Saturday, January 15, 2011

Massive Raid on silver and gold..shortages of silver..cftc hearings vote.

Good morning to you all:

 

First off, I would like to report that one bank entered our illustrous banking morgue, the wonderful sounding bank:   Oglethorpe Bank of Brunswick Georgia.

 

Also, resident expert Richard B from JS Minset has given an extensive analysis of all of our bank failures this year.  The banking mess is still upon us:

 

 Sinclair's Commentary

Analyst Richard B reviews the bank closing by the FDIC, the overvaluation, and the huge loss guarantees given to those that take over the busted institution.

Dear CIGAs,

The FDIC ended 2010 by closing 11 more banks between November 12, 2010, and December 17, 2010. That brought to 157 the total number of banks closed during 2010.

To put this in perspective, a total of 323 banks have been closed since late 2007. Three were closed in 2007, 11 in 2008, 140 in 2009 and 157 in 2010.

Collectively, these last 11 banks closed in 2010 had declared assets of $2.56 billion and deposits of $2.26 billion. The FDIC's estimated cost of closing all 11 banks was $580 million, about 26% of deposits. The FDIC's estimated losses for all of 2010 totalled $22.2 billion.

Loss Share and More Loss Share

In 9 out of 11 cases, resolution of the failures was accomplished by way of the FDIC entering into loss share agreements covering a high percentage of the assets taken over by the successor banks. In connection with these 11 closings, the FDIC entered into new loss-share agreements covering an additional $1.72 billion in assets.

That brings the total face value of assets covered by FDIC loss share agreements up to about $190.74 billion as of the end of 2010. During 2010, the FDIC increased the total value of assets under loss share by at least $69 billion.

Failures Continue to Show Dramatic Overvaluations

These last 11 failures of 2010 continue to evidence the extent to which management of the failed banks exaggerated the value of the banks' assets. Viewed as a whole, the 11 banks had declared asset values of $2.56 billion and deposits of $2.26 billion. The FDIC estimated the closings cost 580 million, meaning the banks' assets were really only worth $1.68 billion. Overall, bank management overvalued assets by $880 million, around 52%.

In two cases, the degree of asset overvaluation was particularly heinous, even judging by recent standards. In both these examples, management overstated the value of the banks' assets by more than 100%.

Paramount Bank of Farmington Hills, Michigan, had stated assets of $252.7 million and deposits of $213.6 million. The FDIC estimated its closing cost $90.2 million. Based on that estimate, the bank's assets were really only worth $123.4 million, and had been overvalued by 105%.

United Americas Bank, National Association, of Atlanta, Georgia, had stated assets of $242.3 million and deposits of $193.8 million. The FDIC estimated its closing cost $75.8 million. Based on that estimate, the bank's assets were really only worth $118 million, and had been overvalued by 105%.

None of the executives responsible for overstating the value of these assets are being criminally prosecuted. There was barely any mention of these outrageous failures in the popular media.

There could be no greater testament to the Financial Accounting Standards Board ("FASB")'s having turned banks' financial statements into running jokes. The FASB has freed bank executives to place outrageously high values on banks' worst, least liquid assets, with impunity.

Banks Being Closed Still A Drop In The Bucket

Finally, in spite of the fact that the FDIC closed more banks in 2010 than in any other year of this crisis, it is clear its backlog of troubled banks is growing. In its third quarter report released late November 2010, the FDIC indicated the number of institutions on its "Problem List" grew to 860 from 829 in the prior quarter.

Each month, dozens of new banks come under the most serious Federal Reserve and FDIC enforcement orders, placing their solvency seriously in doubt. Meanwhile, less than a dozen of the terminally ill are put out of their misery.

This leads to examples like Gulf State Community Bank of Carrabelle, Florida, whose failure was announced on November 19, 2010. The declared value of its assets ($112.1 million) actually ended up being less than the amount of its deposits ($112.2 billion), even though those assets were overvalued by at least 62%. Gulf State's failure cost the FDIC an estimated $42.7 million, 38% of deposits.

This failure to deal with the problem in a timely and effective manner is Management of Perspective Economics, plain and simple. The problem is not going away; it is getting worse. Believing otherwise could be extremely hazardous to your financial health.

Respectfully yours, 
CIGA Richard B

end.

Let us begin with our gold and silver comex trading for yesterday.

 

Our friend Dennis Gartman generally reveals when a major attack will be upon us and he did not disappoint us.  This well informed individual got wind of a massive attack and he sold approximately 66% of all his gold holdings.

Surprisingly, Gartman is bullish on the USA economy as viewed here:

 

Dennis Gartman's First Prediction For 2010: The US Will Grow Like Gangbusters And Surprise Everyone

Vince Veneziani | Jan. 5, 2010, 11:08 AM | 6,026 | comment 6

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Analyst Dennis Gartman says he'll be laying out some predictions for the new decade/year in the coming weeks.

Today, he shared his first in The Gartman Letter. Turns out he's bullish on American growth.

