Saturday, March 5, 2011

Silver advances to $35.67/silver shorts in big troube/Libya in civil war/demonstrations in Egypt commence again

Good morning Ladies and Gentlemen;

First of all, I would like to announce that Sheila Bair due to the shortened week last week, decided to give her weary troops a rest this week.  There were no banks that entered our hallowed banking morgue.

Gold finished the comex session at $1428.20 up a cool $12.20.  Silver finished the session at $35.32 up $1.01
In the access market, gold and silver rallied even further and continued to its zenith after the 3:30 COT report was released which I will discuss with you in the body of my commentary.  Gold closed in the access market at $1432.50 and silver rose to $35.67.

Usually it takes weeks to recover from a raid.  Now it takes only 24 hours to resume gold and silver's normal northernly trajectory.  This weekend the bankers will be in mourning with their huge losses.  They do not know how to extricate themselves from the mess that they are in.

Let us go straight to the comex trading and see how things fared over there yesterday.  The day was quite exciting for the bulls...a bummer for the bears.

First gold.

The total gold comex open interest fell by a very tiny 3688 contracts to 515,043 from 518,731 on Thursday.
When you consider that our banking heroes supplied a massive unbacked paper at the comex, this is totally amazing.  Our bankers were not very amused that their hard work in supplying all of this paper proved fruitless.  The front expiry month of March saw the open interest rise to 98 from 80.  Somebody needed some gold in a hurry.  The front delivery month of April of which I will spend some time with you in the next few weeks declined marginally from 321,644 to 314,632 which is to be expected.

The estimated volume at the comex on Friday came in much lighter than expected at 133,368.  The confirmed volume Thursday, the day of the monstrous raid came it at a humongous 229,484.  The fact that the raid was fruitless has caused another of the long and tortuous weekend banking meetings to discuss their next move.

And not to be undone, silver:

The silver open interest instead of falling under the "martial" plan of the bankers rose by  141 contracts to 135,654 from Thursday's 135,513.  The bankers were not amused with this development as well.
The front delivery month of March saw its OI mysteriously drop from 2040 to 1876.  This was done with zero deliveries on Friday and zero deliveries on Thursday.  There is now no question that cash settlements in silver are the order of the day.  The next front month of May saw its OI fall a bit from 83,718 to 83,398.
This was a mixture of some bankers trying to cover some of their shorts and some of the cash settlers picking up more of the May contract with their newfound fiat wealth.  Word has it that the options in the April month are also high and maybe some of these guys will try their luck by taking delivery of an options contract in April.

The estimated volume at the silver comex was a touch below average at 58,820 contracts.  The confirmed volume on Thursday, the day of the raid came in it 68,685 a little lighter than one whould have thought.
It seems that the bankers were a little loathe to supply the silver paper as opposed to the gold paper.

Here is a chart for March 5. 2011 on deliveries and inventory changes at the comex:

Withdrawals from Dealers Inventory
317,097 oz
Withdrawals from customer Inventory
26,229 oz
Deposits to the dealer Inventory
Deposits to the customer Inventory
No of oz served (contracts ) zero
No of notices to be served 1876
9,380,000 oz

Withdrawals from Dealers Inventory
35,899 oz
Withdrawals from customer Inventory
Deposits to the dealer Inventory
4001 oz
Deposits to the customer Inventory
zero oz
No of oz served (contracts)  40
4000 oz
No of oz to be served 58 notices or 5800 oz
5800 oz

Let us begin with gold:

Note that we had a tiny deposit of 4001 oz of gold in the dealer but also a huge 35,899 oz of withdrawal from the dealer.  None of this gold found its way into the customer.  The customer had no deposits and no withdrawals.  There were no adjustments.

The comex folk notified us late on Thursday that 40 deliveries of gold were served upon our longs for a total of 4000 oz of gold.  The total number of notices served through the exercise of options total 984 this month which equates to 98,400 oz of gold.  To obtain what is left to be served, I take the OI of March  (98) and subtract out deliveries  (40) which gives me 58 notices left to be served upon or 5800 oz of gold.

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

98,400 oz (already served)  +  5800  oz (oz to be served) =  104,200 oz.  For those keeping score this equates to 3.241 tonnes . (Thursday total:  102,300 oz or 3.18 tonnes).

