped over 5.5% with some of the majors (MS, GS, BAC) and Minors (JEF) stumbling very hard. The biggest drop in financials in over two months (and ES also!) was the worst performing sector as equity markets retraced more of that richness relative to credit that has been hanging over this rally's head. Wherever you looked there was pain with Copper smashed lower (along with silver and less so Gold) as the dollar tore higher after EURUSD fell over 330pips from its morning highs.
ES managed a small pull off the lows into the close but remained well south of both VWAP (light blue) and CONTEXT(dark blue) as volume was 15% above average.

A one-day drop in the Financials ETF of over 5.5% is the most since the early August chaos.
And as usual, this is what happens when too much faith in central planning meets reality:
But it will get worse: unless the ECB steps in early and forcefully tomorrow, this is coming:
Away from stocks, credit was even more aggressively sold off (just as we saw in Europe this morning) with HY crushed - which will implicitly drag our expectations of equity market's relative-value down also.
We have been very vocal at the pump-and-dump we suspect has been going on in the HYG ETF and its underlying HY cash market and today saw HYG dramatically underperform at the close. It seems perhaps (once again) that the liquidity hedge prefernce shifted back to HYG (the high yield bond ETF) after HY17 (the suppoosedly liquid credit derivative index) dried up.
And then HYG also cracked lower into the close relative to SPY...
While taking advantage of this disconnection may seem simple, we suspect that HYG was simply the easiest place to set out hedges as we accelerated weaker into the close and every other market dried up. We discussed this at length last week and especially note that we were growing worried about the exuberance in the HYG and the HY bond advance/decline line.
The 'save' in Oil early on (around the report and the EU close) along with the weak auction in 10Y TSYs probabaly supported ES more than otherwise as broad risk assets did not drop quite as dramatically. TSYs closed well off the low yields of the day but were still down for the day quite handily. VIX blew back out as did implied correlation as macro overlays were grabbed at whatever cost for liquidity. Gold remains  up 0.8% on the week but gave back some today with Silver just negative on the week now. The
dollar strength and equity weakness combined to drag us back to -3% YTD
in terms of constant USD purchasing power (and -2.27% outright in the
Charts: Bloomberg


Today the 2 yr bond yield rose at one point above the 10 yr bond.  They finished the day within a whisker of one another. Thus the entire Italian yield curve is flat indicating a massive recession is coming upon them:

First the 10 yr bond:

(courtesy Bloomberg for the charts)
Value7.25One-Year Chart for Italy Govt Bonds 10 Year Gross Yield (GBTPGR10:IND)
Change0.478 (7.060%)

Now the 2 yr bond:
Value7.20One-Year Chart for Italy Govt Bonds 2 Year Gross Yield (GBTPGR2:IND)
Value7.20One-Year Chart for Italy Govt Bonds 2 Year Gross Yield (GBTPGR2:IND)


Bloomberg reports on the vigilante Italian bond attack.  The clearing house LCH Clearnet raised its margin requirements for clients who invest in Italian bonds:

(;  first the LCH clearnet announcement and then Bloomberg's article on the Bond attack):

(courtesy Bloomberg)

Yields surge on margin move: Italian 10-year bond yields have surged through the 7% level, pushing the spread over comparable German bunds through 500 bp for the first time in the euro era. The move followed the decision by LCH. Clearnet to raise the margin on Italian debt. There have been widespread reports that the surge in yields has come despite ECB buying. A number of media outlets have also pointed out the 7% level, which is widely viewed as unsustainable, was the point at which Portugal, Ireland and Greece were all forced to seek a bailout.

Italy Bond Attack Breaches Euro Defenses


The euro-region’s defenses are being breached.
Investors today propelled Italy’s 10-year bond yield to close at a euro-era high of 7.25 percent after the promised exit of Prime Minister Silvio Berlusconi failed to convince them that his country can slash Europe’s second-largest debt burden.
The biggest signal yet that the single currency’s third- largest economy is falling prey to its two-year debt crisis forces German ChancellorAngela Merkel, European Central Bank President Mario Draghi and their peers to decide just how far they’re willing to go to defend the euro.
“The market is testing the commitment of the euro zone’s stewards,” said Eric Chaney, Paris-based chief economist at insurer AXA SA and a former official in the French Finance Ministry. “Italy is the real crisis battleground.”
At 1.9 trillion euros ($2.6 trillion), Italy’s debt exceeds that of Greece,Spain, Portugal and Ireland combined, though unlike those nations, it has systemic importance as the world’s third-largest bond market and eighth-biggest economy. Berlusconi’s offer to quit has still left his nation struggling to produce a government stable enough to deliver austerity after LCH Clearnet SA raised the deposit it demands for trading Italian securities.

‘Ugly’ Outlook

“While Italy is considered too big to fail, she may be too big to save unless there is a major change of attitude towards resolving the crisis,” said John Higgins, an economist at Capital Economics Ltd. in London. “Things could be about to turn very ugly.”
The yield on Italy’s 10-year bond today surged 48 basis points to levels which previously drove Greece, Ireland and Portugal to seek international bailouts. Credit-default swaps on Italy’s government bonds jumped 12 basis points to a record 551, according to CMA prices.
Investors want “a signal that Italy has taken control of its accounts and is increasing the competitiveness of the system,” Marco Tronchetti Provera, Chairman of Pirelli & C. SpA, Europe’s third-biggest maker of tires, told reporters in London today. “Parliament has to take action soon.”
Global pressure on Rome is building days after Group of 20 leaders decried the inability of European counterparts to defeat a crisis now in its third year and threatening global growth.

IMF Visit

International Monetary Fund fiscal monitors are due to visit the Italian capital, and European Union Economic and Monetary Affairs Commissioner Olli Rehn says he wants answers to “very specific questions” on economic pledges by the weekend. U.K. Prime Minister David Cameron today said Italian interest rates are “getting to a totally unsustainable level.”
“This is a form of meltdown,” said Marc Ostwald, a fixed- income strategist at Monument Securities Ltd. in London. “I would imagine the telephones between international finance ministries and central banks are in danger of running so hot they’ll melt down themselves.”
While Berlusconi said yesterday he’d step down as soon as parliament passes cost-cutting steps pledged to EU leaders, a vote on the measures may not come for days. His vow to quit came after he failed to muster an absolute majority on a routine parliamentary vote. He is also seeking elections which may delay reform further.