The Gartman Letter: Over the coming days and weeks we'll put forth our few "predictions" for what may happen in '10. Others have put their ideas forth at the previous year's end, and yesterday, and we figured that our clients have been blasted by that sort of thing, so we'll dribble our predictions out piecemeal. Thus, firstly we'll suggest that one of the surprising events of this year shall be just how strong shall be the US and the global economy as we move along through the year. The consensus amongst the economic cognoscenti is that growth here in the US shall be tepid at best, with GDP figures barely higher by mid-year and perhaps only 1.5-2.25% GDP growth at best by mid-year. We suggest that it shall be quite a good seal stronger than that, and we'd not be surprised to see GDP growth of 3-4% by mid-year. 

Yes, there are problems with housing, and yes the consumer is "strapped," but inventories of everything are low; capital expenditures for everything have been low for years; the nation's auto fleet is old and must be replace… and above all, monetary stimulus remains intact. The surprise: GDP growth will surprise us all… bullishly.

Tags: Analyst Research, Dennis Gartman | Get Alerts for these topics »

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Read more: http://www.businessinsider.com/gartman-my-first-prediction-for-2010-2010-1#ixzz1B7JNlwtv

 

 

 

end.

 

I guess Dennis is not reading the same stuff that we are reading.  However I can tell you that for the past  11 years, this buffoon has made zero dollars in gold and silver and he admitted such in television interviews.

 

 

Dennis sold most of his holdings in gold and accentuated the downdraft.  The world was told that China was limiting bank limits in a measure to curb inflation.  The pundits immediately sold off commodities yet copper continued to rise.

 

Dennis always loses in gold and silver due to the fact that he does not know when to enter the buy side.  He always gets the sell side right as he joins in with his banking buddies.

 

Gold closed yesterday down $26.00 to 1361.40.  Silver fell hard to $28.34 down 94 cents.

 

Let us proceed immediately to the comex trading:

 

First gold;

 

The total gold comex open interest rose  1449 contracts to 590,817. The front options January delivery month for January saw its open interest fall from 87 to 50. We had 65 deliveries on Thursday so the contraction in OI due 100% due to these deliveries.

The all important front delivery month of February saw its OI fall from 290,364 contracts to 277,738.  This was a miniscule drop and pushed our bankers to decide on a raid.  The estimated volume for yesterday was a huge 230,177 contracts.  The confirmed volume for Thursday also was very high at 252,808.  When you have an average volume of around 130,000 and then throw 250,000 un-backed paper, you know  that the intent of the sellers is to get the price lower.

 

For newcomers, there are 6 delivery months in gold:  Feb, April  June, August, Oct. and December.  Silver has 5 delivery months:   March, May July, Sept and December.

There are 12 option months were you receive a futures contract for metal ie. each month of the year. Generally all option holders that exercise their right for a contract turn that into real metal.

Thus for January, I am reporting the options exercised for a physical contract as there is no regular delivery for silver and gold in January.  February is the first delivery month of the year for gold.

 

And now for silver:

 

The total silver comex open interest fall marginally yesterday from 137,059 from 135,881 for a drop of  1178 contracts.  The front options delivery month of January saw its open interest fal from 75 to 34 for a loss of 31 contracts.  We had 41 deliveries so 100% of the contraction was due to notices sent down for servicing.  The estimated volume yesterday was a very high 80,856 contracts.  In oz that represents  404 million oz or 58% of worldly yearly production  (world production = 700 million oz)  The confirmed volume for Thursday was also very high at 74,837. The bankers threw everything in trying to lower the metal prices.  This is sheer madness on their part as the lower prices entice the sovereign funds to pick up cheaper metal wherever they came.  As I will explain later in my commentary, supplies are fast disappearing globally.

 

 

Here is a chart for Jan 14.2011 on deliveries and inventory changes at the comex:

 

Silver

Withdrawals from Dealers Inventory 

5265 oz

Withdrawals from customer Inventory 

 251,124 moz

Deposits to the dealer Inventory

 5116 oz

Deposits to the customer Inventory

1032 oz

No of oz served  (contracts0

Zero oz.

No of notices to be served 34

170,000 oz

Gold

Withdrawals from Dealers Inventory 

zero

Withdrawals from customer Inventory 

 Zero  

Deposits to the dealer Inventory

  zero

Deposits to the customer Inventory

zero

No of oz served (contracts 32

3200 oz

No of oz to be served 18

 1800 oz

 

Let us start with gold;

 

Totally amazing:  no activity whatsoever!!!.  zeroes across the board.  What is going on here?

The gold comex notified us that  32 notices were sent down for servicing for a total of 3200 oz of silver.  The total number of notices so far this month total 480 or 48000 oz of gold. To obtain what is left to be served I take the open interest for January at 50 and subtract out the 32 notices sent down already to give me  18 notices that are left to be serviced or 1800 oz of gold.

 

Thus the total number of gold oz standing in this non delivery month of January is as follows:  48,000 (already served)  +  1800 oz (to be served)  =   49,800 oz  (Thurs. total=  47,000).  We gained another 2,800 oz of gold.  It is surprising that since all options are exercised at the beginning of the month we continually see a rising gold and silver physical delivery amounts.

