Saturday, August 27, 2011

Gold and silver withstand raid, rising to $1794.10/Silver rises to $40.95/ Bernanke does nothing at Jackson Hole

Good morning Ladies and Gentlemen:

Before commencing with my commentary, I would like to report that there were no banking causalities
as of last night.  I guess the FDIC did not want to take away any thunder from Ben Bernanke's do-nothing speech at Jackson Hole.

Gold closed the comex session week at $1794.10 up a huge $34.30 on the day.  Silver also had a stellar day
rising 21 cents to $40.95.  Both metals continued in the access market knowing that all options had expired at 1:30 and the shackles were off.  Here are the closing access market for gold and silver:

gold:  $1829.10
Silver: $41.50

Next week we will see monstrous trading in both metals so fasten your seat belt.

Let us head over to the gold comex and assess the wild action of yesterday.

The total gold comex OI  fell by 5325 contracts to 514,635 from Thursday's level of 519,960.  With gold reversing to the upside on Thursday, short covering by the bums was the order of the day.  In a very surprise
development, the front delivery month of August saw its OI rise from 708 to 723 for a GAIN of 15 contracts.
We had 424 deliveries on Thursday so we must have had someone demanding huge amounts of physical gold.  We again lost zero ounces to cash settlements.  In another surprising move, the next front month of October saw its OI rise by over 10,000 contracts to 40,748 from 30,614.  Very few play October so this is kind of startling.  The huge December month saw its OI fall from 356,424 to 340,628.  This is where the bankers covered their shorts as they saw the writing on the wall.  Some longs who were wishing to take delivery in December  moved up to October from December as they are scared that there would be no metal for them in the last trading month of the year.  The estimated volume at the gold comex was another astounding day at 379,632.  The confirmed volume on Thursday as explained in my last commentary was a super monster day at 421,073.

The silver comex OI fell by 1611 contracts from 120,054 to 118,443. We definitely lost some more silver short bankers as they too saw the writing on the wall.  The front options expiry month of August saw its OI fall from 11 to 1 for a loss of 10 contracts.  We had 10 deliveries on Thursday so the entire loss of OI was due to those deliveries and we lost zero ounces to cash settlements.  The month of August still has the ONE delivery notice left to be fulfilled.  This guy refuses cash settlements and he want metal.

 Inventory Movements and Delivery Notices for Gold: August 25.2011: 

Withdrawals from Dealers Inventory in oz
Withdrawals fromCustomer Inventory in oz
9,173 (HSBC)
Deposits to the Dealer Inventory in oz
Deposits to the Customer Inventory, in oz
9205 (JPM,Manfra)
No of oz served (contracts) today
22,300 (223)
No of oz to be served (notices)
50,000 (500 )
Total monthly oz gold served (contracts) so far this month
763,900 (7639)
Total accumulative withdrawal of gold from the Dealers inventory this month
Total accumulative withdrawal of gold from the Customer inventory this month
622,362 oz

Again no gold entered the dealer as a deposit. We also had no withdrawal by the dealer.

We had the following withdrawal of gold for the customer:

9173 oz from HSBC.

Instantly we had the following deposit of that gold into the customer of :

JPMorgan  ie. a deposit of 9173 oz. ( Good luck to that customer.)

zero hedge also notices this and here is his take on this transfer:  (courtesy zero hedge)

9,173 Ounces Of Gold Transferred From HSBC To JP Morgan Gold Vaults Overnight

Tyler Durden's picture

While we have no information as to who or why (we doknow when and where) engaged in a transfer of 9,173 ounces of eligible gold (for a total of about $16.5 million) from HSBC's gold depository into that of JP Morgan, according to today's closing CME Group Metal Depository Statistics, we can merely point out that it happened. One back of the envelope hypothesis: we have counterparty risk at the bank level (which is currently manifesting itself at both the CDS, the stock price, and the Li(E)bor level; are we going to start seeing counterparty concerns at the gold depository level next? What next: a run on the [    ] gold depository in a self-fulfilling prophecy? The second hypothesis is by now well known- JPM needs all the gold it can get. But a paltry 9,173 ounces? Of course, the last hypothesis is that the two precisely 9,173 ounce transactions are in no way related.


We also had a small 32 oz of gold addition to Manfra.
Thus the total deposits to the customer register 9205
The total withdrawals to the customer register  9173
The net gain in gold for the customer is thus only 32 oz.
We had a tiny adjustment of 502 oz of gold returned to a customer from a dealer in a lease repayment.

