Saturday, June 25, 2011

Raid on Gold/Silver/Commodities/Ron Paul Gold Hearings

Good morning Ladies and Gentlemen:   amended

Before commencing, I would like to announce that we had one new bank entrant and two new credit union conservatorships enter our banking morgue having taken their last breath as they now have become official zombies:


One Bank Failure, One Credit Union Liquidation and Two Credit Union Conservatorships

Jun 24, 2011 - 10:55 PM by Ken - Bank Deals Guy


This was one of the rare Fridays in which the NCUA was busier than the FDIC. In addition to a bank failure, there were one credit union liquidation and two credit unions that were placed into conservatorship.
It was another Georgia bank that failed which brings the national total for this year to 48 and the Georgia total for the year to 14. Compared to last year at this time, there were 86 bank failures in the nation with 9 in Georgia.

The failed Georgia bank, Mountain Heritage Bank, was another small community bank. It was acquired by the Georgia bank First American Bank and Trust Company. All deposits except some brokered deposits were assumed by First American Bank. No depositors with regular deposits lost any money, even those above the FDIC limit.

The liquidated New Jersey credit union, St. James A.M.E. Federal Credit Union, was tiny with just $1 million in deposits. The NCUA arranged for North Jersey Federal Credit Union to assume all of the liquidated credit union's members.

The other two credit unions did not fail, but were placed into conservatorship by the NCUA. They were also small credit unions, each with less than $10 million in assets.

No deposits are affected when a credit union is placed into conservatorship. However, if the NCUA determines that the credit union can't be saved, it will be liquidated. So members who find their credit union placed into conservatorship should immediately ensure that all of their deposits are below the NCUA deposit coverage limits.
end.
Gold closed down by $19.60 to $1500.80.  Silver finished the comex session at $34.64 down 36 cents.
The bankers decided in their bright wisdom that a second raid was necessary especially after they saw the OI in silver.  For those newcomers, the bank orchestrates a raid by withholding their bids and then offering massive amounts of future paper without a profit motive.  This triggers stop losses put on by longs and then this causes an avalanche of selling driving the price further down.  Eventually, we get to an equilibrium of buyers and sellers.
The crooks, generally wait until after the second physical London fix to conserve gold (and silver).  Their modus operandi has been going on for the past 8 years and the regulators just stand there doing nothing with this blatant manipulation.  The bankers have no gold or silver behind them with they offer these massive contracts.  The entire
scheme was officially announced by Bill Murphy at the hearings in March 2010 with our whistle blower, Andrew Macguire , a trader at JPMorgan. The commission refused to hear Andrew who wished to testify.

Let us head over to the comex and see the damage created by our bankers:

First the gold comex:
The total gold comex open interest plummeted by 17,689 contracts due to the initial raid on Thursday.  All OI readings are 24 hours back so we refer to the OI reading as "basis" Thursday. The front delivery month of June saw its OI fall from 767 to 727 for a drop of 40 contracts.  We had 39 deliveries on Thursday so all of the contraction here was due to those deliveries and we lost one contract to cash settlements.  The next big delivery month is August and here the OI plummeted by 350,9334 to 331,350 as it was here the bankers did their damage as many speculators pitched their longs.  The estimated volume on Friday was quite high at 157,437.  The registered volume on Thursday was a monstrous 249,277 contracts as the bankers supplied much of the non backed paper.
The total silver comex OI much to the consternation of the bankers hardly budged on Friday. Actually it surprisingly rose by 479 contracts to 119,838.  Looks to me that the silver players are resolute and are standing pat during all raids.  It will be interesting to see what happenes to the OI for Monday which will be basis Friday.
The OI for the front options expiry month of June saw its OI fall from 18 to 12 for a loss of 6.  We had 5 deliveries on Thursday so we lost one contract to cash settlements.  All eyes are focusing on the big July contract which will begin in earnest on the 30th of June and I will be reporting on this for you.  Here the OI fell from 31,659 to 28,081 which is a normal contraction as we head into first day notice. The estimated volume for yesterday was huge at 86,534. The confirmed volume for Thursday was a monster day  coming in at 132,209 with some switches.

Here is the chart for 6/25/2011 regarding deliveries and inventory changes at the comex. 