 

And now for silver:

Again, the contrast to gold is huge.  The dealer took in a miniscule 5,116 oz of silver with the customer also taking in 1032oz.  The dealer withdrew 5265 oz of silver.  So in this category the dealer net position  lost 149 oz of silver (withdrew)

The  customer withdrew a massive 251,124 oz of silver.  On a net basis, the customer net withdrawal was 251,124 minus 1032 oz =   250,092 oz.

There were no delivery notices sent down for Friday.  The total number of notices sent down so far this month total 303 or  2,015,000 oz.  To obtain what is left, I note that the deliveries are zero so there is nothing to subtract from the JanOI of 34.

Thus 34 notices becomes the total number that must be served upon or  170,000 oz of silver.

Thus the total number of silver oz standing in this non delivery month of January is 2,015,000 +  170,000 =    2,185,000 oz of silver (Thurs level=  2,185,000).  Thus our calculations are correct, the total silver oz standing is 2.185 million oz.

 

Let us now proceed to the commitment of traders release:

First gold;

 


-- Posted Friday, 14 January 2011 | Share this article | Source: GoldSeek.com  

 

Gold COT Report - Futures

Large Speculators

Commercial

Total

Long

Short

Spreading

Long

Short

Long

Short

234,333

56,961

82,517

201,336

426,400

518,186

565,878

Change from Prior Reporting Period

-15,972

8,974

13,520

8,017

-21,501

5,565

993

Traders

184

69

76

55

52

274

168

 

 

Small Speculators

 

 

 

Long

Short

Open Interest

 

 

69,993

22,301

588,179

 

 

 

-9,999

-5,427

-4,434

 

 

 

non reportable positions

Change from the previous reporting period

 

COT Gold Report - Positions as of

Tuesday, January 11, 2011

 

 

Those large speculators that have been long in gold removed a huge 15,072 contracts.

Those large speculators that were short increased their shortage to the tune of 8074 contracts.  These guys got it right with respect to the forthcoming raid.

 

Those commercials that were long gold continue to add to their positions to the tune of 8017 contracts.  These guys are close to the physical scene.

And are friendly hero banks who are perennially short gold covered a massive 21,501 contracts.

 

In a surprise category, the small specs that have been long reduced their longs by a massive 9999 contracts, and those that have been short covered to the tune of 5427 contracts.

 

This report is very weird as it is up to Tuesday Jan 11.2011.  If a raid was ensuing what did all of those commercials cover 21,501 contracts?

The data is very strange indeed!!

 

 

and now for silver:

 

Silver COT Report - Futures

Large Speculators

Commercial

Total

Long

Short

Spreading

Long

Short

Long

Short

38,570

9,301

36,814

30,787

77,537

106,171

123,652

-1,913

-1,147

2,610

1,189

-1,812

1,886

-349

Traders

78

42

37

32

41

134

102

 

Small Speculators

 

 

 

Long

Short

Open Interest

 

 

30,160

12,679

136,331

 

 

 

-2,486

-251

-600

 

 

 

non reportable positions

Change from the previous reporting period

 

COT Silver Report - Positions as of

Tuesday, January 11, 2011

 

 

 

 

 

 

In the silver pits, those large speculators that have been long decreased their positions by a large 1913 contracts.

Those large speculators that have been short reduced their shortage by 1147 contracts.

 

And now for the commercial category:

 

Those commercials that have been long silver added to their longs to the tune of 1189 contracts.  The commercial banks that have been

short silver like JPMorgan and HSBC surprisingly covered 1812 contracts 

The small specs that have been long reduced their longs by 2486 contracts and those that have been short lesssened those shorts by 251 contracts.

 

 

end.

 

 

as far as silver shortages: this hit my desk this morning:

"would" (and any subsequent words) was ignored because we limit queries to 32 words. 

Search Results

1.   BullionVault.com Runs Out Of Silver In Germany

With the US Mint selling silver at an unprecedented pace, it was only a matter of time before the silver shortage would be spotted across ... Then not even Gary Gensler will be able to bail out JPM (we wish we could say the same about Ben Bernanke to ...BullionVault.com Runs Out Of Silver In Germany Tyler Durden ...
www.amvona.com/.../5977-bullionvaultcom-runs-out-of-silver-in-germany.html - United States

2.   BullionVault.com Runs Out Of Silver In Germany | RevolutionRadio.org

14 Jan 2011 ... by Tyler Durden ZeroHedge.com 01/14/2011 With the US Mint ... With theUS Mint selling silver at an unprecedented pace, it was only a matter of time before the silver shortage would be ... Then not even Gary Gensler will be able to bail out JPM (we wish we could say the same about Ben Bernanke to ...
revolutionradio.org/?p=10789

3.   BullionVault.com Runs Out Of Silver In Germany | Phil's Stock World

14 Jan 2011 ... Courtesy of Tyler DurdenWith the US Mint selling silver at an unprecedented pace, it was only a matter of time before the ... precious metals as there is no indication demand is subsiding. ... Then not even Gary Gensler will be able to bailout JPM (we wish we could say the same about Ben Bernanke ...
www.philstockworld.com/.../bullionvaultcom-runs-out-of-silver-in-germany/

 

 

 

It has now been months that central fund of canada has done an inventory purchase.  They are having massive problems locating the physical stuff they need.  We are now seeing a massive disconnect between the physical market and the paper gold and silver bourses.