The total registered gold remains at 1.787 million oz.

The CME notified us that we had a total of 223 notices sent down for servicing for 22,300 oz.
The total number of notices filed so far this month total 7639 for 763,900 oz.  To obtain what is left to be served, I take the OI standing for August (723) and subtract out Friday deliveries (223) which leaves me with 500 notices to be served upon or 50,000.

Thus the total number of gold ounces standing in this delivery month of August advanced as follows:

763,900 ( oz served  +  50,000 (oz to be served)  =   813,900 oz standing or 25.31 tonnes of gold.
we had 764,800 oz on Thursday night so we gained big time yesterday.

I can now give you a little heads up for Monday:

gold notices sent down for Monday with a Tuesday delivery:  468  (it is here that someone was badly in need of gold)
silver notices sent down for Monday:  zero again.

And now for silver 

First the chart:

Withdrawals from Dealers Inventorynil
Withdrawals fromCustomer Inventory62,872 (Scotia)
Deposits to theDealer Inventorynil
Deposits to the Customer Inventory623,386 (Brinks, Delaware)
No of oz served (contracts)zero (0)
No of oz to be served (notices)5,000 (1)
Total monthly oz silver served (contracts)3,755,000 (751)
Total accumulative withdrawal of silver from the Dealersinventory this month152,218
Total accumulative withdrawal of silver from the Customerinventory this month8,306,500

Again no silver was deposited to the dealer and the dealer had no withdrawals.
All of the transactions were with the customer:

We had the following silver deposits into the customer:

1.  596,586 oz into Brinks
2.  26,800 oz into Delaware

total deposit:  623,386 oz

We had the following withdrawal:

62,872 oz from Scotia.

we also had an adjustment of 9732 oz of a lease returned from a dealer at Delaware to a customer at Delaware.
The total registered silver is now 33.528 million oz
The total of all silver in registered vaults is 105.325 million oz.

The CME notified us that zero notices were filed yesterday so the number of notices for the month remain at 751 or 3,755,000 oz.  To obtain the number of ounces standing in silver I take the OI standing for August at (1) and subtract out Friday's deliveries (0) which leaves me with l delivery still to go and this guy only wants metal.  This of course represents 5,000 oz of silver.

Thus the total number of silver oz standing in this delivery month remains at the following level:

3,755,000(served)  +  5,000 oz (to be served)  =  3,760,000 oz.

I would also like to point out that the September contract is now off the board  However it will continue to trade until all longs will be satisfied.  The OI for September at 22,840 is very high but that will contract until first day notice which is August 31.2011, this coming Tuesday.  On Monday night I will have a good idea as to the quantity of silver standing prior to Blythe handing out the fiat goodies.


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: August 27.2011.

Total Gold in Trust

Tonnes: 1,230.80
Value US$:

Total Gold in Trust:  August 25.2011

Tonnes: 1,232.31
Value US$:

we lost another 1.51 tonnes of gold from the GLD and this gold was needed somewhere.
Actually, there is a GLD puke index which seems to suggest that whenever gold leaves the GLD gold rises.  It seems that the index is pretty good at predicting a rise in gold:

From Jim Sinclair's commentary on this subject:

Follow the Money, Not Opinions
Emotions prevent much of the world from seeing beyond the daily noise.
Maybe it’s time for the world to review Jim’s formula.
Also, the GLD Puke Indicator (buy signal triggers whenever GLD tonnes in trust drop >1% in one day) flashed two consecutive buy signals, the 23rd & 24th. It’s been incredibly accurate, and the last time a double signal happened was in September of 2008 just before gold rose from about $750 to over $900. It coincides very nicely with your statistical concentration studies.

Now let us see inventory movements in the SLV: August 27:2011
Ounces of Silver in Trust312,539,039.500
Tonnes of Silver in Trust Tonnes of Silver in Trust9,721.05
august 25.2011:

Ounces of Silver in Trust:   312,052,012.5.

tonnes:  9705.9

we gained 487,000 paper oz into the SLV.

1. Central Fund of Canada: it is trading at a positive 1.5 percent to NAV in usa funds and a positive.9% in NAV for Cdn funds. ( aug 27.2011).
2. Sprott silver fund (PSLV): Premium to NAV stayed at a positive 19.94% to NAV August 27.2011
3. Sprott gold fund (PHYS): premium to NAV rose to a 2.84% to NAV August 27.2011).