Gold
Ounces
Withdrawals from Dealers Inventory
 nil
Withdrawals fromCustomer Inventory
165,805
Deposits to the Dealer Inventory
3228
Deposits to the Customer Inventory
 193,996

No of oz served (contracts)  today
9400 (94)
No of oz to be served  (notices)
 63300 oz (633)
Total monthly oz gold served (contracts) so far this month
 596,800 (6062)
Total accumulative withdrawal of gold from the Dealers inventory this month
5799
Total accumulative withdrawal of gold from the Customer inventory this month
415,073


We had quite a bit of activity at the gold vaults today. For once we add a real deposit
of gold into the dealer account at Brinks:  3228 oz.
The customer also have 3 fairly sizeable deposits:
1. 772 oz (Brinks)
2. 28,651 oz (Scotia)
3. 162,573 oz (JPMorgan)
total deposit:  193,996 oz. to the customer
We had 3 withdrawals by the customer:
1.  The same 162,573 oz is withdrawn from HSBC into Morgan. (see above)
This will be used in the settling process.
We add two other withdrawals:
2. 3007 oz from Scotia
3. 225 oz from Manfra.
total withdrawals of all 3:
165,805 oz.
If you are keeping score, the net customer addition is: 28,191 oz
In my total customer withdrawals I netted out the Morgan/HSBC transfer.
The comex folk notified us that 94 contracts were served for delivery on Friday for 9400 oz.
The total number of notices filed so far this month total 6062 for 606200 oz. To obtain what
is left to be served, I take the OI standing for June (727) and subtract out Friday deliveries (94)
which leaves me with 633 notices or 63300 oz left to be served upon.
Thus the total number of gold oz standing in this delivery month is as follows:
606,200 oz (served)  +   63,300 (oz to be served)  =  669,500 oz or 20,82 tonnes. we lost 100 oz from yesterday.
And now for silver and lot of strange things here:


First the chart:





Silver
Ounces
Withdrawals from Dealers Inventory
825,450
Withdrawals from Customer Inventory
5751 oz (brinks,Scotia,Delaware) 
Deposits to the Dealer Inventory
nil
Deposits to the Customer Inventory
 nil
No of oz served (contracts)  today
nil (0)
No of oz to be served  (notices)
60,000  (12)
Total monthly oz silver served (contracts) so far this month
1,845,000  (369)
Total accumulative withdrawal of silver from the Dealers inventory this month
2,028,035 oz
Total accumulative withdrawal of silver from the Customer Inventory this month.
5,187,811oz


as you can see from the above chart, we have a total of 1.2 million oz of silver leave the dealer from the beginning of the month
as well as 6.01 million oz leave the customer.  This does not include the huge adjustments out of both dealer and customer. Silver is leaving the comex as the owners sense danger.
The dealer today saw no deposit.  The customer also had zero oz added to inventory.
The fun begins with the withdrawals and adjustments.

The customer had 3 major withdrawals:
1. 825,450 oz from Brinks dealer:  total withdrawal dealer thus is 825,450

we had two withdrawals from customer:
1. 3,863 oz from HSBC
2. 1,888 oz from Delaware
total withdrawal:  5751. oz
We also had another major adjustment of 626,961 oz of silver leaving a customer to bail out the dealer.
With the adjustment adding 626,961 oz and the huge withdrawal of 825,450 oz from the dealer we have a net loss of inventory from the registered or dealer category.  The new inventory levels are 27.517 million registered
and 97.8 million oz total silver inventory.
Again for the 8th out of the last 9 days we had zero notices filed (Thursday we had 5 notices). Thus the total number of notices filed so far remain at 369 for 1,845,000 oz. To obtain what is left to be served, I take the OI standing for June (12) and subtract out Friday delivery notices  (0) which leaves me with 12 notices or 60,000 oz  left to be served upon.
Thus the total number of silver oz standing in this non delivery month is as follows:

1,845,000 oz (served)  +  60,000 (oz to be served)  =  1,905,000 oz (we lost 5000 oz to cash settlements.
end
Late last night the comex released its intent to deliver notices on Monday for actual delivery on Tuesday.
On Saturday's I will also include this in my commentary to give you guys and gals a head start:
Total intent on delivery in gold for Monday:  417 contract
For silver:  wow!!! another zero for the 9th straight day of zero deliveries (with one day at 5)

Let us now proceed to our ETF's SLV and GLD and then our physical gold and silver funds:
Sprott and Central Fund of Canada.

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



First GLD inventory changes:  June 25.2011 :


Tonnes: 1,209.14
Ounces:38,875,115.29
Value US$:
60,007,392,238.97



Total Gold in Trust:


June 23.2011
Tonnes: 1,209.14
Ounces:38,875,115.29
Value US$:
60,007,392,238.97



Total Gold in Trust:

June 22.2011
Tonnes: 1,209.14
Ounces:38,875,115.29
Value US$:
59,756,671,340.14




we neither gained nor lost any gold in the GLD


Now let us see inventory movements in the SLV:
June 25.2011 followed by June 23: 2011 and June 22
for comparison purposes:

Ounces of Silver in Trust309,339,815.300
Tonnes of Silver in Trust Tonnes of Silver in Trust9,621.54.