And now for our all important silver:

The comex folk notified us that there were zero oz of silver deposits into the dealer and zero deposits into the customer.  Strange for a delivery month.  The comex notified us that we had a withdrawal from the dealer of 317,097 oz and this silver left all comex warehouses.  For those keeping score, the withdrawals came from 3 registered dealer vaults (  59,529 oz, 247,492 oz and 10,076 317,097 oz.
The next transaction is very strange.  The comex folk notified us that an identical 26,229 oz of silver left the customer for the second straight day from the same 2 registered vaults:  (956, and 25,273 oz ).  Part of my frustration in analyzing these bozos.

Next comes a dandy entry and again very puzzling in the adjustment department.
First we had a "normal"  lease to the dealer of silver to the tune of 19,899 oz. This silver came from the customer.  This silver will be used to settle upon our longs as it seems that the dealer has no silver.  He is counting on the customer for his silver.
Now get a load of this next adjustment:  The dealer's inventory was adjusted negatively to the tune of minus 1,458,475 oz and the customer was credited with 1,458,475 oz and a further 84 oz of silver due to a counting error or some profit motive in allowing the silver to be loaned in the first place.  This is silver that was loaned from a customer on a prior occasion and returned quickly to the waiting arms of this customer.  The supposed inventory of the dealer is now around 40 million oz.

The comex folk notified us that for the second straight day, they could not fulfill any of their obligations to settle upon any of the longs waiting for their metal.  However, there was a drop in OI from 2040 down to 1876 for a fall of 164 contracts.  When you have silver longs who pluck over $150,000 per contract into their brokerage accounts waiting for settlement, and then have some of these longs disappear, you can rightly assume that the only explanation is cash settlements.  Just look above and see gold.  The OI rose even though gold had deliveries.  Silver had no deliveries and OI fell.  Ladies and Gentlemen:  cash settlements is the order of the day at the comex.

The total number of notices that have been sent down so far total 303, the same as Wednesday for a total of  1,515,000 oz.  To obtain what is left to be served  (those that are resolute for physical metal) I take the OI  of  1876 and subtract out yesterday's deliveries (zero) which gives me 1876 notices that are left to be served or 9,380,000 oz.
Thus the total number of physical oz standing in this delivery month is as follows:

1,515,000 oz (already served)  +  9,380,00 =   10,895,000 oz.

What is fascinating is that the March delivery month at 10,895,000 oz is close to the two prior non delivery month of January and February  (4.5 million oz +  2.8 million= 7.3 million ). Usually the two months of January and Feb silver totals are anywhere from 10-30% of March's deliveries.
I would like to add that generally the option holders that exercise generally go for the physical metal.


And now for our non physical ETFs.  First GLD:  March 5.2011

Total Gold in Trust

Tonnes: 1,210.62
Value US$:

GLD on Wednesday night:

Total Gold in Trust

Tonnes: 1,210.96
Value US$:

we lost a tiny 10,946 oz or .34 tonnes of gold.  This gold left the vaults at the Bank of England to put of fires as demand for physical gold is huge.  Probable destination:  the shores of China or Russia or both.

And now for our silver ETF   SLV:

Ounces of Silver in Trust347,063,746.900
Tonnes of Silver in Trust Tonnes of Silver in Trust10,794.89

and on Wednesday:

Inventory:   343,809,775 oz

Tonnes:  10,693.68.

It seems that the silver inventory gained 3.253 million oz of "inventory".  My oh my, are these guys good at getting silver immediately. This is nothing but a silver paper entry as there is little silver over there as well.

And now for our physical ETF's:

The Sprott silver fund  (PSLV ) remains at a high premium of 18.4% to NAV.  I guess this is the real price of physical silver.

The Sprott gold fund (PHYS) has a premium to NAV at 6.00%.  This number is beginning to rise as investors clamor for real metal.

The central fund of canada was its premium to NAV remain steady at around 8.9%.

No question about it:  the world is seeking physical silver in a big way!!


At around 3:30 pm the COT report was released and a few seconds later, silver shot up even higher to end at its high point of the day.  Let us see why:

First the gold COT report:

 Posted Friday, 4 March 2011 | Share this article | Source: 

Gold COT Report - Futures
Large Speculators
Change from Prior Reporting Period

Small Speculators

Open Interest



non reportable positions
Change from the previous reporting period

COT Gold Report - Positions as of March 1.2011

Quite a report:

Those large speculators that have been long pounded the table and added a huge 10,787 contracts and were justly rewarded.  

Those large speculators that have been short did not like the layout of the land and covered 6042 contracts.

And now for our famous bankers, the commericals:
Those commercials that are close to the physical scene and are generally long gold, lightened up on those longs to the tune of 2,121 contracts.