EFSF Backstop

Failure to restore order may leave Italy joining Greece, Portugal and Ireland in seeking outside help. The first port of call would likely be the 440-billion euro European Financial Stability Facility. A country can now tap a precautionary promise of support of up to 10 percent of its gross domestic product -- about 160 billion euros in Italy’s case.
German Finance Minister Wolfgang Schaeuble today told lawmakers that Italy should request aid from the EFSF if it needs it, two people present at the Berlin meeting said.
Higgins at Capital Economics said Italy needs about 650 billion euros to keep out of markets for the next three years, rising to 700 billion euros with support for its banks. Another alternative is the EFSF buys Italian bonds in markets, he said.
A problem is that the rescue fund has about 270 billion euros left after subtracting commitments to Greece, Portugal and Ireland. Governments also have yet to flesh out last month’s promise to boost its spending power to 1 trillion euros. With Italy facing bond maturities of about 475 billion euros in the next three years, Citigroup Inc. and Royal Bank of Scotland Group Plc are among those saying the fund needs at least double that amount to insulate Italy and Spain.

Too Big

“It’s hard to see that Europe would have the resources to take a country the size of Italy into the bailout program,” Finnish Prime Minister Jyrki Katainen said yesterday.
Such dilemmas could push Italy into the arms of the IMF, days after Berlusconi said he turned down a credit line with the Washington-based lender. With G-20 leaders debating whether and how to boost the IMF’s $391 billion war chest to assist Europe’s crisis-fighting, Managing Director Christine Lagarde today warned of a potential “lost decade” for the world economy.
“The bazooka approach would be an IMF-led solution backed by the U.S., China and others,” said Fredrik Erixon, head of the European Centre for International Political Economy in Brussels.
There is mounting pressure on the Frankfurt-based ECB -- now helmed by the Italian Draghi -- to bolster a bond-buying program which it deployed as recently as today to ease Italy’s strains. Another proposal is for the central bank to provide an unlimited guarantee of Italy’s debt in the hope that would remind investors it’s struggling with liquidity not insolvency and to buy it time to pass debt-reducing policies.

‘House Is on Fire’

“The house is on fire,” said Dante Roscini, a lecturer at Harvard Business School and former chief executive officer of Morgan Stanley in Italy. “The ECB needs to print money and buy Italian bonds, it’s the only way to put the fire out.”
The time may still not have come for the ECB to power-up, given central bankers would first want Italy to earn support by showing how it will eventually deliver budget discipline, said Ken Wattret, chief euro-zone market economist at BNP Paribas SA.
“The ECB will only intervene in a limited way when there’s a clearer path towards a more fundamental overhaul of the economy,” he said.
Internal politics and ideology may stay the ECB’s hand permanently despite its prior willingness to rewrite its rulebook. Since May 2010 the ECB has limited its bond buying to 183 billion, and Bundesbank President Jens Weidmann yesterday said the central bank cannot bail governments out, citing Germany’s experience of hyperinflation after World War I.

ECB Religion

“The only thing that would be a real game changer would be if the ECB were to take up this idea of being a lender of last resort to governments, but printing money is against the ECB’s religion,” said Nick Kounis, head of macro research at ABN Amro Bank NV in Amsterdam.
If the central bankers do eventually turn to the printing press it may be part of a broader strategic effort to finally conquer the turmoil which includes Greece being ejected from the euro area, said Eoin Fahy, chief economist at Kleinwort Benson Investors in Dublin. Merkel and French President Nicolas Sarkozy said last week for the first time that a country could leave the euro area if it fails to live by its rules.
“Eventually they’ll get to that point where they have to press ‘print,’” Fahy said. “The question is, do they throw Greece to the wolves first?”
Italy may still not need saving. IHS Global Insight economist Raj Badiani says Italy can survive “several quarters of expensive debt auctions” thanks to positive cash flow and relatively low levels of private debt.
Andrew Bosomworth, a senior portfolio manager at Pacific Investment Management Co. in Munich, senses a “watershed moment.” With Italy all but locked out of markets, European officials may have to jettison their short-term firefighting and pick between a smaller, stronger euro zone or a federalist structure with greater cross-border support.
“What is happening is what they’ve been trying to stop,” said Bosomworth, a former ECB economist.
To contact the reporter on this story: Simon Kennedy in London at


Long time GATA supporter Bill Holter correctly analyzes what this will do to the French and other banks:

All of this souring debt (Italian debt) is owned by banks and bank stocks far and wide are reflecting this. Please remember that banks are highly levered entities, if they are 20:1 levered then a mere 5% drop in their investment portfolio wipes out their capital base completely. Italy's woeful bond market has already spread to France. French banks are huge holders of Italian (not to mention already imploded Greek debt) bonds and investors are making the mental leap that France itself is next in the crosshairs as they cannot support their banks from being hollowed out. It is one GIANT margin call when you step back and look at the big picture.

Over on this side of the pond, we finally saw Jefferson county succumb to chapter11:

AL County Votes for Biggest Muni Bankruptcy on Record


Jefferson County, Alabama, commissioners voted 4-1 to file the largest U.S. municipal bankruptcy after reaching an impasse over concessions with holders of $3.14 billion of bonds.
JPMorgan Chase & Co. (JPM), which arranged most of the debt to fund a sewer renovation, will likely take the biggest loss.
A provisional agreement with creditors that commissioners approved in September included $1.1 billion in concessions and called for sewer-rate increases of as much as 8.2 percent for the first three years. The county was unable to get signed commitments from creditors, Commission PresidentDavid Carrington said today. Terms were changing even last night, he said.
In addition, the county’s 25-member legislative delegation was unable to unite behind bills needed to implement the tentative settlement, including ways to generate revenue for a strained general fund.
The vote by officials in Alabama’s most populous county occurred about a month after Pennsylvania’s capital of Harrisburg sought court protection citing millions in overdue bond payments tied to a trash-to-energy incinerator. A Jefferson filing would eclipse that of California’s Orange County in 1994. The action might reignite concerns among investors over defaults in the $2.9 trillion U.S. municipal bond market.

Commanding Attention

“It’s going to create attention-grabbing headlines, and the question is how retail investors react,”Peter Hayes, a managing director at BlackRock Inc., the world’s largest asset manager and the owner of $95.6 billion of municipal bonds, said before today’s decision.
The threat of bankruptcy has loomed over the county, home to Birmingham, Alabama’s biggest city by population, for more than three years. Commissioners sought to spare residents from ballooning fees needed to pay off the debt that financed a sewer project rife with corruption.
The crisis intensified in March when the state’s highest court struck down a tax on wages that generated $70 million annually for the general fund. The county put employees on unpaid leave, closed courthouses and scuttled road repairs after losing the levy that provided about a quarter of its revenue.
A special session of the Legislature is needed to enact several conditions of the prospective deal with creditors. One would set up an independent sewer authority to issue new debt backed by a so-called moral-obligation pledge from the state.