Ounces of Silver in Trust308,267,418.700
Tonnes of Silver in Trust Tonnes of Silver in Trust9,588.19
June 22.2011:


Ounces of Silver in Trust307,341,246.600
Tonnes of Silver in Trust Tonnes of Silver in Trust9,559.38
Today we gained 1.072 million oz of paper silver into the SLV.
Obviously this silver was not used in the raid.



1. Central Fund of Canada: it is trading at a negative 2.1% to NAV in usa funds and negative 1.6% in NAV for Cdn funds.
    June 25.2011
2. Sprott silver fund  (PSLV):  Premium to NAV rose slightly  to 15.9% positive NAV (June 25 .2011
3. Sprott gold fund (PHYS): premium to NAV fell slightly to a positive 3.62% to NAV  (June25.2011).


end.


Friday also saw the release of the COT report which is from a Tuesday to Tuesday last.
Most of the damage was on Thursday and Friday so we will not glean much from the report but
here it is anyway:
Gold COT Report - Futures
Large Speculators
Commercial
Total
Long
Short
Spreading
Long
Short
Long
Short
262,254
59,027
16,931
167,811
419,058
446,996
495,016
Change from Prior Reporting Period
14,541
3,009
2,661
-4,013
9,805
13,189
15,475
Traders
215
64
56
48
49
284
150


Small Speculators




Long
Short
Open Interest



68,020
20,000
515,016



4,047
1,761
17,236



non reportable positions
Change from the previous reporting period

COT Gold Report - Positions as of
Tuesday, June 21, 2011



In the gold COT, the large speculators sensing economic danger piled into gold by a large 14,451 contracts.
They did not see the ambush coming from our bankers.
Those speculators that have been short gold added 3,009 contracts to those short positions and these guys are a little happier this week than last.
In the commercial section, those commercials that are close to the physical scene sensed the bankers next move by covering 4013 contracts.
Those commercials who are always short added a monstrous 9,805 contracts to their short positions as they knew a raid was forthcoming.
Our small specs that have been long, added a rather large 4,047 contracts to their long positions and no doubt they were fleeced again.
Those specs that have been short added 1761 contracts to their short positions.
And now for silver:
Silver COT Report - Futures
Large Speculators
Commercial
Total
Long
Short
Spreading
Long
Short
Long
Short
30,454
11,131
25,832
35,382
70,946
91,668
107,909
1,193
-1,543
2,633
-3,179
-839
647
251
Traders
76
36
51
36
43
137
111

Small Speculators




Long
Short
Open Interest



28,570
12,329
120,238



745
1,141
1,392



non reportable positions
Change from the previous reporting period

COT Silver Report - Positions as of
Tuesday, June 21, 2011



In silver, the large specs that have been long added a smallish 1193 longs to their positions.
The large specs that have been short covered 1543 of their positions as silver moved higher last week.

And now for our commercials:
Those commercials that have been long silver covered a huge 3,179 positions, I guess sensing a raid was imminent.
And now for our famous bankers who are always short silver like JPMorgan and co:
Surprisingly they covered 839 of their shorts as silver was moving higher.
let us forget about the small specs in silver as they have been blown out since May 1.2011
In conclusion, you can visually see the difference between gold and silver.
The huge margin increases in silver has lessened the leverage and is forcing this silver comex market to become a physical market.  Gold margins were reduced in order to entice more longs to enter and they eventually succumbed to the criminal activity of the bankers. The bankers want players to be in gold and not silver.
end

Let us now see some of the big stories of yesterday.  As promised I will deliver to you
the Ron Paul gold hearings heard before a committee on June 23.2011.
Here is Ron Paul's opening statement to the committee:
Ron Paul: Time for transparency with the U.S. gold reserve

Opening Statement by U.S. Rep. Ron Paul
Committee on Financial Services
Subcommittee on Domestic Monetary Policy and Technology
Hearing on HR 1495, the Gold Reserve Transparency Act
Thursday, June 23, 2011