And now for JPMorgan and friends who have been perennially short on gold:
Just look at what those doorknobs did:
they added a huge 16,669 contracts to their short positions and are now praying, facing east and asking for divine intervention to save them.

Forget the small specs, they were not in it this week.
The game belonged to the large specs and the large commercials.  The large specs won out.

and now for silver:

Silver COT Report - Futures
Large Speculators

Small Speculators

Open Interest



non reportable positions
Change from the previous reporting period

COT Silver Report - Positions as of
Tuesday, March 01, 2011

Those large speculators that have been long somehow did not wish to participate in silver's rise.
They removed a small 1147 positions from their longs.
Those large speculators that have been short added a small  134 positions to their short positions and they are now feeling a little more pain.
And now for our commercials;
Those commercials that have been long in silver stayed pat losing only 259 contracts to their longs.
And now for JPMorgan and HSBC the subject to all of those class action lawsuits and also perennially on the short side:
these guys covered  1592 contracts from their shorts.  It was this released COT report, that caused the silver longs to rejoice  as it seems that JPMorgan is trapped and cannot escape the silver squeeze.  Everyone was expecting that JPM would be covering a greater number.

By goodness, the late bloomers, the small specs, seem to want to get into the game but some of them cannot quite read the tea-leaves.
Those small specs that have been long lessened those positions by a quite a large 1923 contracts and these guys are sorry that they made the wrong bet.
Those small specs that have been short silver, got it right by covering a huge 1911 of their shorts.
To recap:
In gold:  the commercials are supplying the unbacked paper and the large specs are gobbling up anything they can.

In silver: no real addition to the speculator side but the traditional bankers that have been short continue to provide massive unbacked paper and provide this worthwhile service to our longs and is greatly appreciated.


My number two son, Lenny informs me that the backwardation in silver in the back months intensifies where the differential is a huge $1.38.

Zero hedge has commented on the coming short squeeze in silver:

Silver Shorts Bloodbath

Tyler Durden's picture

In what can be only described as a total gutting of all silver shorts everywhere, including those with infinite Fed funded balance sheets (wink wink Blythe), all one can do is commiserate. With silver hitting $35.55 intraday, not even a last ditch attempt to spread the ridiculous Chavez rumor once more (this time the two dictators will really get peace ironed out, we promise) will prevent a battery of margin calls from forcing all the silver market timers to liquidate assets to keep their primer brokers happy. That's ok: all those market timer will sooner, or much, much later, get the top right.
 In other physical uses, the state of Utah passed this: courtesy of Fox News)

Utah Considers Return to Gold, Silver Coins

By Stephen Clark
Published March 03, 2011
|The Utah House was to vote as early as Thursday on legislation that would recognize gold and silver coins issued by the federal government as legal currency in the state. (AP)
The Utah House was to vote as early as Thursday on legislation that would recognize gold and silver coins issued by the federal as legal currency in the state. (AP)
It's been nearly 80 years since the U.S. stopped using gold coins as legal currency, and nearly 40 since the world abandoned the gold standard, but the precious metal could be making a comeback in the United States -- beginning in Utah.The Utah House was to vote as early as Thursday on legislation that would recognize Error! Hyperlink reference not valid. issued by the federal government as legal currency in the state. The coins would not replace the current paper currency but would be used and accepted voluntarily as an alternative.
The legislation, which has 12 co-sponsors, would let Utahans pay their taxes with gold and also calls for a committee to study alternative currencies for the state. It would also exempt the sale of gold from the state capital gains tax.
The bill cleared a state legislative committee on Wednesday, the first of 11 similar bills in statehouses across the country to do so. If the bill clears the House, it would have to pass the Senate before the governor could sign it into law.
Attorney and Tea Party activist Larry Hilton, author of the original bill, said he doesn't foresee any roadblocks.
"There's enough uneasiness going on in the economy to trigger people to feel that, hey, having a little Plan B, kind of a backup system, is not a bad idea," he told
The U.S. used some version of the gold standard from 1873 until 1933, when President Franklin D. Rooseveltoutlawed the private ownership of gold amid the Great Depression. An international monetary system based on a gold-exchange standard continued until 1971 when President Richard Nixon stopped the U.S. from redeeming dollars for gold altogether.
Critics of the gold standard say it limits countries' control over its monetary policy and leaves them vulnerable to financial shocks, such as the Great Depression. But supporters argue that the current financial system's dependence on the Federal Reserve exposes the value of U.S. money to the threat of inflation.Rep. Ron Paul, a longtime critic of the Federal Reserve who has called on a return to the gold standard, has praised Hilton's efforts.
"Efforts such as yours in states around the country highlight the importantance of returning to sound money," Paul wrote in a letter to Hilton. "Even if such efforts fail to achieve legislative success on their first try, their importance lies in bringing to the public's attention the problem of the ever-weakening dollar and the necessity of returning to a sound monetary system."
Hilton said the bill before the House doesn't go as far as his original draft, which was more sweeping, including recognizing more than just U.S. minted coins and more details on specific tax treatment. But he said he's willing to take it step-by step.
He also said he's not pushing to restore the gold standard in the U.S.
Federal Reserve Chairman Ben Bernanke this week dismissed the notion of the gold standard returning to the U.S.
"It did deliver price stability over long periods of time, but over shorter periods of time it caused wide swings in prices related to changes in demand or supply of gold," he told the Senate Banking Committee. "So I don't think it's a panacea."
Bernanke also said that gold couldn't return as the world standard because there's not enough gold in the world to effectively support the U.S. money supply.
Hilton said he's taking a positive approach to the issue.
"This is not an anti-dollar issue at all," he said. "We want to strengthen the dollar. We think by introducing gold and silver of our nation's history, by injecting that into the debate is very healthy for our policymakers."
Jeff Bell, a policy director for the Washington-based American Principles in Action (APPIA), which helped shape the Utah bill, told that passage of the bill would send a message to Washington and other states.
"People sense that in the era of quantitative easing and zero interest rates, something has gone haywire with our monetary policy. But people are afraid to say it," said Bell, who was an adviser to Ronald Reagan's 1976 and 1980 presidential campaigns. "If one state recognizes gold as a valid currency, I think it would embolden people not just in other states but in Washington."
Bell credited Tea Party activists for advancing the legislation this far. Rep. Brad Galvez, who introduced the legislation, is a freshman legislator backed by the Tea Party.
"Saying we now recognize gold as money is a big step forward," he said.
Twelve other states have offered similar proposals: Georgia, Montana, Missouri, Colorado, Indiana, Iowa, New Hampshire, South Carolina, Tennessee, Washington, Vermont and Oklahoma