The bankers are still playing with the central fund of Canada as they still short this vehicle.
The  Sprott silver fund still commands a huge premium as it shows the world the real price of silver.
Sprott gold fund is gaining momentum in its premium as it scours the planet looking for its 6.6 tonnes of gold.

Let us now head over to the see the COT report released at 3:30 and it was a dilly;
This report is from last Tuesday to the 23rd of August.  One day of the raid was included but not the big raid on Wednesday.

First the gold COT:

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
Tuesday, August 23, 2011

Here are large speculators that have been long in gold pitched 5,313 contracts and this was probably done on the first day of the raid on Tuesday, August 23.2011.

Those large speculators that have been short in gold surprisingly fell for the bankers folly and added a
huge 7,092 contracts to their shortfall.  They are crying the blues this weekend.

Those commercials that have been long in gold and are closer to the physical scene added a monstrous 14,588 contracts to their long side.  (Some commercials who are short also go long in other months and that acts in the same way as covering their shorts.)

And now for our famous bankers who are perennially short gold like JPMorgan and cohorts:
these guys  COVERED a huge 3823 contracts of their shortfall.  Remember the big raid did not occur until Wednesday.  It looks to me like desperation time for our bankers.  Even more so that the raid failed miserably as gold resumed its northern trajectory.

The small specs were also burned.  Those small specs that have been long in gold covered a tiny 557
of those contracts are a bit sorry for their stupid actions. 

The small specs that have been short gold misread the tea-leaves and added a huge 5449 contracts to their shortfall.  They were got totally off guard and since the small specs generally get it wrong, we can expect huge gains this coming week in gold as the small specs weep in their grief.

Let us head over to the silver COT..(a little different story)

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, August 23, 2011

Here our large speculators did not follow gold's path as the large speculators are in very strong hands.
These guys added another huge  6,059 contracts to their growing longs.  This has the bankers very nervous and they are calling for midnight oil meetings to discuss their fate.

Those large speculators that are short silver only added 976 contracts to their shortfall.  It could have been worse for them.

In the commercial category:

Those commercials that have been long silver and close to the physical scene, covered a very tiny 274 contracts and that was probably on day 1 of the raid.  As I have commented to you above, the silver contracts are in very very strong hands.

Those commercials that have been perennially short silver  (JPMorgan and HSBC) prepared themselves for
the  upcoming raid by adding a monstrous  6144 contracts to their shortfall.  Midnight meetings for this group as well.

The small specs are finally getting their toes wet by invading the silver arena.  
The small specs that have been long boldly added 1,377 contracts to their longs (and putting up huge dollars as margin requirements are high).
The small specs that have been short silver only added 42 contracts to their shorts and did not follow the criminal commercials in their folly.

Conclusion:  hugely bullish for gold as the bankers covered last week at higher and higher prices  and did so even the day before a big raid.  The bankers are in turmoil.

In silver:  less bullish as the bankers seem to taking on the strong hands of the longs.  Winner will take all.
My bet:  my money is on the silver longs.  The bankers will be taken to the cleaners.


Let us see the big news of Friday and how it shaped the price of gold and silver.

As expected, Big Ben of the land of Bernack said nothing of importance at Jackson Hole.
Initially the stock market tanked by over 200 points as some hopeful souls were expected QEIII immediately.  They were disappointed at first.  But lo and behold, the plunge protection team showed up and lifted the stock market into positive territory.

Gold and silver rose due to:

1. expiration of the gold and silver comex Sept contract.
2.  QE III will probably be announced in September as the economy is faltering badly.

First the official Reuters report on the Bernack's speech:

Fed prepared to use tools to spur growth: Bernanke
Reuters) - Federal Reserve Chairman Ben Bernanke on Friday stopped short of signaling further action to boost growth, but said it was critical for the economy's health to reduce long-term joblessness.
"It is clear the recovery from the crisis has been much less robust than we had hoped," he said in remarks prepared for delivery to an annual Fed retreat.
Bernanke said the Fed will meet for two days in September instead of the planned one to mull its options to provide additional monetary stimulus, among other topics.
The Fed chairman said reducing the record high level of workers who have been unemployed for six months or more would help achieve stronger U.S. economic growth.
"Under these unusual circumstances, policies that promote a stronger recovery in the near term may serve longer-term objectives as well," he said.