Lawmakers Disagree

Democratic lawmakers in the county’s delegation -- any member of which can block a bill -- refused to consider the agreement because of its effect on poor residents, who would have to pay higher fees. Republicans and Democrats also couldn’t agree on how to raise revenue to help close a $40 million deficit in the operating budget and replace the overturned tax. County commissioners refused to make more cuts to a budget that is almost $100 million less than last year.
The size of sewer-fee increases has been a sticking point because residents can ill afford higher costs, according to Commissioner George Bowman, who represents one of county’s two poorest districts. Almost 70 percent of sewer users are in the two districts with the lowest average incomes, he has said.
Jefferson County’s system serves about 478,000 people through 144,000 accounts, according to a June report from John Young, the court-appointed receiver who runs the system.
The county’s median household income is about $45,000 a year, according to U.S. Census Bureau data. Many sewer customers reside in Birmingham, where the figure is about $32,000.

Assistance Fund

The average residential wastewater bill is $37.74 a month, according to Young. He has previously proposed setting up a bill-assistance program for low-income customers, funded by $75 million from a settlement paid by JPMorgan, the biggest U.S. bank by assets, after accusations of securities violations related to the sewer bonds.
The $140 million gap between the county and its creditors includes $69 million in interest-rate swap termination fees owed to Lehman Brothers Holdings Inc., $30 million in “contingency” concessions from smaller creditors, and $30 million for a fund to aid sewer customers. The sum also includes $11 million in concessions from Regions Financial Corp.’s Morgan Keegan unit, which has since sold its bonds, Commission President Carrington said.
A bankruptcy would leave banks such as JPMorgan, investors and the bond insurers Financial Guaranty Insurance Co. and Syncora Guarantee Inc. facing hundreds of millions of dollars in losses. It may also burden residents and businesses with higher taxes or sewer bills, which have risen more than fourfold since 1997 as the system’s cost ballooned.

Orange County

Municipal bankruptcies are rarer than corporate failures. Jefferson would be the 11th this year. In 2010 there were 13,713 corporate Chapter 11 filings, according to a website maintained by the Administrative Office of the U.S. Courts.
Orange County, which was driven into bankruptcy by $1.7 billion in losses on interest-rate bets, had about $2.2 billion in debt outstanding, according to a June 1995 financial report.
On Aug. 1, Central Falls, Rhode Island’s smallest city, sought court protection, citing pension costs it can’t afford. The municipality listed almost $21 million in general-obligation debt outstanding.
The fiscal difficulties that drove Jefferson and Central Falls into bankruptcy were largely self-inflicted and have long been recognized by municipal-bond investors, potentially blunting the market effect of Jefferson’s step. Even so, the event may increase scrutiny of the market.

Investor Reaction

Investors pulled more than $30 billion from municipal-bond mutual funds from mid-November to June, according to data from Lipper US Fund Flows, as the lingering strains of the recession fueled speculation that defaults would jump. While that hasn’t happened, Jefferson’s move may reignite those concerns among households, which own about 37 percent of U.S. municipal debt.
Once in bankruptcy, Jefferson must show a federal judge that it can’t pay its bills and then draw up a plan for meeting obligations, which the court may reduce. Unlike corporate cases, creditors can’t try to seize or sell off county assets, and the court can’t appoint a trustee to run the county.
Municipalities have more leverage with creditors under Chapter 9 of the U.S. Bankruptcy Codethan corporations have when reorganizing debt in Chapter 11 protection, said Marc Levinson, a lawyer who represented Vallejo, California, when that city went bankrupt. A judge has limited authority to force a municipality to take specific actions, Levinson said.

Limited Court Power

“About the only thing a judge has the power to do is dismiss the case,” Levinson said.
Court proceedings may give Jefferson a formal process to rework its debts, a task that has eluded county commissioners, Bentley and former Governor Bob Riley.
The commission’s move threatens to expose banks to even steeper losses. Bentley, a Republican, has sought to avert the step, citing its potential effect on the state’s credit and image.
The crisis in Alabama arose when investors dumped Jefferson county’s bonds as the subprime mortgage-market meltdown sent ripples through Wall Street. Jefferson’s floating-rate securities were coupled with interest-rate swaps, a money-saving strategy pitched by banks that backfired. As credit markets convulsed in 2008, the county’s interest costs soared. When banks demanded early payoffs of the bonds, the county defaulted.
The debt deals also were rife with political corruption, leading the cost of the sewer project to soar as it was built during the 1990s. Former commission president and Birmingham MayorLarry Langford, a Democrat, was convicted of accepting bribes in connection with the financing.

Corruption Fallout

Two former JPMorgan bankers are fighting Securities and Exchange Commission charges that they made $8 million in undisclosed payments to friends of commissioners to secure the bank’s role in the deals. In 2009, JPMorgan agreed to a $722 million settlement with the SEC.
The financings arranged under Langford converted almost all the county’s sewer debt into securities that carried interest rates that periodically reset, a strategy promoted by Wall Street as a way for borrowers to save money using short-term interest rates on debt that didn’t mature for decades. The swaps paired with the bonds were meant to hedge against adverse changes in the rates.

Exposed to Crisis

That strategy left the county exposed in 2008, when the credit crisis pushed up municipal lending rates. As banks began hoarding capital, the market froze for auction-rate bonds, a type of security used by Jefferson, and the county had to pay penalty interest rates.
After some bond insurers incurred losses on subprime- related securities, threatening the credit ratings they used to guarantee other Jefferson debts, investors in 2008 dumped the sewer securities on banks that had agreed to act as buyers of last resort. That triggered contractual requirements for the county to pay off $850 million of the debt in four years instead of the 30 or 40 under the original agreements, according to government records.
The demands pushed the county into defaulting. The uncertainty that has reigned since then has led some businesses, politicians and residents to be thankful for any route that would bring the saga to a close.
To contact the reporters on this story: William Selway in Washington; Martin Braun in New York at; Margaret Newkirk in Birmingham at
To contact the editor responsible for this story: Mark Tannenbaum at

Zero hedge comments on the chapter eleven filing. Our wonderful friend, JPMorgan is now on the hook for two the major bankruptcies in the past week:  MFGlobal and Jefferson county.
It could not have happened to nicer fellows:

Jefferson County Files Largest Ever Chapter 9 Filing
Tyler Durden's picture

Update Update: Yep, it's official: JEFFERSON COUNTY COMMISSION VOTES FOR RECORD MUNI BANKRUPTCY, commissioners vote 4 to 1 to screw over JP Morgan
Update: according to an update tweet, "Jeffco bankruptcy: Commissioners are now discussing the motion. They have not voted yet." Things are fluid. Stay tuned.
The bad news for JP Morgan just keep on coming. According to the Tweeter account of Birmingham News, "Jefferson County Commission makes motion to file bankruptcy." We translate this to mean that the "avoided bankruptcy" state has just metamorphosed into simple "bankruptcy" - granted one which will be the largest municipal bankruptcy in history. This means that JP Morgan is now on the Unsecured Creditor Committee of the two biggest bankruptcies of 2011: MF Global and JeffCo as well. And so the second major domino after Harrisburg is down. Many more coming.
More as we see it.