I would like to comment a bit on the Wynter B affair.  I will get to the bottom of this.
I strongly believe that this group is out there as they are asking for and receiving some cash settlements.  I find the 50 dollar plus payment a little to difficult to believe.
I also find that the comment that JPMorgan warning  that if they not cash settle upon these guys  then this group would become an unsecured creditor is wrong.
This is not true as generally  you put your money with your broker and if they do not deliver upon you with bar numbers and weights, then your money stays with you and your broker and you have a claim against the comex/bankers for potential losses.  However this does not say that this was not said.
Many of you thought that that the "Wynter B" story was the big story.  It wasn't.  The big story was the release of the William Cohan piece in the WSJ and NYTimes which I downloaded for you.  It now seems that the silver scandal is now mainstream.
I am getting more information from the "Wynter" side of things and I will report on this to you.


Let us head over and see the big economic stories of the day.  First the jobs numbers came in as expected:

February payrolls surge, jobless rate near 2-year low
WASHINGTON (Reuters) - Employers hired more workers in February than in any month since May last year and the unemployment rate fell to a near two-year low, raising hopes the economic recovery has gathered critical momentum.
Nonfarm payrolls increased 192,000, the Labor Department said on Friday, above market expectations for 185,000 jobs. Data for December and January was revised to show 58,000 more jobs created than previously estimated.
The peak of monthly employment last May was when payrolls were being boosted by government hiring for a census.
The unemployment rate dipped to 8.9 percent, the lowest since April 2009, from 9.0 percent in January as more people reported finding work.
"We have moved into the expansion phase of the economic cycle and the economy is self-sustaining," said Brian Levitt, an economist at OppenheimerFunds in New York.
Still, February's bounce in employment after payrolls were depressed by extreme weather in January is unlikely to sway the Federal Reserve from its ultra-easy monetary policies.
The jobless rate has dropped 0.9 percentage point since November. The rate is derived from a survey of households, while the job creation figure comes from a separate survey of employers. The household survey showed more people were employed in February.
The unemployment rate is being closely watched by the Fed and could welldetermine the timing of the central bank's first interest rate hike. The Fed, which meets on March 15, has held overnight lending rates near zero since December 2008.
Economists believe the Fed will want to see payroll gains in excess of 200,000 for at least six to nine months and a significant decline in unemployment before starting to withdraw its massive monetary support from the economy.
"If we start to add enough jobs, sufficient to lower the unemployment rate, I think the Fed will feel a little more comfortable in easing off the throttle," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania.
"But right now, the economy is still fragile. There are a number of potholes that we can hit and the Fed is not going to want to act on exiting any time soon."
A surge in crude oil prices above $100 a barrel due to turmoil in the Middle East and North Africa represents a new headwind for the economy.
But Fed Chairman Ben Bernanke this week said higher oil prices were unlikely to steal much from growth or spark broader inflation, as long they are not sustained.
With the jobless rate far from its natural 5-6 percent level and inflation still short of the Fed's target of close to 2 percent, analysts expect the Fed to complete its $600 billion government bond-buying program through June to help the economy.
As in previous months, the private sector accounted for all the job gains in February, with an addition of 222,000 positions. That was up from 68,000 in January.
Employment in the private service sector, which pulled back in January, when much of the United States was hit by heavy snowfall, showed solid growth in February, rising 152,000 from 33,000 jobs in January.
Payrolls in the goods-producing industries saw a weather-related bounce of 70,000, with construction increasing 33,000 after shedding 22,000 jobs in January. Manufacturing, a sector that is powering the recovery, added 33,000 jobs.
Government employment fell 30,000, contracting for a fourth straight month, pulled down by state and local governments, which are under heavy budgetary pressures.
The average work week was steady at 34.2 hours. Average hourly earnings rose one cent.