For those of you who think that we will not have QEIII guess again.  We will receive the stimulus spending in September.  Just look at what our GDP numbers for the revised 2nd quarter:

Second-quarter growth revised down to 1 percentFri Aug 26, 2011 8:33am EDT
WASHINGTON (Reuters) - The economy grew much slower than previously thought in the second quarter as business inventories and exports were less robust, a government report showed on Friday, although consumer spending was revised up.
Gross domestic product growth rose at annual rate of 1.0 percent the Commerce Department said, a downward revision of its prior estimate of 1.3 percent. It also said after-tax corporate profits rose at the fastest pace in a year.
Economists had expected output growth to be revised down to 1.1 percent. In the first quarter, the economy advanced just 0.4 percent. The government's second GDP estimate for the quarter confirmed growth almost stalled in the first six months of this year.
The United States is on a recession watch after a massive sell-off in the stock market knocked down consumer and business sentiment. The plunge in share prices followed Standard & Poor's decision to strip the nation of its top notch AAA credit rating and a spreading sovereign debt crisis in Europe.
While sentiment has deteriorated, data such as industrial production, retail sales and employment suggest the economy could avoid an outright contraction…

Goldman Sachs are generally pretty well connected and here is their reasoning by another ONE TRILLION in QE III is necessary  

(released by zero hedge,  late Thursday night)

Here Are Wall Street's Expectations For Tomorrow, As Goldman Makes The Case For $1 Trillion In QE3

Tyler Durden's picture

After 3 months ago everyone was convinced there was no QE3 imminent ever, all it took for the lemming majority to scramble to the other side of the boat was a 20% drop in stocks. Since then, following a brief stabiliziation in stocks, based precisely on beliefs that Bernanke would once again pull something from this bag of goodies, the lemmingrati once again shifted back, and the majority now pretends it does not expect anything out of Jackson Hole tomorrow, even though it obviously does, as otherwise the market would resume its plunge. UBS earlier conducted a survey among money managers, finding that 50% of the 82 respondents expect Bernanke to limit Jackson Hole remarks only to reviewing the rationale for the Fed to pledge ZIRP until mid 2013. Then there are those who actually told the truth, such as Goldman which, in a note yesterday, says that $1 trillion in QE3 is an absolute minimum if the Fed wants to get GDP higher by at least 0.5%. To wit: "Taken together, our analysis suggests that QE3 is unlikely to be a panacea for growth. Nonetheless, our estimates suggests that $1trn of asset purchases–or an equivalent increase in the duration of the Fed's balance sheet–might increase GDP growth by up to 0.5 percentage point in the first year after any announcement of QE3." And since we are talking the truth here, why not stop pretending you care about GDP - just think of the marginal impact on Wall Street bonuses...
First, the UBS responses:
  • 18% expect Fed will extend average maturity of Treasury holdings, similar to “Operation Twist”
  • 3% expect either “QE3 Max” (purchases include risky assets or a 10-yr yeld target) or a QE3 along the lines of QE2
  • “We suspect that a reasonable chunk of the nearly 4% gain in the S&P 500 this week is built on the hope that the speech is friendly to risk assets. Hence they could suffer at least a bit if the Chairman does not pave the way for QE3”
One firm that is not shy about its "QE3 or bust" policy, er, recommendation is Goldman. Here is the firm's Sven Jari Stehn defending the firm's outlook why a $1 trillion boost in LSAP (or duration equivalent extension, because see, LSAP is the same as Operation Twist from a risk preference shift perspective, but unfortunately twitter-poll responding FX traders are unable to grasp this...). As a reminder, it was Goldman who was calling for $2 trillion in QE2 only to get $900 billion. Compromise? And does this mean that Bernanke will merely implement $500 billion in Operation Twist 2 then? We shall find out tomorrow. 
That said, if the Chairman disappoints, the market will not be happy.
From Goldman Sachs:
Following the sharp deterioration in the economic outlook, we now see a greater-than-even chance that the Federal Open Market Committee (FOMC) will resume quantitative easing later this year or in early 2012. We recently discussed that such a step might involve either another expansion of the balance sheet or an increase in the duration of the Fed's balance sheet without expanding it (see "For More Easing, Will Fed Go Big or Go Long?" US Daily, August 15, 2011.) But given the disappointing growth performance since the adoption of the second round of asset purchases ("QE2") late last year, many commentators question how effective QE3 would be in boosting the sluggish recovery. In today's comment we attempt to shed some light on this question in two steps.
First, we reexamine the link between quantitative easing and financial conditions. As discussed on many occasions in the past, we think that the Fed's unconventional policies work primarily through easing financial conditions via lower interest rates, higher equity prices and a weaker dollar.Specifically, we estimated in the run-up to QE2 last summer that $1trn of asset purchases would boost our financial conditions index (GSFCI) by around 80 bps.(This estimate was derived as the average effect from three models that ranged from 25-115bp. For details see Sven Jari Stehn, " Unconventional Fed Policies and Financial Conditions: How Tight a Link?" US Daily, August 17, 2010.)
Using our previous methodology, we update these estimates to include QE2. Specifically, we explain the level of the GSFCI with three components. First, we include the announced stock of the Fed's asset purchases (that is the announcements in November 2008, March 2009 and November 2011 to purchase $600bn, $1.15trn and $600bn of securities, respectively). Second, we include the target fed funds rate (as a measure of the current stance of conventional monetary policy) and the slope of the Eurodollar curve (to capture expectations for future monetary policy). Finally, we include a number of economic variables that capture other economic influences, including Reuters/University of Michigan long-term inflation expectations and initial jobless claims. We estimate this model using weekly data between January 2000 and August 2011. We find that the first two rounds of asset purchases, on average, eased financial conditions by 101bp per $1trn (see column 1 in the table below). This estimate is consistent with our previous range of estimates, but a bit higher than their average.
The Estimated Effect of Fed Asset Purchases