 

 

Ed Steer has given a great commentary today on the silver and gold mintages of eagles:

 

The U.S. Mint reported a big jump in gold eagle sales yesterday...19,500 ounces worth. There were no sales in silver eagles. For the month, there have been 63,000 ounces of gold eagles and 3,407,000 silver eagles sold.

Over at the Comex-approved depositories on Thursday, they reported a net withdrawal of 250,241 ounces of silver. The link to that activity is here.

 

 

Ed Steer and ted Butler do a great job dissecting the banking participation report coupled with the CFTC data.  It looks like the banks are hiding their short positions in their holding companies.

 

Here is the Steer commentary on that:

What's amazing about these numbers is that since we know [from last week's Bank Participation Report] that JPM's short position is around 100 million ounces, it's easy to see that the three traders left in the '4 or less' category, must be holding around 134 million ounces between the three of them. I would say that HSBC is one of the three...and that the other two big shorts would be U.S.-based bank holding companies. Because their 'bank holding companies'...they are not required to report their short positions to the CFTC in the monthly BPR.

But it's what's in the '8 or less' category that's real interesting. By straight subtraction, the four bullion banks left in the '8 or less' category must hold about 65 million ounces...16 million ounces apiece. A pittance compared to Morgan and the rest of the 'big 4'. I would guess that the four smaller bullion banks in the '8 or less' trader category would mostly be American-based bank holding companies as well.

Now, to gold...where the bullion banks covered a huge pile of short positions...29,518 contracts [2.95 million ounces worth] to be exact. The Commercial net short position has now dropped down to 22.5 million ounces. The '4 or less' bullion banks are short 18.9 million ounces...and the '8 or less' bullion banks are short 25.5 million ounces.

What applies to silver regarding bank holding companies, also applies equally to gold.

Since Friday's COT report was for positions held at the end of trading on Tuesday, January 11th...there has been, without doubt, more improvement in the bullion banks' short positions since then. But, because of the criminal way they cover what they're doing, we won't have a clue as to how much improvement there was until next Friday's report. So, once again, we wait

 

end.

 

 

 

I now have details on the vote at the CFTC on the 13th of January.  To many of you, the meeting was a major disappointment. I do not think so.

 

First here is the official release of the CFTC hearings.  I would like to extend thanks to Ross Pellegrino for sending me the text on the hearings:

 

 


 
http://www.cftc.gov/PressRoom/Events/opaevent_cftcdoddfrank011311.html
 
http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/pl_factsheet.pdf
http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/pl_qa.pdf
 

 

Ross.

 

 

Here is a commentary from Chris Martenson where he believes that JPMorgan will not have to change any of their ways.

 

I have also been conversing with Bart Chilton on this and he states that the position limits is only a proposal and nothing else.  He is confident that the proper position limits on silver

will be implemented.  He also believes that they will not be able to hide their exemptions.

 

Here is Chirs Martenson's commentary and I would like to thank Bob Acker for providing this to me:

 

 

 

 

http://www.chrismartenson.com/blog/jp-morgan-wins-cftc-position-limits-do-not-apply-them/50663

JP Morgan Wins: CFTC Position Limits Do Not Apply (To Them)

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Friday, January 14, 2011, 12:17 pm, by cmartenson

http://www.chrismartenson.com/files/imagecache/user_image_blog/pictures/picture-4.jpg?

Speaking of changing the rules...

Gold and silver are now down hard over the past two days, and the reason may have something to do with the fact that the CFTC utterly caved to JPM in their long-awaited decision on position limits in a 4-1 vote.

http://www.chrismartenson.com/files/u4/Gold_and_silver1-14-2011_12-16-57_PM.jpg

While position limits will eventually be set, maybe, someday, the course of action taken by the CFTC grandfathers in JPM's (and HSBC, et al.) current outlandish positions.

Here's the background (emphasis mine):

On July 21, 2010, the Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. Among other things, the Dodd-Frank Act amended the Commodity Exchange Act to:

  • Require the Commission, as appropriate, to limit the amount of positions, other than bona fide hedge positions, that may be held by any person with respect to commodity futures and option contracts in exempt and agricultural commodities traded on or subject to the rules of a designated contract market (DCM).
  • Require the Commission to establish position limits, including aggregate position limits, for swaps that are economically equivalent to DCM contracts in exempt and agricultural commodities (collectively, economically equivalent swaps). Such limits must be imposed simultaneously with limits on DCM contracts.

(Source

The only wiggle room in the Dodd-Frank bill is for "bona fide" hedge positions, which, I should state, I think is not a good idea because the exact definition of a 'bona fide hedge' is elusive.

For example, you and I could decide to engage in a massive short-hedged position where you short a commodity but buy calls from me. Your 'hedge' is only as good as my credit. Or perhaps you decide that oil and natural gas have enough negative correlation that you are 'hedged' by being equally short and long on both substances. What if your correlation blows out? You're not hedged, is the answer to that question.

Continuing into the meat of the new position limit ruling, we find these discomforting items:

The Commission's proposed regulations call for:

Position limits to be placed on 28 core physical-delivery contracts and their "economically equivalent" derivatives.