It seems that people in Yuma Arizona did not share in the joy of this job creation number:
(courtesy Jim Sinclair) and the Yuma Sun newspaper.

Latest jobless report continues bleak outlook March 03, 2011 4:08 PM 
Yuma County’s jobless rate as a percent of the total work force continues its upward climb, reaching an unadjusted 23.2 percent for January.
That compares to 22.9 percent in December and 21 percent in January 2009, according to the monthly unemployment report released Thursday by the Arizona Department of Commerce.
Of a total reported civilian work force of 88,600 in January for Yuma County, 20,500 were without work and looking for jobs. Over the past year, the biggest percentage of job losses for this area have been sustained in construction, information, financial activities and hospitality.
Currently, the Commerce Department is not providing seasonally adjusted rates for outlying counties that have traditionally been reported on in the past as the area’s unemployment rate.
Meanwhile, the state’s jobless rate remained unchanged in January from the month before. But it turns out that December was actually far worse than we were told at the time. In fact, so was all of last year and the year before.
New figures released Thursday by the Arizona Department of Commerce show that the state’s seasonally adjusted unemployment rate actually hit 10.4 percent in November of 2009. But the agency was telling everyone at the time that the rate was just 9.3 percent.
Here is what is going on in Wisconsin:  (courtesy of zero hedge)

Wisconsin Governor To Issue 1500 Layoff Notices Unless Fugitive Democrats Return To The State

Tyler Durden's picture

In addition to "stagflation" which we announced in January would be the word of the year, we now have a new contender in the running for what may soon be the most popular word for the next 10 months: "escalation." To wit: in addition to everything happening in MENA, escalation has now struck right in our own back yard, after Wisconsin governor Walker announced he would fire 1500 state workers unless democrats, who have been fled and are hiding in Illinois to avoid a critical vote on collective bargaining, return to the state. Reuters take on this word: "The threat of layoffs increased the stakes in a bitter battle between Wisconsin Republicans and Democrats, a fight being watched around the nation as other states like Ohio and Indiana weigh rolling back public employee union power as part of budget-cutting efforts." Of course, 'escalation' could go hand in hand with 'broke' which is the third and last "word of the year" contender: "Earlier this week, Walker declared the state "broke" when he unveiled his proposed two-year $59.2 billion budget for fiscal 2012-2013, which eliminates more than 21,000 positions and cuts funding to education, cities and counties." Whether this will result in so far peaceful protests turning violent as "austerity" which was the word of 2010 comes to the shores of the US is for now unknown.
From Reuters:
Republican Walker told reporters late on Thursday that "extremist elements" among 14 absent senate Democrats had blocked progress in negotiations on his "budget repair bill."

"Just when we think the process is moving forward, we see no action," Walker said. "We're frustrated."

The Democratic senators fled to Illinois two weeks ago to deny majority Republicans a quorum and a vote on the bill, and behind-the-scenes negotiations have failed to produce a compromise. Just one Democrat is needed for a quorum.

Walker said some of the absent Democrats, who have been threatened with $100-a-day fines and the prospect of being taken into custody if they return to Wisconsin, appear willing to stay away "not only for several more months, but potentially the next two years."

With no action expected on the bill, Walker said he will be forced to send out layoff notices to 1,500 state employees, saving some $30 million.