There is, however, reason to believe that QE3 might be less effective in easing financial conditions than the first two rounds of purchases. This is because Fed asset purchases are likely to have larger effects during times of extreme market stress, and particularly when they are targeted at a specific market dislocation, like the mortgage-related purchases during QE1. As a result, one would expect that QE1 had a more significant effect on financial conditions than the subsequent program. Unfortunately, it is difficult to test for this empirically as we only have two experiences to go by. That said, we find some tentative evidence that the effect of QE1 on financial conditions was larger than during QE2: the effect rises to 120bp per $1trn when we estimate the model only through the end of QE1 in March 2010 (see column 2 above). To the extent that this finding points to diminishing returns to quantitative easing, we might expect additional purchases to ease financial conditions by less than 100bp per $1trn of purchases (or an equivalent extension of the average duration of the balance sheet).
Moreover, the effects of further quantitative easing on financial conditions might well be dampened by the Treasury's debt management policies. This is because in an environment where the federal funds rate is near zero, asset purchases–whether financed by the creation of bank reserves or by selling short-maturity holdings–are essentially equivalent to a shortening of the average maturity of the government debt. (For details of this argument see Jan Hatzius, "QE2 as a Shortening of Treasury Debt Maturities," US Daily, October 26 2010.) The average maturity of the privately held Treasury debt, however, has recently been increasing despite QE2–up from 57 months in October 2010 to 58 months in March 2011 (the latest available figure). If this trend continues, the effects of QE3 on financial conditions may be at least partially offset by the Treasury’s debt management policies.
Having discussed the effect of quantitative easing on financial conditions, we turn to the link between financial conditions and growth. Our estimates–summarized in the chart below–suggest that a 100bp easing in financial conditions would boost growth by 0.8 percentage point in the first year and another 0.2 percentage point in the second–i.e., raise the level of real GDP by 1% after two years. (For details see Sven Jari Stehn, "Another Look at the Link Between Financial Conditions and Growth," US Daily, October 26, 2010.) The chart below furthermore breaks down the total effect into its components, suggesting that about half of the total effect of the easing in financial conditions on GDP can be explained by an increase in consumer spending. The response of fixed investment, housing and net exports to easier financial conditions also contributes significantly to GDP growth.
The Effect of Easier Financial Conditions on GDP