Establishment of position limits on physical commodity derivatives in two phases:

  • Initial transitional phase: spot-month position limits only, based on deliverable supply determined by and levels currently set by DCMs.
  • Second phase: spot-month position limits, based on the Commission's determination of deliverable supply, and position limits outside of the spot month.

Translation: Only the front month of any contract will be subject to the position limits initially. Later, at some undefined point "early next year," out months will be included.  But for now it's just the spot month.

Impact: Watch out for crazy out-month behaviors as JPM, et al. seek to skirt this rule.

Okay, that's not too terrible.  

But this is:

Spot-month position limit levels set at 25% of deliverable supply for a given commodity, with a conditional spot month limit of five times that amount for entities with positions exclusively in cash-settled contracts

That's just horrible.

For anybody like JPM that has no intent of taking physical delivery, they will be prevented from accumulating a position that is more than 125% of the total deliverable supply.  What sort of a limit is that??  That's like trying to limit the damage from auto accidents by 'limiting' freeway speeds to 'no more than' 175 mph.

Also, anybody who might want to actually buy the physical is limited to 25%, so any potential Hunt Bros. need not apply. The outer limits of this game have been exclusively reserved for speculators and manipulators.

That's not even remotely the outcome I was hoping for. This 'ruling' tantamount to saying "carry on!"

And what does 'deliverable supply' mean?  Does it refer to COMEX warehouse deliverables in current storage  or can special players receive additional preferential treatment by including 'deliverables' available to them via contractual arrangements with the LBMA?  Lots of questions are emerging for me here.

But it gets worse:

Exemptions for bona fide hedging transactions (based on the Dodd-Frank Act's new requirements for such transactions) and for positions that are established in good faith prior to the effective date of specific limits adopted pursuant to the proposed regulations.

Translation: "JPMs silver position is in complete violation of even these generous new 'rules' so we're just going to let them keep it."

Impact:   Just check the price behavior of gold and silver for the impact.  The gold and silver markets have traded upwards of late in part because of the thought that JPM would finally be forced to play fair and reduce their outlandish precious metals short positions.  Nope. Guess not.

Once again, all sense of fair play has been abandoned in the interest of giving a special handout to a set of large banks that are reporting near-record earnings. When, I must ask, is enough enough?

The message that I receive from this ruling is that US markets are now hopelessly and irrevocably captive to the behind-the-scenes wishes of the banking class, for which "everything and then some" seems to be not quite enough.

Worse, an already-battered faith in the markets has been kicked again.

Here's my prediction: Someday the US commodities markets will experience a very painful set of failures, big banks will be caught on the bad end of that experience, and they will simply, once again, lobby to have the rules changed in their favor.

To everybody who hopes to make money by being on the opposite side of that trade, good luck collecting your winnings. They will simply be rule-changed right out of your hot little hands.

Thank you for playing sir, and sorry about your luck; would you care to try again?

The CFTC is now playing the role of Lucy holding the football. If you don't wish to be the Charlie Brown in this story, I'd advise that you take delivery.

Here's CFTC Chairman Gary Gensler describing the rationale, such as it is, for the CFTC's ruling [with my reactions inserted in-line]:

Position limits help to protect the markets both in times of clear skies and when there is a storm on the horizon. In 1981, the Commission said that "the capacity of any contract market to absorb the establishment and liquidation of large speculative positions in an orderly manner is related to the relative size of such positions, i.e., the capacity of the market is not unlimited." [So far, so good!]

Today's proposal would implement important new authorities in the Dodd-Frank Act to prevent excessive speculation and manipulation in the derivatives markets. The Dodd-Frank Act expanded the scope of the Commission's mandate to set position limits to include certain swaps. [Still good]

The proposal re-establishes position limits in agriculture, energy and metals markets. It includes one position limits regime for the spot month and another regime for single-month and all-months combined limits. It would implement spot-month limits, which are currently set in agriculture, energy and metals markets, sooner than the single-month or all-months-combined limits. [Okay, spot-month goes first, before single-month and all-months combined.  Got that.  With the grandfather and 'bona fide hedge' exemptions of course.  Left that part out...]

Single-month and all-months-combined limits, which currently are only set for certain agricultural contracts, would be re-established in the energy and metals markets and be extended to certain swaps. These limits will be set using the formula proposed today based upon data on the total size of the swaps and futures market collected through the position reporting rule the Commission hopes to finalize early next year. ["Will be set?" Early next year? Isn't that a year from now?  Why so long?]

It will be some time before position limits for single-month and all-months-combined can be fully implemented. In the interim, if a trader has a position that is above a level of 10 and 2 ½ percent of futures and options on futures open interest in the 28 contracts for which the Commission is proposing position limits, I have directed staff to collect information, including using special call authority when appropriate, to monitor these large positions. [For silver, this amounts to some 5,300 contracts.  Well above the 1,500 contracts Ted Butler called for based on the 1% of world production limit.  It's too high.]