The scenario over at MF Global gets scarier by the minute.  It seems that these guys had considerable Rep to Maturity exposure similar to what the Greeks bought from Goldman Sachs to hide this from their balance sheet:  The New York crime scene widens;

First definitions to help you:  Harvey
(Definition of a Rep to Maturity):
With the collapse of MF Global, focus naturally moves to the risky repo transactions in which the business enterprise engaged and the accounting for these transactions.  After all, billions of dollars of liabilities were kept off the balance sheet.  What rationale did MF Global have to remove the liabilities from its balance sheet?
 The transactions ran like this (also see Felix Salmon’s “What Happened at MF Global”).  MF Global bought a large long position in European sovereign debt apparently thinking that the financial leaders of Europe were capable of and willing to address the mess in their economic house.  The company then borrowed money in a repo, putting up these debt instruments as collateral.  Given that the coupon on the bonds was greater than the repo interest rate, MF Global enjoyed the profits of the spread)
Now the article courtesy of zero hedge and RCWhalen:)

MF Global, Repo-to-Maturity and Large Bank OBS exposures

rcwhalen's picture

There have been a number of good analyses of the MF Global collapse and the role of “repo-to-maturity” trades in the failure.  See “MF Global and Repo Accounting,” which also has links to Felix Salmon and several other good posts.  Read Yves Smith’scomment on Lehman Brothers from last March as well.
But one of the things that most people seem to miss in this fiasco is the role of off-balance-sheet or OBS accounting in making the failure of MF Global a reality and, in particular, what it implies for other, larger banks.  Many observers say that the FASB erred by not “fixing” the OBS issue via disclosure, but in fact we need to eliminate OBS treatment of all assets, period.  Indeed, the MF Global failure suggests that the US and EU banking systems may be facing a far larger problem than even the most bearish analysts suspect.
First let’s ponder a recent report by the International Swap Dealers Association or ISDA.  A post on RiskCenter summarizes the findings:
“The counterparty credit risk exposure of 12 US bank holding companies and international banking companies to monoline insurers has led to some $54 billion in write-downs by the banks since 2007, according to a new analysis by the International Swaps and Derivatives Association, Inc. (ISDA).  ISDA conducted the study as part of its examination into the losses incurred in the US banking system due to counterparty defaults on OTC derivatives.  An earlier paper on the subject, based on data from the US Office of the Comptroller of the Currency (OCC), showed such losses for US banks amounted to only $2.7 billion from 2007 through the first quarter of 2011. After further investigation, it became apparent that the transactions involving subprime mortgage risk taken in synthetic form (via derivatives) were booked in firms outside the US banking system.”
What the ISDA report suggests, oddly enough, is that the large banks which comprise the most important members of the derivatives markets and ISDA both have been under-reporting their losses to monoline insurers by more than 20x in their SEC filings.  But the report also confirms in the last sentence the key factoid that should make the blood of Barack Obama, Jamie Dimon and FOMC members run cold, namely that the banks were hiding these losses on RMBS from investors and regulators in OBS vehicles.  This is essentially systematic securities fraud, enabled and facilitated by the FASB and ISDA.  By relying solely on GAAP accounting, the OCC, Fed and other regulators have left themselves completely in the dark regarding large bank OBS exposures.   
So now we come to the MF Global failure and Jon “Superman” Corzine, who followed the familiar pattern of taking a financial and legal template developed in Washington and specifically the Treasury market and extending the model into inferior assets.  This is precisely the same behavioral pathology, to my friends Barry Ritholtz and Joe Nocera, which Wall Street used in the subprime crisis.  Washington started the game rolling and Wall Street made it better.  As Flo and Eddie sang with Frank Zappa and the Mothers at the Fillmore East in June 1971, “so happy together.”
In a “repo to maturity,” banks are permitted to match fund Treasury securities and then lend the securities out.  The bonds are not shown on the books of the bank or dealer, because the servile functionaries at the FASB have blessed the repo as a risk-shifting transaction.  In economic terms nothing could be further from the truth, but reality has never stopped the FASB from embracing acts of global idiocy like fair value accounting and OBS treatment for RMBS securitizations.  
The repo-to-maturity arrangement works with Treasury paper because the Fed stands willing to buy any securities issued by the US government at par, thus the repo has no risk.  The problem comes, however, when the financial institution starts to think that it can do these same, repo-to-maturity trades with paper other than Treasury collateral.  This is why we need to eliminate the OBS distinction in the US immediately.
What Corzine apparently did at MF Global was to put on repo-to-maturity trades on with non-US, EU government debt.  While the post-WWII construct created by the US makes all debt issued by members of the OECD “zero risk” under the Basel accord, this reality is now disintegrating.  The sovereigns are now the inferior credits in the global markets, but many large US and EU banks are loaded to the gills with this debt.  Unfortunately Corzine did not get the memo.  Remember, the OECD is a Cold War construct of the US meant to help defeat the Soviet Union.  It has nothing to do with assessing credit risk or even economic capacity to service debt.
So when people ask me about the exposure of US banks to EU governments, the answer is that we do not know because of the FASB and the willingness of US bank regulators to look the other way by accepting GAAP disclosure as sufficient.  When JPM, GS and MS tell us that their EU exposure is limited, what they are really saying is that their GAAP disclosed exposures are small.  The real risk exposure is, in my view, far larger.
If we could see all of the OBS exposures of the top 10 US banks to EU government via deceptive if for now legal canards such as repo-to-maturity, my sense is that the difference between the reported risk of US banks on EU government debt and the actual risk exposures would be the same as the gap between the OCC’s view of bank risk on monoline insurers and the reality just confirmed by ISDA.  Thanks guys.
And just to show we are paying attention, ISDA is wrong to criticize Gretchen Morgenson’s characterization of the MF Global collapse in last Sunday’s New York Times.  Cash is cash, but repo-to-maturity is a derivative, just like any trade that involves an ISDA agreement.  
So here is the question Morgenson should ask the top bank CEOs: How much exposure to EU government debt does you bank have OBS?  I suspect that the reason for the great performance in financials today is that people in the markets have reached the same conclusion.  So, to me, we should hit the bid for US large cap financials in the AM regardless of what is happening in the EU tomorrow – or not.