Again, we see a couple of reasons why this link might be weaker in the current context. First, the disappointing growth performance in 2011H1 suggests that the effect of the easing in financial conditions in 2010H2 might have been smaller than the above estimates imply. A possible explanation is that some of the normal transmission channels seen in the chart above might be "clogged" in the current environment. In particular, a significantly positive effect on housing construction seems unlikely given the large amount of unoccupied inventory that currently hangs over that market. Moreover, the response of consumption might well be more muted in light of households' inability to extract equity from homes through refinancing due to widespread negative equity. In a simple attempt to capture these effects, we fully exclude the contribution of residential investment to GDP growth implied from the chart. (An alternative approach would have been to exclude parts of both the housing and consumption response.) Doing so suggests that a 100bp easing in financial conditions might boost growth by only 0.5 percentage point in the first year (see dashed line). Second, it is possible that rising energy prices might offset some of the growth effects of any QE3-induced easing in financial conditions. Although we agree with the view expressed by Fed Vice Chair Janet Yellen–that commodity prices are best explained by the fundamentals of global supply and demand rather than by the stance of US monetary policy–the significant increase in crude oil prices before and after the QE2 announcement raises the question whether there might have been at least some offset to the easing in financial conditions. In support of this view, our "oil-adjusted" financial conditions index–which takes into account the price of crude oil–shows less easing in response to the Fed's purchase programs than the GSFCI.
Taken together, our analysis suggests that QE3 is unlikely to be a panacea for growth. Nonetheless, our estimates suggests that $1trn of asset purchases–or an equivalent increase in the duration of the Fed's balance sheet–might increase GDP growth by up to 0.5 percentage point in the first year after any announcement of QE3.

Has the Fed Started QE3?

-- Posted Friday, 26 August 2011 | Share this article | Source:

By Bud Conrad, Casey Research
The Fed surprised the market by extending its policy of 0 to 0.25% Fed funds rate to mid-2013. The way the Fed manages to drive rates lower is to buy Treasuries with newly created money – driving the price up and the rates down. The big question is whether the policy will have a sizeable effect on markets. The chart below shows the historical jump in the Fed’s combined policy tools that were used to lower rates and bail out financial institutions through a variety of programs. These include the big purchase of mortgage-backed securities (MBS) called QE1 and the large purchase of Treasuries called QE2.
The point of the extrapolation in the chart is just to guess how much more money the Fed might need to create to keep the rate extremely low for another two years. By connecting a straight line from the start of the unusual policy tool expansions in late 2008 to today’s number, and then extending it to 2013, we can estimate that the policy might require about $1.5 trillion in order to keep the rate low.
The Fed doesn’t calculate the amount of money that might be required and probably doesn’t know for sure. They just keep buying on the open market until the rate comes to its target. If there were a loss of confidence in the dollar, the amount could become very large – and in the extreme, printing more money contributes to that loss of confidence, which in turn causes runaway inflation. We are not there yet. But this kind of open-ended promise is a dangerous precedent because we can’t be sure of the cost of the commitment.
However, we can say that the Fed policy is to let the dollar fall and to support the bankers and politicians who want to stimulate the economy.
[Many analysts at Casey Research foresaw the problems that are playing out today with US debt and the dropping value of the dollar. Join Bud, Doug Casey, other Casey Research experts, and special guests including John Mauldin and Mike Maloney in a free online event focusing on the American debt crisis – including how you can protect yourself and your wealth.]

-- Posted Friday, 26 August 2011 | Digg This Article | Source:
The following  did go over to well in Europe yesterday.  It looks like there will be no other currency to buy except gold and silver!!  The news sent the USA/Swiss cross up by a huge 1.54% to .805 usa/swiss franc.

The European bourses sank on this news. The German DAX lost 46 points, England's FTSE fell by 21 points and the French CAC lost 31 points.

  (courtesy Dow Jones news service)

UBS Mulling Fee On Swiss Franc Deposits For Bank Customers
ZURICH (Dow Jones)-

-UBS AG (UBS) Friday said it may shortly begin to levy a temporary charge on Swiss franc deposits as a way of encouraging its bank customers to keep their cash in the surging Swiss currency as low as possible.
The bank said in a statement distributed by Swift earlier Friday that "in view of the prevailing market conditions which in particular affect the Swiss franc, we are closely monitoring the development of the CHF cash balances maintained in current accounts of our CHF cash clearing customers."
It added: "Should we see a continuation of the net inflow of CHF in cash clearing accounts of our banking customers, we might have to take corrective action, within the next few days, by means of an Temporary Excess Balance Fee."
The move represents the most assertive step yet by a major Swiss bank to get clients to stem inflows into the Swiss franc, which has surged against the euro and U.S. dollar.