"The reality is, we shouldn't have to be going down the path of preparing for layoffs." Walker said.
Further validating the farce:
"If they (Democrats) came back tomorrow, for example, we'd still try and see if we could talk to our bank and see if we could push this (refinancing) forward because it's much better than losing $165 million in savings," Walker said.

The Capitol has been besieged by pro-union protesters, some camping out in the stately building, though the last group left late on Thursday after a Wisconsin judge ordered them out to allow cleaning crews to do their work.

Protesters claimed victory in the case, as Wisconsin Judge John Albert said authorities cannot deny the public access to the Capitol building. After business hours, people must leave or be in violation of state law, the judge ruled.
If this is the way politics in America will be done going forward, when any party knows the only way to prevent passage of austere financial measures is by fleeing, one wonders: just what is the point of the US "democratic" system when a minority can hold up the majority just by taking the first one way taxpayer funded private jet out of the state?


The legendary Sam Zell was on CNBC and gave this warning to all:

Zell: Dollar's Global Fall Will Be 'Disastrous’ for US Living Standard

Thursday, 03 Mar 2011 12:27 PM
Billionaire real-estate magnate Sam Zell warns that Americans should brace for a "disastrous" 25 percent decline in the standard of living if the U.S. dollar’s reign as the global reserve currency ever ends.

He says that there are signs in the market that it could eventually happen. As it is now, a Korean manufacturer who wants to sell to Brazil must first buy dollars to complete the deal. If countries decide to bypass the dollar, the effect would be a disaster, Zell says.

Sam Zell

"Frankly, I think we’re at a tipping point. What’s my biggest single financial concern is the loss of the dollar as the reserve currency," he told CNBC in an interview. "I can’t imagine anything being more disastrous to our country than if the dollar lost its reserve-currency status."

Although he is "hoping against hope" the dollar remains the standard for international exchange, he warns that "you’re already seeing things in the markets that are suggesting that confidence in the dollar is waning."

If that happens, the impact on the United States would be deep. "I think you could see a 25 percent reduction in the standard of living in this country if the U.S. dollar was no longer the world’s reserve currency," Zell said "That’s how valuable it is."

Zell says that the bond market seems remarkably complacent about the risk. But that could turn on a dime, he warns.

"The worry in the bond market is never there until it’s there. The dollar has gone down 20 percent in the last three or four years," Zell says. "I don’t know who is buying 30-year fixed-rate debt. I don’t understand TIPs (Treasury inflation-protected bonds) that are projecting 30 years of benign inflation."

Benchmark 10-year Treasury note yields are around 3.48 percent. TIPs maturing in 2041 have a yield of 1.96 percent.

Once the world turns on the U.S. dollar, if it does, things will change fast, Zell warns. "How could interest rates not go up? Either they go up or the dollar goes down, one or the other," Zell says.

As for inflation, he estimates that actual inflation is between 5 percent and 7 percent right now, despite government figures showing the CPI flirting with low single digits. Fear of deflation — prices falling out of control — has been the primary motivator at the Federal Reserve to pump up money supply by more than $2 trillion in recent months.

Nevertheless, oil is rising fast and food riots are breaking out in developing countries. The United States has been less affected until recently. Zell points out that our Consumer Price Index tends to hide inflation by counting depressed home prices at 42 percent of the index.

"If you adjusted the CPI to reality you’re probably looking at 5, 6, 7 percent inflation today," Zell says.

"The reality out there is the costs are going up. The fact that we’ve been massive beneficiaries of Chinese mercantilist policies that have allowed us to buy goods at much less than their fair value. That has hurt us on the manufacturing side, but it has been a subsidy to America. That subsidy is coming to an end."

Others agree with Zell that the dollar’s world dominance will soon fade.

Ray Dalio, founder & CIO of Bridgewater Associates, told CNBC that it is "inevitable that the dollar's role as the world's currency will diminish from the dominant world currency to one of a few."

"It will fade probably fairly quickly so the United States which accounts for almost two-thirds of the reserves will probably go down to 50 percent of the world's reserves and it will have an effect on lending," he added.

Meanwhile, Bill Gross, found of bond giant Pimco, recently told investors that the Fed’s heavy thumb on the scales on behalf of low interests was perhaps necessary given the magnitude of the crisis. The second round of easing known as "QE2," perhaps, also had a role to play.

However, as the deadline for the second round to end looms — it is set to expire in June — there are serious questions about whether a smooth transition to private demand for U.S. debt will appear, Gross said.

