Gold closed:
Gold is now above its 200 day moving average which on a technical basis is good news. Even though the precious metals market is manipulated this news surely bothers our bankers:
Gold Storms Above 200 DMA
Remember when various economics professors and self-anointed Ph.D'ed market timers said to sell everything because the gold 200 DMA had been breached to the downside, never to be crossed back again, to which our simple retort was, "Many are doing their damnedest Ph.D.-best to somehow fuse economic theory and technical charting, and state that a breach of the 200 DMA in gold is indicative of imminent price collapse. And then there are facts. Such as this nugget from Stone McCarthy which looks at previous episodes of the 200 DMA breach and concludes based on severity of trendline penetration compared to average, that "this is just one reason we see strong potential for a rebound as participants reduce short exposure." So much for technicals." Sure enough: less than a month later, and $100 higher, gold is right back above the 200 DMA. Oh, and we expect to hear nothing from said academicsfor a long time.
end
Gold finished the comex session at $1631.00 for a gain of 23.50 dollars. Silver had a stellar day rising by $1.02 to $29.78. The risk on trade was orchestrated by our elite bankers today as bourses throughout the globe rose. