Before commencing this important commentary, I would like to introduce you 4 new members into the banking morgue. Very shortly they will be joined by their ring leader JPMorgan and their band of merry banking friends:
Goldman Sachs, Citibank, Bank of America, Morgan Stanley and Wells Fargo:
|The 4 banks that failed last night are as follows:|
1. Habersham Bank of Clarkesville GA
2. Charter Oak Bank of Napa California
3. San Luis Trust Bank of San Luis Obispo CA
4. Citizens bank of Effingham , Springfield GA.
may they rest in peace.
As many of you are quite well aware of, gold and silver had a stellar day yesterday. Gold climbed by$3.50 to $1388.20. However the star of the show was silver climbing by 73 cents to $32.30. During the session it reached a high of $32.87 as the bankers panicked and started to cover their massive shorts.
Let us head over to the comex and see how the trading fared yesterday.
The total gold comex open interest rose by 2369 contracts to 481,548 from Thursday's level of 479,179.
The front February delivery month saw its open interest rise from 648 to 653 despite 4 deliveries on Thursday. We got a few queue jumpers needing some gold. The next delivery month of April saw its open interest also rise from 311,585 to 312,764. However the volume at the gold comex was still rather subdued coming in at an estimated 104,766. The confirmed volume on Thursday was also quite low at 103,537.
This is of concern to our commissioners as business is leaving for London. It may indicate that investors want the physical metal and are not willing to wait for a future month to obtain their physical metal.
The total silver comex open interest rose to an unheard of 150,615. We reached this level before but that was when we had considerable calendar spreads which had no economic benefit. These spreaders have since departed so this volume is a true indication of demand. The rise in open interest from Thursday was a rather large 2349 contracts. Despite midnight oil meetings by the bankers, the onslaught in silver continued on Friday and the bankers finally succumbed by buying back some of their massive shorts.
The front options expiry month of February saw its open interest mysteriously rise from 91 to 113. We had zero deliveries on Thursday so we had quite a few queue jumpers in need of silver. The front month of March saw its open interest drop marginally from 55811 contracts to 53,125. We are a week away from first day notice and it looks to me that many of our silver players are resolute and willing to stand for delivery.
This will be quite a week.
The estimated volume at the silver comex yesterday was 103,401 which is huge with small amounts of rollovers. The confirmed volume yesterday was also high at 103,195. The bankers are in disarray!!
Here is a chart for Feb 18.2011 on deliveries and inventory changes at the comex:
Let us start with gold. We witnessed a tiny 5899 oz of gold deposited to the dealer
yet no withdrawals form the dealer. The customer was busy in gold: he received a deposit of 10,632 oz but another customer removed 63,991 oz or 2 tonnes of gold.
There were no adjustments.
The comex folk notified us that 58 notices were sent down for servicing for a total 5800 oz of gold. The total number of notices sent down so far this month total 10,725 for a grand total of 1,072,500 oz of gold. To obtain what is left to be serviced I take the Feb. open interest (653) and subtract from that total the Friday deliveries of 58 which gives me 595 notices left to be serviced or 59,500 oz of gold.
Thus the total number of gold oz standing in this delivery month of February is as follows:
1,072,500 oz(already served) + 59,500 (oz to be served) = 1,132,000 vs Thurs. total of 1,131,000 for a gain of exactly 1000 oz.
And now for our star of the show, silver:
There were only deposits of silver by the customer as the dealer was not present in any transaction yesterday. The customer received 84,225 oz but another customer removed 262,603 so the net loss of silver by the customer section at the comex was 178,378 oz.
There must be fires all over the place as entities need physical silver. There were no adjustments.
The comex folk notified us that 18 delivery notices were sent down for a total of 90,000 oz of silver The total number of notices sent down so far this month total 412 for a total of 2,060,000 oz. To obtain what is left to go to finish off the month, I take the Feb open interest (113) and subtract out the Friday deliveries (18) which gives me 95 notices left to be served upon or 475,000 oz.
Thus the total number of silver oz standing in this non delivery month is as follows:
2,060,000(already served) + 475,000 (to be served) = 2,535,000 vs Thursday's total of
2,425,000 for a huge gain of 110,000 oz. Again someone was badly in need of silver.
The huge rise in silver price has caught the silver bankers totally offside on the silver banking. The BIS data released in November (www.goldexsextant.com) shows that the G 10 bankers have collectively sold forwards and swaps to the tune of 4 billion oz and short naked calls for another 3 billion oz. The total, 7 billion oz represents 10 years of production. If you just do the forwards, then it is 7 years of annual silver production. Let us say the average cost of acquiring these derivatives and forwards equate to $15.00 for silver. Thus collectively the entire G10 bankers are feeling massive pain (losses) to the tune of:
7 billion oz of silver( 32.30-12.00) = 7 billion x $17.30 = 121.1 billion dollars of losses.
This is in a market of only 14 billion dollars. It begs the question to what economic need was this done.This is still off balance sheet.
If you include only the forwards or swaps (the lending of actual metal to which nothing has come back yet) then the losses are:
4 billion x 17.30 or 69 billion dollars.
Regardless how you look at it, the bankers are in serious trouble with this huge rise in silver prices. I hope you understand the severity of the situation.
Let us now travel to the COT and see what happened with our banker positions.