Stocks have doubled from the March 2009 bottom and marked steadily upward since the second round was announced in August, which has given some stock investors pause.

"Investors should view June 30, 2011 not as political historians view Nov. 11, 1918 (Armistice Day — a day of reconciliation and healing) but more like June 6, 1944 (D-Day — a day fraught with hope for victory, but fueled with immediate uncertainty and fear as to what would happen in the short term)," Gross said in recent commentary online.

"Bond yields and stock prices are resting on an artificial foundation of QE2 credit that may or may not lead to a successful private-market handoff and stability in currency and financial markets."


The USA dollar index finished at 76.41 and is in danger of a free fall. I will watch this carefully for you. The long bond closed at 119.21 and I will watch this for you as well.

On the international front, civil war in Libya is intensifying. I strongly believe that the USA will invade Libya to protect its oil interests.  Anyway, here is what is happening over there right now.  (courtesy of Associated Press)

Success on both sides sows fear of Libya civil war

By MAGGIE MICHAEL and PAUL SCHEMM Associated Press © 2011 The Associated Press

March 5, 2011, 9:29AM

TRIPOLI, Libya — Moammar Gadhafi loyalists swept into the opposition-held city closest to Tripoli on Saturday, tightening security around the regime-held capital. To the east, rebel forces captured a key oil port as the country veered toward civil war.
The contrasting fortunes of the two warring sides suggest that the conflict in Libya could last for weeks and maybe months, with neither side mustering enough military power to decisively defeat the other. The government is fighting fiercely to maintain its hold in Tripoli and surrounding areas and the rebels are pushing their front westward from their eastern stronghold.
Gadhafi, who has led the country virtually unchecked for four decades, has unleashed a violent crackdown against those seeking his ouster, drawing international condemnation and sanctions.
Hundreds have been killed, perhaps more, putting pressure on the international community to do more to stop the crackdown on protests that began on Feb. 15, inspired by successful uprisings in Egypt and Tunisia, its neighbors to the east and west respectively.
President Barack Obama has insisted that Gadhafi must leave and said his administration was considering a full range of options, including the imposition of a "no-fly" zone over Libya.
So far, Gadhafi has had little success in taking back territory, with the entire eastern half of the country and some cities near the capital under rebel control. But the opposition forces have had limited success in marching on pro-Gadhafi areas, leading to a standoff that could last for weeks and maybe months, with neither side mustering enough military power to decisively defeat the other.
Saturday's assault on Zawiya, a city of some 200,000 people just 30 miles (50 kilometers) west of Tripoli, began with a surprise dawn attack by pro-Gadhafi forces firing mortar shells and machine guns.
Witnesses who spoke to The Associated Press by telephone with the rattle of gunfire and explosions in the background said the shelling damaged government buildings and homes. The fighting sparked several fires, sending a cloud of heavy black smoke over the city, and witnesses said snipers were shooting at anybody on the streets, including residents who ventured onto balconies.
Initially, the rebels retreated to positions deeper in the city before they launched a counteroffensive in which they regained some of the lost territory, according to three residents and activists, who spoke on condition of anonymity for fear of reprisals.
By midafternoon, the rebels had reoccupied central Martyrs' Square while the pro-regime forces regrouped on the city's fringes, sealing off the city's entry and exit routes, the witnesses said.
"We will fight them on the streets and will never give up so long as Gadhafi is still in power," said one of the rebels, who also declined to be identified for the same reason.
Pro-Gadhafi forces on foot and firing artillery, mortars and other heavy weapons launched a new attack on Zawiya in late afternoon from the south and west, two other witnesses said by telephone.
The anti-Gadhafi rebels fared better elsewhere, capturing the key oil port of Ras Lanouf on Friday night, their first military victory in a potentially long and arduous westward march from the east of the country to Tripoli.
Witnesses said Ras Lanouf, about 90 miles (140 kilometers) east of pro-Gadhafi Sirte, fell to rebel hands on Friday night after a fierce battle with pro-regime forces who later fled.
An Associated Press reporter who arrived in Ras Lanouf Saturday morning saw Libya's red, black and green pre-Gadhafi monarchy flag, which has been adopted by the rebels, hoisted over the town's oil facilities.
One of the rebels, Ahmed al-Zawi, said the battle was won after Ras Lanouf residents joined the rebels.
Al-Zawi, who participated in the fighting, said 12 rebels were killed in the fighting, in which rocket-propelled grenades and anti-aircraft guns were used.
Officials at a hospital in the nearby city of Ajdabiya, however, said only five rebels were killed and 31 wounded in the attack. The discrepancy in the figures could not immediately be explained.
"They just follow orders. After a little bit of fighting, they run away," said another rebel at Ras Lanouf, Borawi Saleh, an 11-year veteran of the army who is now an oil company employee.
The march on Sirte, said al-Zawi, would start after the rebels regroup and reorganize.
In the rebel-held east of the country, meanwhile, a large arms and ammunition depot outside Benghazi, Libya's second-largest city, blew up Friday in a massive explosion that completely destroyed an area three times the size of a soccer field.
Ambulance drivers told AP Television News that at least 26 people had been killed in the blast, which flattened entire buildings, cars and trees. It also deprived the rebels of arms and ammunition needed to fight their way westward toward Sirte on the Mediterranean coast.
It was not immediately clear how the depot blew up, but suspicion immediately fell on Gadhafi agents.
Schemm reported from Ras Lanouf, Libya. Associated Press writers Hamza Hendawi and Sarah El Deeb contributed to this report from Cairo.