The huge Blackrock has a huge position in Italian bonds.  Look at their hilarious release:

(courtesy Dave from Denver..the Golden Truth)


ROFLMAO - Don't Get MF'd by Blackrock

"Italian Government paper may as well be toilet paper" - unnamed source

Gotta love the entertainment being provided by our corrupt system right now.  The big money manager - Blackrock (many of you probably have retirment funds being managed by Blackrock) - has been accumulating a giant position in Italian Government bonds.  In response to questions about this, here was Blackrock's response:  BLACKROCK'S ROVELLI: ITALY SPREADS DON'T REFLECT FUNDAMENTALS  (source: zerohedge).   That is hugely hilarious.

Here's the Golden Truth:  that statement is correct - the spreads don't reflect fundamentals.  The yield on the 10-yr Italian sovereign bond should be 14.5%, not 7.25%.  What this means is that if the current market price of a generic 4% 10-yr Italian Govt bond is priced at 78, the fundamental price in my view should be 47.  This means that for every $100 million in intermediate term bonds that Blackrock is happily loading up on, fundamentally those bonds are worth $47 millon less than they paid for them.  If you have retirement funds being kept by your advisor or pension plan at Blackrock, you might want to think about liquidating your account and getting the money out before Blackrock turns into the next MF Global times 100.  I'm not kidding about this.


Jessie of Jessiecrossroads explains why he believes MFGlobal funds were stolen:

MF Global's Customer Assets - STOLEN"Why do I believe MF Global executives transferred customer assets not cash to "house" accounts? Because missing cash would be noticed immediately. Their clients were still trading and clearing and cash was required to settle. Securities such as U.S. Treasury Bills, blue-chip equities such as CME Group stock held by many exchange members, and physical assets such as gold, warehouse receipts, and other certificates of title are less active. They would not be missed Thursday through Monday."

Here is a letter from the receiver explaining to a customer who has his funds frozen due to the bankruptcy of MFGlobal.  This should never have happened and the regulators are nowhere to be seen:
From: Kimberly Laube Sent: Tuesday, November 08, 2011 12:25 PMTo: Nell S
Subject: MF Global update, Nov 8, 12:30pm CST
Dear CTG Customer,
Where we stand at this point:
· Accounts at MF Global with cash or T-Bills remain ‘frozen’ by regulators and the Trustee. There is no specific word yet on when these funds, or a portion of them, will become accessible to the account holders.
· Accounts with positions have transferred over to RJ O’Brien, along with a percentage of the required maintenance margin. No word on when additional funds will transfer over. Margins calls must be met with liquidation or additional funds.
· Option positions were transferred at a value of $0 or at 11/3/11 settlement value. We’re told premium values will be adjusted/added as needed by Wednesday to make the positions accurate.
Clients who have a newly established account at RJO:
· Apply for online access to account – (or ask us for help.)
Clients who did not get transferred to RJO, but wish to set up a new account now:
· Account forms –
Links to articles with MF Global updates:
· MF Global Trustee -
· CME Liability?
· T-Bills as collateral -
· CNBC to investors from Nov 3 -
We are continuing to work with representatives from MF Global and RJ O’Brien to stay on top of this situation. Additionally, along with reps from many other IBs and clients, we are consulting on our legal rights to protect assets frozen at MF Global. We will continue to update you as soon as we learn more.
Nell Sloane

Let's see how Jeffries is reacting to the 2 yr Italian bond converging on the 10 yr bond. remember that they are long the spread i.e. they need a widening of the yield curve not a flattening out of it:
These guys will be toast by next week:

(courtesy zero hedge)

Perhaps It Is Time For Another Statement From Jefferies

Tyler Durden's picture

4 statements later, countless promises, several Leucadia triple-downs, and one 2-page CUSIP statement later and... Jefferies is down 9.2%. Perhaps the market was not all that convinced that "Jefferies is fine" after all. Our spidey sense is tingling that yet another statement by Jefferies is imminent. Also, it may be time for Jefferies to bite the bullet and unload the other half of its sovereign flow book: that sure will teach the market to doubt management's good intentions. And never mind the spread on liquidation firesales: after all who cares about EPS on a day like today.

Lee Adler who is the only one covering this, discovers huge funds leaving the dollar denominated assets:

(courtesy Lee Adler/Minyonville and Jim Sinclair)
Hit With Big Withdrawals, Fed Sells Assets, Borrows CashBy Lee Adler Nov 07, 2011 8:10 am
The Fed’s action was not only a direct contradiction of its stated policy, but it ran counter to Bernanke’s penchant for telegraphing every important move the Fed makes. What’s up?
The Fed was hit with withdrawals of $83.3 billion last Wednesday, the largest withdrawals from its deposit accounts that were not associated with quarterly tax payments since February 2009, and $7 billion of that was the net cash transferred to the US Treasury from its note and bond sales less outlays.
The Fed still had to meet the other $76 billion. These transactions were revealed in the Fed’s weekly H.4.1 report. The Fed was apparently forced to take extraordinary measures to fund these withdrawals. These included the outright sale of nearly $24 billion in its Treasury note and bond holdings from the System Open Market Account (SOMA). As a result, the Fed’s SOMA fell to $2.611 trillion, some $43 billion below the Fed’s stated target of $2.654 trillion.
Prior to last week, it had not strayed from the target by more than $7 billion since June. The Fed’s action was not only a direct contradiction of its stated policy, but it was done without warning or explanation. It ran counter to Federal Reserve Chairman Ben Bernanke’s penchant for telegraphing every important move the Fed makes so that the banking/speculating organizations can front-run it. The Fed took another unusual and virtually unprecedented action to fund these massive withdrawals. It borrowed $43 billion from foreign central banks (FCBs) through reverse repurchase agreements (reverse repos, or RRPs).

Over in Greece they still have not officially named their new Prime Minister. It was widely rumoured that Lucas Papademos  (L Pap) would be named as he is a carbon copy of G Pap and our ECB bankers/USA bankers.  The conservative MP Samaras is against this banker. 
Should be interesting in the next few days over in Greece:
Greece:o Still no new prime minister: An announcement on a new prime minister is expected today. Reuters reported that while former ECB vice-president Lucas Papademos had widely been considered the front-runner, sources in both parties said that this was now in doubt and the two sides were considering other options. The article said that there were reports in the Greek media that Papademos had set conditions that the parties would not accept, while he also wanted to replace Evangelos Venizelos as finance minister. Other potential candidates mentioned in the press today include parliamentary speaker Filippos Petsalnikos and socialist lawmaker Apostolos Kaklamanis, a founder of the Socialist party. * * * * *

Over in Germany, Merkel seems to planning her exit strategy of the Euro by adopting the DeutscheMark.  She earlier stated that the rate will be 1.95 DM/per euro:

Did Merkel Just Usher In The Deutsche Mark?