This is interesting, Russia is offering loans to individuals or sovereigns only if backed by gold;

MOSCOW, Aug 26 (Reuters) - Russia's central bank will offer gold-backed loans for up to 90 days at an interest rate of 7 percent, it said in a statement on Friday, expanding its lending facilities for dealing with any future liquidity crunch in the banking system.
The gold-backed lending was approved by the board of directors at a meeting on Friday. The rate on the facility is in line with the central bank's Lombard rate on borrowing secured against high-quality bonds.
"This measure fits the central bank's policy of developing refinancing instruments within the banking system. The facility will be unlikely in strong demand, only at times of liquidity crunches," said Maxim Oreshkin, chief economist at Credit Agricole in Moscow.
Levels of rouble liquidity remain at comfortable levels for now, with the overnight interbank rate having hovered within 3-4 percent range since early 2010 compared to more than 10 percent seen during the crisis of 2008-2009.
Alexander Morozov, chief economist at HSBC in Moscow, said the new instrument will likely only be used by up to 1 percent of the whole refinancing market in Russia

The Golden Truth has commented on this story, on the Jackson Hole speech by Ben Bernanke, the BP oil spill and further comments on the Bank of America investment by Buffet:


Russia Moves Closer To A Gold Standard And A Quick Comment On Bernanke

Kudos to "Ranting Andy" for sourcing this story.  Russia's Central Bank has announced a program to offer short term, gold-backed loans LINK  It's not clear to me if this facility will will be available only to Russian banks or if non-Russian banks will have access to the program.  What IS clear to me is that the Russian Central Bank, which has been an aggressive monthly accumulator of physical gold, has decided to include gold, along with high-quality bonds, as part of its acceptable collateral policy.  It would not surprise me to see more eastern Central Banks offer gold-backed loans.  And eventually I suspect that these Central Banks will no longer accept sovereign-issued bonds, like Treasuries, as loan collateral.

As for Bernanke's speech at Jackson Hole today, I thought it was a pathetic attempt to vindicate himself and place the failure of his monetary policies squarely on the shoulders of Congress and the White House.  To blame the current economic weakness on the debt-limit debacle is utterly absurd.  And in the epitome of hypocrisy and disingenuousness, he lectured that Congress needed to be more "transparent" with and accountable for its legislative procedures and objectives.  I really can't believe he made a statement like that considering the fact that the Fed spent millions lobbying Congress to kill Ron Paul's audit the Fed bill.   Quite frankly, and quite alarmingly I find Bernanke to be one of the more deceitful and spineless public figures in my lifetime.  Nixon would be embarrassed by Bernanke's antics.

Looks like BP's oil well in the Gulf of Mexico is leaking again:  LINK   We can only hope, contrary to what is likely the case, that Obama did not negotiate a "fence" around BP's liability and that the corrupt oil company will be held financially accountable for its crimes.  Of course, given that the Teleprompter's track record has been to alleviate corporate accountability, I'm sure he gave BP a get-out-of-full-liability card last time around the monopoly board.

On a final note, I hope anyone reading this who owns/owned Bank of America stock took yesterday's price action as an opportunity to unload their shares or any mutual funds that have a big holding in BAC.   BAC is desperate for liquidity and I would bet a 1 oz. gold eagle that Buffet's deal with the 5% takeout premium was structured as a short term "bridge" deal to keep BAC liquid until a bigger bailout can be put in place, at a time that makes it politically feasible, and takes Buffet out at that 5% premium plus accrued information.  God bless crony-capitalistic insider trading!


You must shake your head with all of these bewildering announcements coming out of Washington:

(courtesy Jim Sinclair commentary)

Some Of Your Taxpayer Assets Will Be Sold Off To ‘Vulture Funds,’ In Case You Were Interested First Posted: 8/25/11 05:08 PM ET Updated: 8/26/11 10:56 AM ET
Hey, everybody! Time now to check what’s going on with that giant portfolio of foreclosed-upon homes that we, as taxpayers, own. Did you forget that we owned a giant portfolio of foreclosed-upon homes? Because we do. Anyway, the good news is that we may not have this portfolio for much longer. The bad news is that we’ll be relieved of it in one of the worst deals possible.
At any rate, Ken Layne points us to some recent news on that front:
The largest transfer of wealth from the public to private sector is about to begin. The federal government will be bulk-selling the massive portfolio of foreclosed homes now owned by HUD, Fannie Mae and Freddie Mac to private investors — vulture funds.
These homes, which are now the property of the U.S. government, the U.S. taxpayer, U.S. citizens collectively, are going to be sold to private investor conglomerates at extraordinarily large discounts to real value.
You and I will not be allowed to participate. These investors will come from the private-equity and hedge-fund community, Goldman Sachs and its derivatives, as well as foreign sovereign wealth funds that can bring a billion dollars or more to each transaction.
In the process, these investors will instantaneously become the largest improved real estate owners and landlords in the world. The U.S. taxpayer will get pennies on the dollar for these homes and then be allowed to rent them back at market rates.