Staff will brief the Commission and make any appropriate recommendations based upon existing authorities for the Commission's consideration during its closed surveillance meetings at least monthly on what staff finds. [Oh, so this is not a regulatory action, but a fact-finding mission? It's rather unusual to find a government body that takes care to under-interpret a congressional mandate for regulatory power, but we seem to have one in the CFTC.  Odd that such a loss of regulatory nerve only seems to occur when the interests of big banks are on the line...] 

(Source)

Let's close with a statement of regret by Bart Chilton, who tried very hard to do the right thing, but couldn't get the other four commissioners to see things his (and my/our) way.

Statement of Commissioner Bart Chilton at the 9th CFTC Public Meeting on Rulemaking under the Wall Street Reform and Consumer Protection Act

January 13, 2011

As regulators, I think we have one key mission. It is embodied in the Commodity Exchange Act. We have a singularity of purpose to ensure efficient and effective markets and to prevent and deter fraud, abuse and manipulation. Quite frankly, I think we can do better. We can because the new Wall Street Reform and Consumer Protection Act requires that we develop what many of us consider to be some fairly precious parameters.

Today, I am hopeful we will move forward to propose a position limits rule, a most precious parameter that we should have proposed much earlier in a way that would have implemented the provision as Congress intended. That's not happening.

Yesterday, eight U. S. Senators told us to move forward on limits. That follows two other senatorial letters from last month.

This is a Commission of five individuals, a group of people who make these decisions. That pretty much ensures no individual will get their way all the time. I'm certainly not getting my way on position limits, nor are the Senators who wrote to us.

I am thankful that we will have position points in place as a kind of glide path to position limits. As I've said repeatedly, points are not limits. However, they will help us learn more and do better as we go forward in further developing important—and precious— parameters.

(Source)

Thank you for trying Bart.  I am grateful for your efforts.  I wanted to give Gary Gensler, the former Goldman Sachs executive, the benefit of the doubt, and I did that.  All benefit and all doubt now removed.  Once a squid, always a squid, I guess.

I am still trying to get my arms around this ruling and its likely impact on gold and silver prices going forward.  Long-term this changes nothing, except to reinforce my conviction that I have no interest in playing in rigged markets.  

Further, given the opportunity to do the right thing in an open and transparent manner, the CFTC, quite predictably, caved to large interests - the same large interests that are helping to shape, if not drive, current fiscal and monetary policy.  

For more on rule changing, please read yesterday's piece, Don't Worry, They'll Just Change the Rules. I guess I should append the following to that title "...or decline to enforce them."

 

 

 

end.

 

As many of you now, the vote for the  implementation of position limits was 4:1 with the only negative vote belonging to newcomer Scott O'Malia.  You will recall that it was this gentleman who asked me point blank if the comex would fail and I answered in the affirmative in that I felt that countries like China,  would load the boat with the precious metals and cause an eventual default.  For those of you who have not seen the video of my question and answer, it is on the top right hand side of my home page www.harveyorgan.blogspot.com.

 

I was intrigued with O'Malia's no vote.  He seems to be wrapped up in the massive swaps by the banks and he does not know how to regulate these.  He is probably scared to death if JPMorgan has to open their swap books and see the trades that I have highlighted to you to you on many occasions.  It is has been my contention all along that the real short position on silver is not JPMorgan or HSBC but mainland China.  The USA needed a hoard of silver supply to compliment the banking gold supply to keep the suppression scheme alive.

 

China had about 300 million oz of silver inherited with the overtake of China in 1949. The gold was air-freighted to Taiwin  (69 tonnes) but the silver remained in Shanghai and Beijing.  In 1990 the usa had 2 billion oz of above ground silver and by 2003 their supply went to zero.  They needed the Chinese supply.

 

Here was their supposed deal: in or around the year 2000 and events leading up to now:

 

1. USA gives most favoured nation treatment to China.

2. China lends  silver in a swap position.   China gets dollars as collateral and USA gets silver.

3. China can get their silver back at any time say past 3 or 4 years.

4. China loves the deal as they pick up gold on the cheap.

5. It is now 2010 and China want its silver back but the usa state that the silver is gone.  They can keep the usa dollars in collateral.

 

6. China refuses and is angry.  They now massively short on the comex knowing that they will not supply the metal.  It is up to the bankers.

7. They use conduits on the buy side and take delivery.

 

This is what O'Malia is frightened of when the CFTC sees the swap book on Morgan.

 

It now seems that Ted Butler is thinking along the same lines as me on the subject.  From Ted Butler through Ed Steer:

 

 

The CFTC/CME position limits meeting on Thursday was a bust of sorts. Here's silver analyst Ted Butler's take on it. "The CFTC meeting went pretty close to what I had handicapped on Wednesday. The proposal involves a formula based upon total open interest [10% of the first 25,000 contracts of open interest...and 2.5% of the remaining open interest]. In silver, this would amount to a position limit of around 5,300 contracts based upon current open interest. This is an economically stupid level for silver position limits and the staff should be ashamed for proposing it. It is three and a half times greater than the 1,500 contract level proposed by thousands of members of the public."

"The sad truth is that the [staff's] proposal was only passed because it is a measure without substance and is only tentative at best. Given the current composition of the Commission, no meaningful reform on position limits is possible anytime soon. Nothing with teeth could garner a majority vote."