For far too long the United States government has been less than transparent in releasing information relating to its gold holdings.
Not surprisingly, this secrecy has given rise to a number of theories about the gold at Fort Knox and other depositories. Some people speculate that the gold has been involved in gold swaps with foreign governments or bullion banks. Others believe that the gold has secretly been shipped out of Fort Knox and sold. And still others believe that the bars at Fort Knox are actually gold-plated tungsten.
Historically, the Treasury and Mint have dismissed these theories, rather than addressing these concerns with substantive rebuttals. No one from Congress has been allowed to view the gold at Fort Knox in nearly 40 years, recent photographs of the gold holdings seem to be hard to come by, and the Mint's and inspector general's audit statements contain only the bare minimum of information.
Because the government has for so long refused to provide substantive information on its gold holdings, it is not surprising that so much confusion abounds, both within and without the government. The difference between custody and ownership, questions about responsibility for U.S. gold held at the New York Fed, and the issue of which division at Treasury is ultimately responsible for the gold reserves are just some of the questions that have come up during the research for this hearing.
In a way, it seems as though someone decided to lock up the gold, put the key in a desk somewhere, and walk off without telling anyone anything. Only during the preparation for this hearing was my office informed that the Mint has in fact conducted assays of statistically representative samples of gold bars, and we were provided with a sample assay report. This type of information should be reported or at least tabulated and published, so that the public knows how many bars of gold exist, what their fineness is, and whether they are encumbered in any way through loans, swaps, etc.
While the various agencies concerned have been very accommodating to my staff in attempting to shed some light on this issue, it should not require the introduction of legislation or a congressional hearing to gain access to this information. This information should be published and available to the American people. This gold belongs to the people, especially since much of it was forcibly taken from them in the 1930s, and the government owes it to the people to provide them with the details of these holdings.
We would greatly benefit from a full, accurate inventory, audit, and assay, with detailed explanations of who owns the gold and who is responsible for ownership, custody, and auditing. While the Mint and the inspector general trust the accuracy of the audits performed between 1975 and 1986, this still means that at least two-thirds of the gold reserves were last audited over a quarter century ago. Surely a full audit every 25 years is not too much to ask.

I look forward to the testimony of the witnesses regarding the condition of the gold reserves, the accounting audits that are regularly performed, and the inventories and assays that have been conducted on some of this gold over the years. I am also very interested to hear their comments on the Gold Reserve Transparency Act so that we may put forward a measure that provides the public with accurate and complete information on their gold.

Here is the official video of the hearings:



From the hearings we got some unusual feeble responses from the witnesses.
Aside from not pronouncing "assay" correctly, the inspector general of the Treasury
could not state how the USA accounted for their pledged gold to the IMF.  The responses were quite comical
They had no ideal if the IMF gold was double counted. The witness stated that "he was told there were no encumbrances on the USA gold."
In previous commentaries, I have told you that the IMF gold is housed in 4 locations:
1. Federal Reserve bank of NY.
2. Bank of England
3. Bank of France
4. Bank of India.
all of the IMF gold of 3200 tonnes was pledged and newcomers paid 401 tonnes of  real gold in the 70's.
This is the gold that the IMF sold recently and half went to India. 
However there are some disturbing testimony that I need to have clarified.
The inspector general stated that the USA has 3 secured locations for the gold:
1.Fort Knox
2. West Point
3. Inside Norad mountains, Denver Colorado.
Later in his testimony he stated correctly that there is a 4th facility at the Fed Reserve Bank of NY.
His testimony states that the 3 facilities that he audits, the total gold has a weight of over 9300 tonnes
with the fineness ranging from .47 to .999 with an average fineness of .9006.
I find the numbers a little troubling. The USA is the only country to hold official gold in (a) non deliverable bars ie
of coin melt and (b) London good delivery bars.
If one were to take "over"  9300 tonnes and multiply by a fineness of .9006 one would get this:
9300 x .9006  =  8375.58 tonnes of pure gold.
The USA has official gold at 8,133 tonnes of pure gold at the FOUR REGISTERED FACILITIES
He states that the gold audited in his three facilities that he has jurisdiction over has 245 million oz plus which would be correct as the Federal bank of NY has a little over 15 million oz.  Together the total of 261 million oz equates to 8,133 tonnes.
Somehow his 9300 tonnes with an average fineness of .9006 does not match. There should never be a time when gold falls below the .9 fineness. The only gold that I know they acquired in 1933 was coin melt with a grade of .90 gold.
My question:  what on earth are they measuring?  I will let all of you master sleuths out there to figure this one out!!
Also, the USA in 1933 melted all of its gold coins (except one gold coin) that it produced as well as the 1932 year production. They melted gold coins from previous years that were not distributed and the rest was acquired from USA citizens by the Roosevelt's edict of 1933.  The total acquired was around 6900 tonnes. With the USA buying gold at 35.00 dollars per oz, it at one point (around 1944) the USA held 2/3 of the worlds gold supply with a figure somewhere north of 20,000 tonnes.  Thus 6900 tonnes were of coin melt and the rest in good delivery bars.
Second question:  where are the good delivery bars?
Third question:  the gold for the pledged IMF was held at the Federal Bank of NY along with other official gold of other foreign nations. The federal Bank of NY is an official foreign depository for gold. The USA's officially pledged gold to the IMF was 17% of total weight pledged by all nations or 3200 x .17 =  544 tonnes of .999 gold.  (The Federal Bank of NY only holds only official .999 gold).  Is the USA gold held at the Federal Bank of NY double counted in official reserves with respect to the IMF pledged gold?  No audit was done on the Federal Bank of NY gold by the inspector general of the Treasury. Is it possible for the Federal Reserve bank to hold coin melt gold?
Now you can watch the inspector general's testimony and watch his body language.   As inspector general he must know how the IMF gold is accounted.
end.
I found the following especially good and I encourage you all to read the transcripts of the interview:
Sinclair and Hathaway tell King World News: Hell could break loose