 Over in Euroland, we were greeted with this story early Friday morning as Greece tries to stave off default.  Please note that 2 yr Greek bonds are trading at 46.38% interest and the drachma is trading on a when issued basis:

Greece Activates Last-Ditch Liquidity Rescue Package To Preserve Its Financial System

Tyler Durden's picture

The biggest news of the day today was not that some old crony capitalist had doubled down yet more of his non-taxable wealth on a bet Bank of America would yet again be bailed out, or that Wall Street is about to be sumberged under 3 feet of water. No, the most notable event from today was what we commented on in our first post from 7 am, namely that: "If we crossed through some spacetime vortex that brought us back in time just two short months ago, to July of this year, today's confirmation that the second Greek bailout has now failed, following the Finnish finance minister's comments that the country will defy Germany and will not give in to demands to abandon its deal for Greek collateral, which in turn has sent the Greek 2 year bond bidless, its yield up 227 bps to an all time record 46.38%, would have been enough to send the futures and the EURUSD plunging." Well, a few hours later, we did get a plunge, even if it was not in the US, but in Germany, where the entire local market flash crashedupon realizing what we noted hours prior: that Greece is now pretty much done. Yet it turns out there was more: unwilling to admit defeat yet, Greece was forced to pull out the last rabbit hiding deep in the recesses of the hat. As the Telegraph reports, "In a move described as the "last stand for Greek banks", the embattled country's central bank activated Emergency Liquidity Assistance (ELA) for the first time on Wednesday night." Such efficiency out of the Greeks for once- not a single Persian was harmed, or even needed, in this 21st century version of Thermopylae: the Greeks did it all on their own.
More: "Although it was done discreetly, news that Athens had opened the fund filtered out and was one of the factors that rattled markets across Europe. At one point Germany's Dax was down 4pc before it recovered. The ELA was designed under European rules to allow national central banks to provide liquidity for their own lenders when they run out of collateral of a quality that can be used to trade with the ECB. It is an obscure tool that is supposed to be temporary and one of the last resorts for indebted banks." So much for temporary: we are rather certain that the only time this last ditch measure is turned off is when Greeks resume paying each other in Drachmas again. The good news: Drachmas, which we hear are now trading on a When Issued basis with several banks, will be back in circulation very soon.
Raoul Ruparel of Open Europe told The Telegraph: "The activation of the so-called ELA looks to be the last stand for Greek banks and suggests they are running alarmingly short of quality collateral usually used to obtain funding."

He added: "This kicks off another huge round of nearly worthless assets being shifted from the books of private banks onto books backed by taxpayers. Combined with the purchases of Spanish and Italian bonds, the already questionable balance sheet of the euro system is looking increasingly risky." 

Athens' activation of the ELA will raise concerns that Greece will simply shift debt to Brussels. 

By accepting a lower level of collateral the debt in the ELA is, in theory, supposed to be the responsibility of Greece. However, since the Greek state is surviving on eurozone bailouts and Greek banks are reliant on ECB funding, in practice the loans are backed by the eurozone. The terms of lending and other details are not disclosed publicly. 

Mr Ruparel said: "Though the ELA is meant to be a temporary emergency solution, we know from Ireland, where the programme has been running for almost a year, that once banks get hooked on ELA they rarely get off it.
Just like Europe's short selling ban: the drastic measure at stock market controls was supposed to last 2 weeks; it has now been extended for months in places. Another thing we are confident is that by the time all is said and done, any selling will be made illegal.
First in Europe and then in the US.


It is time to say goodbye and I will see you on Monday night. I will try and check in and see how you are all doing but I have been called in for more strenuous babysitting services for my grandchildren so my time will be a bit limited.  The coming week will see massive volatility so fasten your seat belts and enjoy the ride.

all the best

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