[But] "there was one surprising and very encouraging development. There was palpable and genuine alarm and concern expressed by Commissioners O'Malia and Sommers, two staunch opponents of position limits, about the [CFTC's] staff looking into the details of JPMorgan's swap book which justifies its giant concentrated silver short position on the Comex. Heretofore, this function had been handled by the CME. Of course, neither silver nor JPMorgan was mentioned, but it was clear that any such inquiry was of great concern [to them]. As you may recall, this issue came up at the last hearing on December 16th...and it led to my speculation that JPM's swap book was [filled] mostly with Chinese counterparties. Whether interests from China are holding positions in the OTC market with JPM is of secondary importance. The real issue is that JPMorgan has to have some excuse for holding the concentrated silver short position and it appears that the CFTC surveillance staff is beginning the process of inquiry

 

 

 

 

 

end.

 

 

In other physical news, the premiums on gold are rising big time in Asia:

 

 

Shanghai Gold Premium Hits $23/Oz, China Opens 1 Million Gold-Savings Accounts 
THE PRICE OF GOLD touched fresh 1-week highs in late Asian trade on Wednesday, slipping back as European stock markets rose and Portugal's new issue of 10-year debt found what bond dealers called "strong demand".

The gold price in Dollars retreated below $1380 from $1387.50 per ounce.

Silver bullion traded in wholesale 1,000-ounce bars slipped 1.4% from its own 1-week high at $29.89 per ounce.

"The physical market remains tight," said an Asian dealer on Wednesday morning, three weeks ahead of the Chinese New Year, with premiums for wholesale gold bars – over and above London prices – holding near this week's two-year highs at $3 per ounce in Hong Kong.

Over in mainland China, contract prices at the Shanghai Gold Exchange (SGE) ended Wednesday's session unchanged at the equivalent of $45 per gram – some 1.8% above London benchmark quotes and equal to a premium of more than $23 per ounce.

"The factory worker who assembled your iPhone is buying gifts for his family in Shenzhen before going back home to Hunan," writes another Hong Kong gold bullion dealer.

More…

 

 

 

 

end

 

Our ETF's"

 

 

THe GLD lost 185,429 oz of gold again on Friday or a loss of 5.69 tonnes:

 

It new inventory is 1265.88 tonnes of gold or 40,633,51`3

 

 

The SLV  remained firm: last night at:

 

Here is tonight's level:

Ounces of Silver in Trust

344,840,267.900

Tonnes of Silver in Trust Tonnes of Silver in Trust

10,725.73

 Sprotts gold fund PHYS saw its premium to NAV dropped to 1.41%

The Central Fund of Canada has its premium rose to  6.6%

The Sprott silver fund PSIL,  or( PSLV) surprisingly saw its positive to NAV rise to 15.81% after the raid.

 

With such a massive high premiums Sprott  is looking for silver to add to its inventory.  He is having difficulty finding the stuff.

 

end

 

 

 

 

Here are other big stories on the day:  Homelessness continues to rise!!

 

 

 

Too Big to Fail? Homelessness Increases as Help Decreases

A report released yesterday confirmed startling increases in homelessness nationally. It's the second report to do so in the past month. These findings should come as a wake-up call to anyone who cares about the fundamental values on which our country is founded.

The report, "The State of Homelessness in America," issued by the National Alliance to End Homelessness, assembles data that show that from 2008 to 2009, homelessness in general increased by 3 percent, and homelessness among families increased by 4 percent. Given that the economic recession and foreclosure crises were already in full swing by then, this may not seem like an unexpected increase.

But here's the catch: The Alliance numbers capture only a very narrowly defined slice of homelessness: People in shelters or other emergency housing, or in public places. In addition to these increases, the number of families living doubled-up with others due to economic necessity increased by 12 percent to more than 6 million. The increases documented in the Alliance report parallel those reported by the U.S. Conference of Mayors in December 2010, which found a 9 percent increase in family homelessness over the past year in the 27 cities it surveyed across the country.

The report doesn't classify this group as homeless, but many organizations, including the National Law Center on Homelessness & Poverty, do. So does the U.S. Department of Education as it determines when children are homeless. For the people affected, the difference between a spot on a friend's couch or floor and a shelter or park bench is significant — albeit short-lived. As the report notes, doubling up is a typical route to so-called "literal" homelessness: The report estimates that one in 10 of those who are doubled-up will eventually find themselves in shelters or on the streets.

Regardless of what we call it, the increase in doubling up makes a couple of things clear: First, homelessness is part of a larger continuum, and it is affecting an increasingly broader part of the U.S. population. Both new reports pointed to job loss and the foreclosure crisis as major causes of the recent dramatic increases, a trend that the Law Center has been tracking. As both trends continue to sweep across the country, the numbers of people affected will almost certainly increase, and the suffering of those already affected deepen.

The other clear and even more disturbing point is this: Despite the enormity of the current crisis, there is virtually no safety net in place to help those affected. According to federal government data, some 40 percent of all homeless people are unsheltered due to lack of resources. The U.S. Conference of Mayors' report states that in the cities they surveyed an average of 27 percent of requests for emergency shelter went unmet. In some communities, there are now waiting lists for emergency shelter.