end.
We had two economic data released on Friday.  One had the USA GDP first quarter revision to 1.9% from 1.8%.
If one were to include the real inflation then we would have a negative GDP.  The second is more important as the private ECRI  leading indicators is down.  This is quite ominous.  Special tanks for Reuters for the two reports:

First-quarter GDP revised up to 1.9 percent


\
WASHINGTON (Reuters) - Economic growth was revised modestly higher in the first quarter to account for a slightly faster pace of restocking by businesses and a smaller increase in imports, government data showed on Friday, but remained anemic.
Gross domestic product growth rose at annual rate of 1.9 percent, the Commerce Department said in its final estimate, up from the previously estimated 1.8 percent. The revision was in line with economists' expectations.
The economy expanded at a 3.1 percent rate in the fourth quarter. Growth has remained tepid so far in the second quarter, but both economists and the Federal Reserve are cautiously hopeful that activity will pick-up in the third quarter.
First-quarter growth was supported by stronger than previously estimated accumulation of business inventories, slower imports and a smaller decline in residential construction, while the increase in business spending was revised lower.
Business inventories increased $55.7 billion, above last month's $52.2 billion estimate. The change in inventories added 1.31 percentage points to GDP growth.
Business investment rose at a 2.0 percent rate instead of 3.4 percent as outlays on equipment and software were not as strong as previously estimated.
Consumer spending -- which accounts for more than two-thirds of U.S. economic activity -- grew at an unrevised 2.2 percent rate.
Imports were revised down to a 5.1 percent growth pace from 7.5 percent.
Even though exports were not as strong as previously reported, trade made a modest contribution to growth in the first quarter. Government spending contracted at a much sharper 5.8 percent rate rather than 5.1 percent, with defense outlays dropping at a revised 11.8 percent rate.
The report also showed that after-tax corporate profits were revised to an increase of 1.2 percent instead of a 0.9 percent drop. Economists had expected corporate profits to be revised to show a decline of 0.8 percent.
It also showed inflation pressures a little bit stronger, with the personal consumption expenditures price index revised to up 3.9 percent rate from 3.8 percent increase. That compared to the fourth quarter's 1.7 percent increase.
The core PCE index closely watched by the Fed advanced at a 1.6 percent rate, the highest since the fourth quarter of 2009, rather than 1.4 percent reported last month. Fed officials would like to see this measure close to 2 percent.
-END-






US future econ growth rate falls in latest week-ECRI


NEW YORK, June 24 (Reuters) - A measure of future U.S. economic growth dropped slightly in the latest week, while an annualized growth gauge dropped to its slowest rate since December, a research group said on Friday.
The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index fell to 127.0 in the week ended June 17 from a revised 127.7 the previous week, originally reported at 127.8.
The index's annualized growth rate fell to 2.9 percent from 3.6 percent a week earlier, which was revised from 3.7. It was the slowest rate since the week of December 3, 2010.
The lower score came as U.S. durable goods purchases rose more than expected in May, according to data released on Friday.

end.

John Williams reports on this revision:
Jim Sinclair’s Commentary
Here is the latest from John Williams’ ShadowStats.com.
- Bernanke Befuddled by Weak Economy?
- Major Downside Revisions to GDP Revisions Loom As Economy Slowly Slides into a Double-Dip
"No. 375: GDP Revision, May Durables Goods Orders and Home Sales"
http://www.shadowstats.com

end.