Tyler Durden's picture

Rather worryingly, Bloomberg is reporting a Handelsblatt report (due tomorrow) that Mrs. Merkel is investigating ways to enable countries to leave the Euro.
Merkel's CDU Seeks to Make Euro Exits Possible (via Bloomberg)
RMBS patents ruled invalidGerman Chancellor Angela Merkel’s Christian Democratic Union party wants to make it possible for European Union members to exit the euro area, Handelsblatt reported in a preview of an article to be published tomorrow, citing unnamed participants in the discussion.

A commission within the party, that is crafting a framework to be presented at a party meeting, has proposed allowing a euro member who doesn’t want to or isn’t able to comply with the common currency rules to leave the euro region without losing membership in the EU, the newspaper said.

Today, the USA reported inventories shrinking instead of advancing.  This is a huge negative to GDP and now the next reading on the GDP level will shrink. Here is the official story from the Dow Jones newswires and a great commentary on what will happen to the GDP with this result:
US Wholesale Inventories Fall 0.1% In September
Wed Nov 09 10:00:11 2011 EST
WASHINGTON (Dow Jones)--U.S. wholesale inventories declined in September for the first time since 2009 as sales slowed, signaling that companies remain cautious about stockpiling goods in a still weak economy.The inventories of U.S. wholesalers declined by 0.1% to a seasonally adjusted $462.05 billion - the first dip since a 0.8% drop in December 2009, the Commerce Department said Wednesday.
In August, inventories rose a revised 0.1%. Initially, inventories were seen as up 0.4% in August from the prior month.
The September decline was unexpected, as economists surveyed by Dow Jones Newswires had forecast a 0.6% increase in overall wholesale inventories.
Sales of wholesalers, meanwhile, grew 0.5% to $403.15 billion, after 1.0% gain in August.
Wholesalers hold about 30% of all business inventories in the U.S., with manufacturers and retailers making up the rest.
With an uncertain economy, companies aren't stocking up heavily. Specialty product maker Leggett & Platt (LEG), for instance, slowed production to reduce inventory, a decision that contributed to a decline in gross margin during the third quarter.
Economic growth did pick up in the summer after a weak first-half of the year, but elevated unemployment, 9.0% last month, threatens to hamper consumers' ability to spend.
Last week, the Federal Reserve said the economy would grow less than 2% this year and predicted the gross domestic product would edge up by a range of 2.5% to 2.9% in 2012, while unemployment is expected to continue to top 8.5% next year.
Wednesday's report showed the amount of wholesale goods on hand relative to sales held steady in September. The inventory-to-sales ratio, which measures how many months it would take for a firm to deplete its current inventory, remained at 1.15.
Wholesalers' inventories of durable goods - items such as computers and refrigerators meant to last three or more years - rose by 0.4%, after a 1.0% jump in August. Auto inventories also increased 0.4% and sales rose 0.7%.
Non-durable goods inventories moved down 0.9%, while non-durable goods sales increased by 1.2%. Petroleum stockpiles declined 4.0% in September, while sales moved up 3.9%.
(courtesy Dave from Denver...the Golden Truth):

"At that point, nothing is left but gold. Now trading at $1790, it could zoom right past $2000 to $3000 an ounce"  LINK

"Inventories to result in big hit to Q3 GDP" - It looks like wheels are falling off the U.S. economy.   Of course, those of us who have been paying attention to the details beneath the headlines were expecting that the lipstick that the Government and Wall Street have been putting on the proverbial pig would soon wear off.  This was the first inventory decline since September 2009.  Here's the report: LINK

Recall that the Government has estimated that the 3rd quarter GDP had grown by 2.5%  Notwithstanding all of the problems we know about with this metric, the decline in inventory build-up - when the expectation was for another gain in inventory - will cause the revision of that 2.5% number to be lowered quite a bit.  Several forecasters are already reducing that 2.5% initial estimate by 25-30% down to 1.7-1.8%.  When you start to factor in the grossly underestimated inflation factor - the "GDP deflator" - you can pretty much assume that the GDP was negative on a real basis in Q3.

Another sign of the big decline in economic activity was the earnings report issued by GM today.  As has been detailed by, GM has generated a large portion of its sales growth by stuffing its network of dealers with inventory.  Recall, GM itself books a sale when the car leaves the factory floor and is shipped to the dealer, who uses Government supported "warehouse financing" to pay for the car.  Sales reported by GM do not directly translate into actual sales to the end user, which means that the GM's sales are not necessarily indicative of true organic economic activity  Despite "beating" Wall Street earnings estimates, GM's stock is down over 8% 10% today, as GM warned of future weakness and of course blamed Europe.  But I would also speculate that we will see greater than expected weakness in auto sales in the U.S. as well.  Note:  I would also bet that if I had the time to go through GM's financials and the footnotes to those financials that I would would an absolute accounting nightmare.  In my view GM stock is a great short-play here.

The inventory/GDP dynamic has been that large manufacturing companies like GM have been "pulling forward" sales using pricing and financing incentives.  This is de rigueur with the auto manufacturers, but pretty much permeates the entire manufacturing sector.  Eventually the end purchaser slows down and the distributor in the economic chain - the auto dealer or retailer - reduces its inventory stocking which causes the manufacturer to slow down.  The manufacturing to final sales cycle can be "sticky," but once it gets going in one direction it tends to have snowball effect.  So any kind of economic strength was exaggerated and now the slowdown could be ugly.

Why do I say this?  Let's take a look at the financial condition of the "end-user," the middle class.  To begin with, while most people were scrutinizing the problems in Europe because the media wants us to believe that's the real problem in the world, I noticed this report:  The figures from payroll taxes reported to the Social Security Administration on jobs and pay are, in a word, awful.  LINK This particular data report is something that you won't see on CNBC or Bloomberg or Fox News.  The Government doesn't issue a press release and they want you to keep your eye on the European "ball."  But those numbers tell you that less Americans are working and they are earning less money.  A bit different story than the payroll and earnings numbers that are highly statistically massaged and released for CNBC to promote, huh?

So Americans in reality have less money to spend going forward and we know banks are not lending because the average credit profile of the average American sucks.  Here's proof of that:  The national mortgage delinquency rate (the rate of borrowers 60 or more days past due) increased for the first time since the end of 2009.  Here's that LINK  Call me crazy, but I'm guessing that if your neighbor isn't making his mortgage payments, he ain't rushing out to buy a sparkling new GM or Ford either.