More…

 

 

 

end

 

 

 

New Hit to Strapped States 
Borrowing Costs Up as Bond Flops; Refinancing Crunch Nears 
By MICHAEL CORKERY And IANTHE JEANNE DUGAN

With the market for municipal bonds tumbling, cities, hospitals, schools and other public borrowers are scrambling to refinance tens of billions of dollars of debt this year, another sign that the once-safe market is under duress.

The muni bond market was hit with the latest wave of bad news Thursday, prompting a selloff that sent the market to its lowest level since the financial crisis. A New Jersey agency was forced to cut the size of a bond issue by about 40% because of mediocre demand, and pay a higher rate than expected. And mutual fund giant Vanguard Group shelved plans for three new muni bond funds, citing market turmoil.

"We believe that this delay is prudent given the high level of volatility in the municipal bond market," said Rebecca Katz, spokeswoman for the nation's biggest fund company.

The market has fallen every day this week, and investors have been net sellers of their holdings in municipal-bond mutual funds for nine straight weeks, according to fund tracker Lipper FMI.

Yields on 30-year triple-A rated general obligation bonds shot higher to 5.01% on Thursday, reflecting a spike in perceived risk, according to Thomson Reuters Municipal Market Data. The last time those bonds yielded 5% was Jan. 30, 2009, during the financial crisis.

More…

 

 

 

 

 

end

 

Here is a great commentary on the foreclosures:

 

Foreclosure Filings in U.S. May Jump 20% From Record 2010 as Crisis Peaks

A record 2.87 million properties got notices of default, auction or repossession in 2010, a 2 percent gain from a year earlier,

Jan. 13 (Bloomberg) -- Rick Sharga, senior vice president at RealtyTrac Inc., discusses the outlook for the U.S. housing market and home foreclosure filings. The number of U.S. homes receiving a foreclosure filing will climb about 20 percent in 2011, reaching a peak for the housing crisis, as unemployment remains high and banks resume seizures after a slowdown, according to RealtyTrac. Sharga speaks with Mark Crumpton on Bloomberg Television's "Bottom Line." (Source: Bloomberg)

The number of U.S. homes receiving a foreclosure filing will climb about 20 percent in 2011, reaching a peak for the housing crisis, as unemployment remains high and banks resume seizures after a slowdown, RealtyTrac Inc. said.

"We will peak in foreclosures and probably bottom out in pricing, and that's what we need to do in order to begin the recovery," Rick Sharga, RealtyTrac's senior vice president, said in an interview at Bloomberg headquarters in New York. "But it's probably not going to feel good in the process."

A record 2.87 million properties got notices of default, auction or repossession in 2010, a 2 percent gain from a year earlier, the Irvine, California-based data seller said today in a report. The number climbed even after a plunge in filings in the last part of the year -- including a 26 percent drop in December -- as lenders came under scrutiny for their practices…

-END-

 

 

 

 

and finally this important paper written by usa watchdog's Greg Hunter on the same subject:

 

 

Courtesy of Greg Hunter's USAWatchdog.com

Dear CIGAs,

I was shocked to see this headline from an Associated Press story yesterday, "Economists project home sales, construction to rise sharply in 2011 from extreme lows of 2010."   I was dumbfounded by the title of the article and even more taken back when I read the story which said, "The forecast delivered at the International Builders' Show in Orlando sees U.S. economic growth sharply lifting home sales and residential construction over the next two years, but from near-historic lows posted last year. "  The chief economist for the National Association of Home Builders, David Crowe, said, "Single-family home construction, a bellwether for the housing market and the economy, will rise 21 percent to 575,000 this year and climb to 860,000 in 2012." (Click here to read the full AP story.)

That is still about 75% less new construction from the peak of the housing boom a few years ago.  This forecast was made just prior to yesterday's release of the "Year-End 2010 U.S. Foreclosure Market Report" from RealtyTrac.com.  Its headline read "Record 2.9 Million U.S. Properties Receive Foreclosure Filings in 2010 Despite 30-Month Low in December."  The report went on to say, "Total properties receiving foreclosure filings would have easily  exceeded 3 million in 2010 had it not been for the fourth quarter drop in  foreclosure activity — triggered primarily by the continuing controversy  surrounding foreclosure documentation and procedures that prompted many major  lenders to temporarily halt some foreclosure proceedings," said James J.  Saccacio, chief executive officer of RealtyTrac.  "Even so, 2010 foreclosure activity still hit a record high for our report, and many of the foreclosure proceedings that were stopped in late 2010 — which we estimate may be as high as a quarter million — will likely be re-started and add to the numbers in early 2011."  (Click here to read the entire RealtyTrac report.)

So, a back log of foreclosures will increase by about 20% in 2011, which RealtyTrac is predicting to be another record year.  There have been 3 million repossessed homes since 2006, and RealtyTrac says there could be "3 million" more by 2013.  2010 was also a record year for repossessions with well over one million homes taken back by the banks.  Meanwhile, the National Association of Home Builders is expecting a 21% increase in new homes?    

More…

 

 

 

 

end.

 

You can now turn on your TV as Monday should bring our precious metals on the rise again.

 

Have a great weekend

Harvey

 

 

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