The Dow plummeted by 115 points on Friday mainly to the downgrading of Italian banks as Moody's
states that the contagion of a Greek default will play havoc to the Italian banks:
(courtesy Bloomberg)
Moody’s warns on Italian banks

By Rachel Sanderson in Milan
Moody’s has changed its outlook on 13 mid-sized and smaller Italian banks to negative and warned it could downgrade the long-term debt ratings of 16 others following its announcement last week that it had put the country’s sovereign debt on review for possible downgrade.
The move by the rating agency follows sharp falls in the share prices of Italian banks in recent days. Its warning affects Italy’s largest retail bank, Intesa Sanpaolo, and Monte dei Paschi di Siena, its third-largest bank by assets. UniCredit, Italy’s largest bank by assets, has recently been downgraded by Moody’s.
The Italian banking sector weathered the financial crisis better than other European economies due to its relatively conservative lending culture and high levels of savings among retail customers.These remain strengths, but concerns about the possibility of contagion from Greece alongside low economic growth in Italy have cast a pall over the sector’s stock market performance.
This is coupled with investor worries about capital adequacy and governance in the midsized mutual banking sector, in particular Milanese mutual Banca Popolare di Milano, which is due to agree a €1.2bn ($1.7bn) capital increase this weekend at the request of the Bank of Italy.
Moody’s said its review for possible downgrade of Italian sovereign debt had triggered reviews for possible downgrade of banks and subsidiaries with relatively high long-term deposit and debt ratings, often in the double A or single A categories.
It has also placed the bank’s midsized Italian banks, which are considered less systemically important, on review pending policy changes related to governance and strategy.
The largest Italian banks, with the exception of UniCredit, have undertaken or have pending rights issues after being put under pressure from the Bank of Italy to boost their capital ratios to provide a counterweight to concerns about Italy’s high national debt.
Intesa Sanpaolo successfully completed a €5bn rights issue last month, while Monte dei Paschi last week launched a €2bn capital increase.
UniCredit, which has a core tier one ratio (a key measure of financial strength) of 8.58 per cent, has denied it intends to undertake a rights issue, but bankers widely expect it to go to the market in the autumn.
Bankers also expect consolidation will follow demands by the Bank of Italy to reform the governance structure of the mutual banking industry, where management has been stymied by bylaws that give unions sway over strategy.
-END-






Italian Banks Plunge Amid Concern Debt Contagion Spreading2011-06-24


By Marco Bertacche, Elisa Martinuzzi and Francesca Cinelli
June 24 (Bloomberg) -- UniCredit SpA and Intesa Sanpaolo SpA slumped in Milan after a review of lenders’ credit ratings spurred concern the European debt crisis may spread just as banks face scrutiny from regulators over capital levels.
UniCredit, Italy’s biggest lender, led the drop, tumbling as much as 8.9 percent. Intesa Sanpaolo, the country’s second- largest bank by assets, slid as much as 7.2 percent. Both stocks were briefly suspended after breaching limits on intraday swings.
Moody’s Investors Service said yesterday it may downgrade 13 Italian banks because they would be vulnerable to a cut in the government’s credit rating. The firm said last week Italy’s ratings may be cut because of slowing economic growth and the potential for the sovereign crisis to drive the country’s borrowing costs higher. Italian banks are also being stress- tested by European regulators next month to assess whether they have sufficient capital.
"The downgrade by Moody’s may be furthered to encompass the long-term debt," said Thomas Laschetti, a trader at Tullett Prebon Ltd. in London. "That is enough to create the right environment for deleveraging exposure to the sector."
Officials at Intesa Sanpaolo and UniCredit in Milan declined to comment. The banks pared some of their losses by 2:02 p.m. Intesa was down 2.6 percent at 1.74 euros while UniCredit fell 5.3 percent to 1.37 euros.
‘Sensitive’ to Rating
"These banks are sensitive to even a moderate change in the government’s credit standing and its ability to support the country’s banks," Moody’s said in its statement.
Prime Minister Silvio Berlusconi said today the country’s banks are "well capitalized." Speaking at a summit of European leaders in Brussels, he said he wasn’t worried about Moody’s comments about the country’s banks.
The European Banking Authority yesterday updated its stress tests to take into account extra trading losses that banks may face on their holdings of sovereign debt from crisis-hit European Union countries including Greece. Intesa and UniCredit are among the five Italian banks that are subject to the tests.
Italian banks are also seeking to raise money from investors to bolster capital. Unione di Banche Italiane ScpA, Italy’s fourth-biggest bank, fell as much as 5 percent to 3.628 euros. The lender may struggle to lure buyers to its 1 billion- euro ($1.4 billion) rights offering, which closes today. The bank is offering investors eight new shares at 3.808 euros for every 21 held.
‘Struggling’ Economy
"There is still uncertainty surrounding the sovereign risk and bank capital requirements," said Paul Vrouwes, who helps oversee about 20 billion euros of shares at ING Investment Management in The Hague. "Italy’s economy is struggling more than other nations." He doesn’t plan to buy UBI stock.
European Central Bank President Jean-Claude Trichet said this week that the link between the region’s debt crisis and its lenders is "the most serious threat" to financial stability in the European Union. EU leaders are meeting in Brussels, seeking to avoid a repeat of the financial crisis that followed the 2008 collapse of Lehman Brothers Holdings Inc. They are in talks to avert a Greek default, while preparing a second bailout.
Banca Monte dei Paschi di Siena SpA, which is seeking to raise 2.2 billion euros in a rights offering that runs through July 8, fell as much as 5 percent to 51.95 euro-cents, a record low. The shares are available for 44.6 euro-cents in the offering.
-END-