Ultimately, the Government's response to all of this will be to print more money.  A former Bank of Japan board member is calling for Japan to put its printing press into overdrive:  LINK  This will be followed by the ECB and the Fed cranking up their Heidelbergs.  So we have the perfect recipe for much higher gold and silver prices:  negative GDP, negative interest rates, money printing and higher inflation.  Don't pay attention to the day to day or week to week price action in the metals - it's mostly traders and manipulators.  One of the board members of the CFTC is now openly admitting that the silver market is highly manipulated.  The price of gold and silver six months from now will besubstantially higher than where it is now. 
The banks are still in trouble as home prices continue to plummet.  This is the collateral on the banks balance sheet and the banks will never recover until house prices rise

(courtesy Dow Jones)
US 3Q Home Prices Fall In Nearly 75% Of Metro AreasWed Nov 09 10:13:57 2011 EST
WASHINGTON (Dow Jones)--U.S. home prices fell in nearly 75% of metropolitan areas in the third quarter and the national median price dropped as the housing market showed renewed weakness in the second half of the year.The median price for previously occupied homes sold in the July-September quarter fell compared with last year in 111 out of 150 areas tracked by the National Association of Realtors, the trade group said Wednesday. Prices rose in 39 metro areas.
The results were roughly even with the second quarter, in which median prices fell in 109 out of 151 cities tracked by the real estate trade association. The national median price for single-family homes sold in the third quarter was $169,500, down 4.7% from the same quarter a year earlier.
Home sales in the third quarter were down 0.1% from the second quarter, but were up 17% from a year earlier, the Realtors' group said.
"Home sales need to recover first, only then can prices stabilize," said Lawrence Yun, the Realtors' chief economist, in a statement.
The metro areas showing the biggest decline in median prices from a year earlier were Mobile, Ala. (-17.7%), Phoenix, Ariz. (-17.6%), Allentown, Pa. (-17.5%) and Salt Lake City (-15.3%). Areas showing price increases were Grand Rapids, Mich. (23.7%), South Bend, Ind. (19.8%), Palm Bay-Melbourne, Fla. (17.7%) and Youngstown, Pa. (13.1%).
With the economy weak and many Americans reluctant to commit to a home purchase, the housing market has been slow to recover from the worst downtown in decades. The Realtors' group said last month that the number of people who signed contracts to purchase previously occupied homes in the U.S. sank in September to the lowest level in five months.
Nationwide, "distressed property," including foreclosures and homes at risk of foreclosure, accounted for 30% of third-quarter transactions, down from 33% in the second quarter, the Realtors' group estimated.

Italy’s Woes Spell ‘Nightmare’ for BNP - Just As I Predicted But Everybody Is Missing The Point!!!

Reggie Middleton's picture

Summary from Barclays Capital inst sales:
1) At this point, it seems Italy is now mathematically beyond point of no return
2) While reforms are necessary, in and of itself not be enough to prevent crisis
3) Reason? Simple math--growth and austerity not enough to offset cost of debt
4) On our ests, yields above 5.5% is inflection point where game is over
5) The danger:high rates reinforce stability concerns, leading to higher rates
6) and deeper conviction of a self sustaining credit event and eventual default
7) We think decisions at eurozone summit is step forward but EFSF not adequate
8) Time has run out--policy reforms not sufficient to break neg mkt dynamics 
9) Investors do not have the patience to wait for austerity, growth to work
10) And rate of change in negatives not enuff to offset slow drip of positives
11) Conclusion: We think ECB needs to step up to the plate, print and buy bonds
12) At the moment ECB remains unwilling to be lender last resort on scale needed
13) But frankly will have hand forced by market given massive systemic risk
All seem to be missing the point! I have been warning since early 2010 Pan-European sovereign debt crisis! I warned of BNP in June, with very accurate reseach reports and models available to subscribers - BNP, the Fastest Running Bank In Europe? Banque BNP ExĂ©cuter. Despite all this, I fear the greater picture is being missed by most.
the risk of sounding overbearing, Italy heard the fat lady acapella
last year, it's just that no one was listening. BoomBustBlogSubscribers should reference  Italy public finances projection
from March of 2010. The killer is that France is inexoriably leveraged
into Italy through its banks. If Italy defaults (and it will) it
literally breaks the French banking system. All BoomBustBlog followers
have read this - Wednesday, 03 August 2011 - France, As Most Susceptble To Contagion, Will See Its Banks Suffer
when (and not if, but when) French banks fail, France will both get
downgraded and be forced to bail out - once again. They will have to
choose between bailing out Greece, Portugal and Ireland - or themselves.
I'll leave it up to you which is the most probable path.
Once the
inevitable happens, then the Faux Caucus-Franco bailout mechanism that
was suppose to support the unsupportable collapses in throught as it had
already collapsed in reality. The result? Everybody should then realize
that those risk free Bunds are risky as hell because they are backed by
a net export nation (Germany) that will have nobody to export to, and
spend much of its economic output bailing out the unbailable, or running
from said entities.
Things are much, much worse than many are making it out to be.

Saturday, 23 July 2011 The Anatomy Of A European Bank Run: Look At The Banking Situation BEFORE The Run Occurs!: I detail how I see modern bank runs unfolding


Thursday, 28 July 2011  The Mechanics Behind Setting Up A Potential European Bank Run Trade and European Bank Run Trading Supplement

identify specific bank run candidates and offer illustrative trade
setups to capture alpha from such an event. The options quoted were
unfortunately unavailable to American investors, and enjoyed a literal
explosion in gamma and implied volatility. Not to fear, fruits of those
juicy premiums were able to be tasted elsewhere as plain vanilla shorts
and even single stock futures threw off insane profits.

Wednesday, 03 August 2011 France, As Most Susceptble To Contagion, Will See Its Banks Suffer

case the hint was strong enough, I explicitly state that although the
sell side and the media are looking at Greece sparking Italy, it is
France and french banks in particular that risk bringing the
Franco-Italia make-believe capitalism session, aka the French leveraged
Italian sector of the Euro ponzi scheme down, on its head.
I then provide a deep dive of the French bank we feel is most at risk. Let it be known that every banked remotely referenced by this research has been halved (at a mininal) in share price! Most are down ~10% of more today, alone!

Greg Hunter on the Euro woes:

  • Sovereign Debt is Everybody’s Problem
9 November 2011By Greg Hunter’s
The most pressing problem on the planet right now is the European sovereign debt crisis. It is a gigantic highly leveraged mess caused by greedy reckless bankers. It was nurtured with the help of regulators who turned a blind eye and allowed the problem to mushroom into an uncontrollable financial cancer. The European Union is struggling to come up with a plan or bailout fund big enough to truly end the crisis, but there is none in sight. Every time there is a plan, it is shot down or falls apart. There was talk of Germany backing the EU bailout fund with its gold reserves, but that was rejected by the Germans. (Germany is the world’s number two holder of gold with 3,412 tonnes.) Can you blame them? It is ironic this so-called bailout fund is looking for tangible backing and that world leaders would turn to the yellow metal. Didn’t they all have a pact to sell gold not so many years back? This tells me any country with toxic sovereign debt that wants a bailout better be considering putting up its gold reserves…
Tomorrow night I will deliver my commentary but it will be during the wee hours on Friday morning.

all the best



MichaelBrady said...