I will bet that everyone thought that the situation in Egypt is back to normal. Guess again:
source, Bikyamasr  in Egypt.

Protesters clash with police in Egypt’s Alexandria, four injured

Mar 5th, 2011 | By Mohamed Abdel Salam | Category: EgyptFeatured
CAIRO: Thousands of protesters surrounded the State Security buildings in Giza and Alexandria on Friday, demanding the dissolution of the forces and the release of political prisoners.
The protesters, before both buildings, carried anti-torture signs and demanded that the State Security be disbanded, saying “people want the State Security to fall.”
Shortly after the protests began, clashes broke out between security forces and riot police and the protesters. Eye witnesses said thugs attacked protesters using molotov cocktails.
At least four people were seriously injured in the violence, which consisted of police firing on protesters. Initial reports from activists said that four people were killed, but Bikya Masr could not confirm these statements.
The violence forced the protesters to disperse in Giza, however it failed to curb the demonstrations in Egypt’s second largest city of Alexandria.
Central security forces cordoned off the buildings, and a State Security official addressed the protesters in Dokki, Giza – a Cairo suburb – trying to appease their anger and asked them to leave.
The protesters refused to leave until their demands are met and asked for the army to come and disperse them.
In Alexandria, witnesses said Molotov cocktails were thrown by both protesters and police. Local newspapers reported policemen, officers and informants from the State Security fired tear gas and live ammunition to disperse protesters. Live bullets could be heard and seen fired from the rooftop of the building.
Protesters pleaded for the help of the army to protect them.
The Army intervened eventually, and tried to prevent the protesters from entering the building through the main gate, however, some protesters managed to break into the building and the offices, and found confidential documents dated 2011.
The protesters shredded the papers and documents.

This is not good for the USA consumer:  (courtesy zero hedge)

As Gas Prices Surge By 28 Cents A Gallon In The Last 10 Days To $3.47, The APTA Informs Us How This Is Actually Great News

Tyler Durden's picture

As the bruised and battered US consumer continues to be fornicated at the pump, there is, we are told, an amazing silver lining to this inflationary catastrophe: according to the American Public Transportation Association, as gas prices spike they bring with them the savings for U.S. commuters who rely on public transportation, a transit group said on Friday. See: and now the surge in price has been spun. Soon, when gas is $5 then $10/gallon, the administration will tell us how we are all saving so much money by using the subway... Of course until such time as the already insolvent MTA (and other regional transportation authorities) are "forced" to hike prices due to retaining those workers which even Wal Mart decided to pass on.
From Reuters:
 U.S. gas prices have increased 28 cents a gallon in the last 10 days to $3.47 per gallon. Individuals who travel by bus or commuter rail instead of filling up their tanks at that price would save $825 per month on average, the American Public Transportation Association said.

The group included the national average of $161.56 for an unreserved parking space in a downtown business district in its calculations.

Political uncertainty in oil-producing Libya is pushing up oil prices, and that in turn is forcing many Americans to pay more at the pump.

If prices remain high, individuals would save an average $9,904 each year, APTA said, adding that "this is the highest savings for public transit riders in two years."
And the kicker from the APTA:
APTA said a commuter who relies on public transportation in New York City has the most savings over a driver -- $14,376 a year -- followed by those in Boston, San Francisco, Chicago and Seattle.
Next up: the administration touts the benefits of death. Just consider the amazing savings one will have by not having to spend tens of thousands of dollars on that barbarous relic, food.


Well I guess that wraps up the week.  I hope you all have a grand weekend and I catch up with you on Monday.  I will try and answer your questions this afternoon.

all the best

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