As many of you are aware food prices are escalating around the globe and this is scaring the Obama administration.  Here is an example of pasta prices rising due to shortage of durum: (courtesy Bloomberg)
Pasta Price May Surge on Curbed Durum Supply

June 23 (Bloomberg) --


Abah Ofon, an analyst with Standard Chartered Bank, talks about agricultural commodities. World food prices that rose 37 percent in a year, driving 44 million more people into poverty, are a "plague" that need action from world leaders now, French President Nicolas Sarkozy said. Group of 20 farm ministers are in Paris for the second day of a summit. Wheat as much as doubled in the past year as Russia and Ukraine curbed exports. Ofon speaks in Hong Kong with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
Unrelenting rainfall may have slashed U.S. planting of durum wheat to the lowest level in more than 50 years, fueling a surge in the price of pasta and noodles as mills scramble for supply of the grain.
Farmers who normally are finished planting by now had completed just 44 percent as of June 19 inNorth Dakota, which produces more than two-thirds of U.S. durum, government data show. It’s too late to sow more without delaying the harvest to the winter-frost period, said Frayne Olson, an agricultural economist at North Dakota State University in Fargo.
Planting may drop 47 percent this year to 1.365 million acres, the lowest since 1959, Olson said. In the past month, parts of North Dakota and Montana, the second-biggest grower, had triple the normal rainfall, National Weather Service data show. North Dakota durum prices are up 52 percent in the past month, and U.S. pasta in May was the most-expensive on record.
"Basically, the selling has shut off in the U.S., because if you’re a holder of durum, there’s no point in selling it," said Jim Kulp, a general manager at Philadelphia Macaroni, which makes pasta including the Alphabet Soup noodles for Campbell Soup Co. (CPB) "If you’re holding durum wheat, it’s like gold. So why would you sell it?"
While durum accounted for less than 5 percent of total U.S. wheat output last year, it is the primary source of grain used in pastas. Varieties including soft, red and hard, red winter wheat are baked into pastries, cookies and bread.The U.S. Department of Agriculture will update its durum- acreage estimate on June 30. In March, the agency said farmers would plant 2.365 million acres this year.

end
And this report from Jim Sinclair on the same subject: pasta
Pasta Price May Jump as North Dakota Durum Floods Boost Campbell’s Costs By Whitney McFerron – Jun 24, 2011 1:40 PM M
Unrelenting rainfall may have slashed U.S. planting of durum wheat to the lowest level in more than 50 years, fueling a surge in the price of pasta and noodles as mills scramble for supply of the grain.
Farmers who normally are finished planting by now had completed just 44 percent as of June 19 in North Dakota, which produces more than two-thirds of U.S. durum, government data show. It’s too late to sow more without delaying the harvest to the winter-frost period, said Frayne Olson, an agricultural economist at North Dakota State University in Fargo.
Planting may drop 47 percent this year to 1.365 million acres, the lowest since 1959, Olson said. In the past month, parts of North Dakota and Montana, the second-biggest grower, had triple the normal rainfall, National Weather Service data show. North Dakota durum prices are up 52 percent in the past month, and U.S. pasta in May was the most expensive on record.
“Basically, the selling has shut off in the U.S., because if you’re a holder of durum, there’s no point in selling it,” said Jim Kulp, the general manager of the milling division at Philadelphia Macaroni, which makes pasta including the Alphabet Soup noodles for Campbell Soup Co. (CPB) “If you’re holding durum wheat, it’s like gold. So why would you sell it?”
While durum accounted for less than 5 percent of total U.S. wheat output last year, it is the primary source of grain used in pastas. Varieties including soft, red and hard, red winter wheat are baked into pastries, cookies and bread.