Posted Friday, 18 February 2011 | | Source: GoldSeek.com
In the gold COT report, those large speculators that were long gold added massively to their positions and were clearly rewarded for their efforts.
Those speculators that were short gold, saw the light and covered 1607 of their short positions.
And now for our commerical sector:
Those commercials that are long gold covered 1606 contracts as a way of supplying the gold paper.
Those commercials that have been perennially short gold increased their short positions by a massive 7109 contracts. They are feeling a little pain tonight. Forget the small speculators they are not in the game.
Ok let us see what gives here at the silver COT:
Those large speculators that have been long pounded the table by massively increasing their long positions to the tune of 5803 contracts.
Those large speculators that have been short continued to go short to the tune of 1929 contracts and were caught terribly offside. They are feeling pain tonight.
And now for our famous commercials.
Those commercials that are long silver and close to the physical scene added 2900 contracts to the long positions, guessing correctly that silver was on the move.
Those commercials that have been short silver from day one like JPMorgan et friends continue to supply the massive paper to the tune of 6831 contracts. It seems that JPMorgan underestimated demand for silver from all quarters as they continued to supply the paper. The small specs are just not in the silver game.
In a nutshell: PANIC at banking circles this weekend.
Let us see how our ETF's fared. First our non physical ETF's:
Here is the inventory at the GLD last night:
Total Gold in Trust
Thursday's total: 1224.01 tonnes of gold
we lost: .91 tonnes of gold. This no doubt put out fires over in England has the Chinese are trying to get as much gold onto their shores as possible. They are buying GLD shares and tendering them for metal. The Bank of England is going to have headaches when they cannot get their gold back.
Now for our SLV inventory for Friday night:
As promised, I sent the following down to the CFTC. It is self explanatory:
that business would migrate to other bourses, namely the LBMA. I guess that you are seeing a noticeable drop in the trading volume at the gold comex. It appears to me that many speculators
are sensing the exchange as being rigged, so they are moving their business elsewhere. A fear of loss of business was certainly expressed by the commissioners at the March 25 hearing equally, with the lone exception being Mr Chilton. The delay in the
implementation of position limits may have been the last straw as investors need integrity of markets and we are certainly not seeing much of that lately.
due to its lesser amounts of impurities than the European benchmark, Brent Sea Crude contract. Since the mantra of the comex is a price discovery mechanism, something is going haywire in this market. The spread of Brent over WTI is now over 16.00 dollars per barrel premium.
I invite your comments on this.
Let us now go to the big stories of the past few days:
The first one is a tandy. MERS has now given up and basically states that the transfers of mortgages are null and void:'
MERS is planning to shortly announce a proposed amendment to Membership Rule 8. The proposed amendment will require Members to not foreclose in MERS’ name. Consistent with the Membership Rules there will be a 90-day comment period on the proposed Rule. During this period we request that Members do not commence foreclosures in MERS’ name. If a Member determines that it will commence a foreclosure in MERS’ name during this 90-day period, two weeks advance notice must be given to MERS to permit verification of the appointment and current status of the Certifying Officer proposed to participate in the foreclosure. No foreclosure may be processed in MERS’ name without first obtaining this verification. We encourage Members to bring foreclosures only in the name of the holder of the note, in the name of the trustee or the servicer of record acting on behalf of the trustee
As to whether this will actually impact a housing business whose every component is in regulatory and legal flux and limbo, and more specifically, the share prices of WFC and BAC, please direct your queries to Liberty 44, c/o Central Market Planning Bureau.
It looks like MERS is out of business and the bankers are in the glue!!
and then this story on the mortgage mess:
It looks like we have a bank run over in South Korea;
courtesy of Zero Hedge
Bank Run In... Korea
Although operations of three of Busan Savings Bank’s four affiliates were not suspended, there are fears that they could be hit by a bank run on their deposits.
In the case of Busan II Savings Bank, its capital adequacy ratio stood at 6.0 percent as of the end of 2010, but its liabilities exceeded assets by 12.5 billion won.
Two other affiliates, Jungang Busan Savings Bank and Jeonju Savings Bank, have capital adequacy ratios of 3.6 percent and 5.6 percent, respectively. But they are unlikely to avoid a suspension of business if a bank run occurs.
The state-run Korea Finance Corporation and four commercial banks - Woori, Kookmin, Shinhan and Hana - have decided to inject 2 trillion won of emergency liquidity into the savings bank sector.
In addition, the government has decided to extend the amount of loans that can be borrowed by the Korea Federation of Savings Banks to support savings banks from the current 600 billion won to 3 trillion won.
Financial authorities are currently working to establish a joint deposit insurance account as a safety net for other financial sectors to curb the spread of possible financial risks from the savings banks. Funds for a joint deposit insurance account would be collected by financial institutions.
Here are two stories on the middle east protests which gather huge attention globally:
US pledges for democracy may not extend to Bahrain, even if Obama finally supported Egypt’s rebellion. Mark LeVine Last Modified: 18 Feb 2011 13:04 GMT
Troops open live fire around Pearl roundabout in Manama after nightfall, at least 66 wounded.
And then this story on the advancing Iranian ships in the Suez:
By Jonathan Stempel
The Real Crisis That Will Soon Hit the US
I think that I have given you enough for this weekend.
I will try and answer all of your questions this afternoon.
Have a wonderful holiday weekend