Thanks Harvey!

Anonymous said...

Thanks Harvey ! I can smell the fresh air, hear the palm trees rustling in the breeze, feel the sun on my skin but when am i going to see the silver price rise to $100.00 so i can make my dream a reality ? Waiting patiently in Newyork traffic behind smogging trucks. Ray Jr.

Anonymous said...

Regarding Italy in bond freefall and future of the EU & the Euro, It is easy to understand, but ...

"They say that breaking up is hard to do
Now I know, I know that it's true
Don't say that this is the end
Instead of breaking up I wish that we were making up again

I beg of you, don't say goodbye
'Cause breaking up is hard to do"
With acknowledgements to
Artist: Neil Sedaka
Breaking Up Is Hard To Do

Anonymous said...

Thanks Harvey,

Two questions:

1) How is it that the CME isn't automatically covering the equity shortfall in the MF Global accounts? Isn't this a prime function of the exchange? Isn't the CME on the hook for any malfeasance due to their clearing members, MF Global being among them? Isn't the whole point of the exchange to guarantee the exchange members' viability and traders equity through constant monitoring and oversight? Or will they simply belatedly cover these shortfalls only after an on-going, 3-year investigation like that for the silver manipulation?

2) Is it possible that the reason we see no (or very little) activity into and out of registered silver and gold inventory, despite constant "settlement" activity, is that the much of the registered metal is actually being misappropriated as collateral to cover loans to the various clearing members. Jesse's link to the McKenna article pertaining to MF Global apparently doing this very thing would seem to be a possible explanation as to why very little gold or silver either enters or leaves registered. Maybe it's encumbered, though not in the manner of MF Global, but encumbered nonetheless?

Harvey Organ said...

anonymous: you are perfectly correct. The CME is so corrupt and they certainly have an obligation to pay 100% of investors collateral.

however that may implode JPM which is having problems with:

1. MF GLobal
2. Jefferson county
3. Jeffries

rumour has it that all JPM senior executives are puking their guts out with losses these past 2 weeks.

ps still no word from the CME on inventory movements.

the speed of movement of the metals out of the vaults must have frazzled them.

see you later tonight.


PM Bug said...

Harvey you wrote: "... bankers seem impervious to the new regulations set to begin on Jan 1.2012 ..."

That was contingent on the CFTC defining the word "swap" if I remember correctly - something you said they were scheduled to do by November 1, but which has not, to the best of my knowledge, been done yet.

commodities report said...

dow jones tanked yesterday... wat was the reason ?

Paul said...

“the total number of silver oz standing in this non delivery month is … 1,275,000 a gain of 350,000 oz from yesterday.”
Tuesday 8th “we gained a huge 330,000 oz standing.”
Monday 7th “we gained 165,000 oz standing”
Friday 4th “we gained 65,000 of additional silver from Thursday)”
Thursday 3rd “we gained 10,000 oz standing.”
Wednesday 2nd unchanged
Tuesday 1st “355,000 oz standing”
Monday 31st “180,000 oz”
Friday 28th “185,000 oz” (the opening balance for November)
Thursday 27th “3,760,000 oz which is quite an achievement for a non delivery month”
Already three days of November having seen an increase of a third of a million in the standing ounces. I think we are seeing a run of physical silver taking place.

Harvey Organ said...

Good morning to you all:

I am now amended by commentary to include the movements of silver and gold from the vaults.

And for your morning head start:

gold notice for deliveries: 3 only
silver notices for deliveries: 9

I will report to you but late in the evening.

all the best

Anonymous said...

Pls notice the Gold chart at 10:00 am today it was smacked down $50.00 in a matter of minutes. How anyone can look at this and still believe we have regulators that can or will do anything. This tells it all.

"You want the Truth
You can't handle the truth"
From "a Few Good Men"

Harvey, can you pls use your influence with those who you know..

Anonymous said...

Harvey et al...

Does anyone else agree that Silver's Beta correlation with JPM stock is almost EXACTLY a 1?

Please....someone.....enlighten me. How can this go on without SOMEONE, ANYONE stepping in and doing something? Everyone here and all around the world has a RIGHT and DUTY to stand up and voice this? Why is this one little not-so-trivial piece of manipulation so important? Because the Gold/Silver relationship to dollars via price discovery is "the" UNDERLYING LYNCHPIN of the entire system. The original deriviatives are all based on leveraging PHYSICAL GOLD/SILVER....


Harvey....use your influence. Pass this post along. It needs to be done, NOW!!


11-11-11....tomorrow? hmmm...

Anonymous said...

You should read Jesse's Blog Today:

REALIZATION: The EVIL has been written into the law and if you disagree, then you are the new Evil.

The law is no longer protecting the littel guy on the street.

Anonymous said...

Oh, I am well aware.

"The Laws are created to protect the Elite from those they PLUNDER"



Anonymous said...

People, Harvey can't really use his influence. He's only been around for a short while. It's not fair to expect him what he cannot do.

It is YOU who are supposed to be doing something about it. YOU. First of all, cash out your savings accounts and CDs. Second of all, buy silver/gold with it while you can. Thirdly, get out of the paper markets. Cash out while it's still around 12,000 on the Dow. Lastly, buy up everything tangible while you still can.

Dude, the one stuck in NY traffic - I believe that silver may not get out of its trading range of $30-50 until around May 2013, unless civil breakdown in the EU starts up ahead of that time, unless MF Global kicks things in to place, or unless Israel goes to war with Iran. Use this time between now and then to grab all the silver you can.


Anonymous said...

Sorry KS, I wasn't directing that specifically at you. I was just trying to state that complaining for the CFTC to enforce the law is null and void becuase the evil has not been written into the law. Jesse's article displays that truth openly.

The reality of that truth is that if we want Justice, it is no longer going to come from those administering the law.

That is a very dire truth that we find ourselves in. And the cards are stacked against all of us.

Anonymous said...

To Harvey, in appreciation for all that you do on our behalf

“Harvey, We want you on that wall , We need you on that wall. You use words like honor, code, loyalty... You use these words as the backbone to a life spent defending something.

You know who; use 'em as a punchline.

Harvey: Did you order the Gold red?
Harvey: Did you order the Gold red?
You know who: You're damn right I did!!”

You are exactly what we need more of "A Few Good Men"

Anonymous said...


That's too funny. I just got done reading that Ilene article on ZH and the video attached!


Anonymous said...

The thousand 32 OzT manfra withdrawals were all simultaneously depositied in scotia on the same day...hmmm

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