end.
We how have Bill Gross of PIMCO hint at silver manipulation for the first time:
(special thanks to GATA and zero hedge for the report)

Pimco's Bill Gross hints at silver market manipulation

 Section: 
2:17p ET Friday, June 24, 2011
Dear Friend of GATA and Gold (and Silver):
Business Insider today reports a remark apparently made by bond trader Bill Gross of Pimco suggesting realization that market intervention by or under the influence of government to suppress inflation indicators extends to silver:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

end
I saw this presentation by zero hedge's Reggie Middleton where he discusses the contagion effect on the European banks exposed to PIIGS debt.  It is very lengthy but worthwhile.  It is Saturday so I hope you have time to read the entire commentary and review the attached video:

The Anatomy of a Serial European Banking Collapse

Reggie Middleton's picture






This is part two of our recap of the European Bank Exposure analysis that we released last year in anticipation of a total refresh next week encompassing all of the interesting turns of events. In order to get a full appreciation of the gravity of the capital trap that the European banking system is in, and by extension the European commercial real estate markets, I humbly request that you review the last four BoomBustBlog posts on this topic before you move on, including the videos of my keynote presentation at the ING CRE Valuation seminar in Amsterdam. The video walks through the capital trap quandary that the European banking system is in from a bird's eye level. In this article we will drill down to the street level by illustrating a French bank featured in last year's analysis:
  1. Over A Year After Being Dismissed As Sensationalist For Questioning the ECB's Continued Solvency After Sovereign Debt Buying Binge, Guess What!
  2. Click, Clack, Click: The Sound of Falling Dominoes Behind The Door of the Eurocalypse!
  3. LGD 100+: What's the Possibility of Certain European Banks Having a Loss Given Default Approaching 100%?
  4. Greece Reports: "Circular Reasoning Works Because Circular Reasoning Works" - Or - Here Comes That Default!!! 
  5. Eurocalypse Cometh! Principal Haircuts, Serial Bailouts, ECB Insolvent! Disruptive Sound Of Dominoes In Background Going "Click, Clack"! BoomBustBloggers Instructed To Line Up Bearish Positions Again!
It has been my belief that the global market crash of 2008 brought upon by the US mortgage/housing market bubble bursting has never finished. Massively collaborated attempts at global finance central planning have stalled the plans of Mother Markets, but her wrath cannot be held at bay. Reference Do Black Swans Really Matter? Not As Much as the Circle of Life, The Circle Purposely Disrupted By Multiple Central Banks Worldwide!!! for my complete take on the situation. In the meantime, let's look at what French banks did to claw for yield as the US bubble popped in the 2007/2008 period. As derived and excerpted from icon Euro Bank Soveregn Debt Exposure Final - Pro & Institutional (934.65 kB 2010-05-13 00:11:32):
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As can be seen from above, it is not only the US who has piled leveraged unit of fiat currency upon leveraged unit of fiat currency in an attempt to spin gold out of spider webs. Indeed, you can't even blame just the members of the PIIGS anymore, either, for although they gorged on debt - someone had to supply said debt and there is still such a thing as risk management and/or due diligence. No?
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What is the result of throwing pound after pound of leveraged fiat currency meat into the hungary maw of an overweight European brown bear who is naught to give it back nor make good use of it? Let's ask one of the banks from year's report...
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As you can see, the haircut estimtes we used last year actually pale as compared to what Mother Market is enforcing this year. With that in mind, remain cognizant that the numbers you are about to see were based upon proposed losses that are nearly half of what they are today! The update to this document will have the more recent loss figures for the banks, using a realistic methodology, and not the "delay and pray" accounting smoke and mirrors currently reported as results by many banks - and as allowed by their regulators. For those who wish to access our most up to date figures, there aresubscriber-only online spreadsheets illustrating NPV of losses from probable restructuring scenarios:
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Whoa!!! A 63 Texas Ratio when losses were half of what they are now????!!! As Americans, and TExans from the S&L Crisis area know, a Texas Ration of 100% generally means no more bank!
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Where would said Texas Ratio madness come from? Why, exposure - of course!
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Remember the mark to market game being played as detailed in Is Another Banking Crisis Inevitable? and as illustrated in the Amsterdam ING Conferene video...
image011
Well, as I explained in both New Amsterdam (Haarlem, Manhattan) and Amsterdam (Netherlands), this restructuring thing is going to spike rates, which will in turn spike cap rates, whick flatten commercial real estate in a very big way. Guess who's exposed to all of the above...

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end:
I hope you all have a grand weekend and I will see you on Monday.
Harvey





























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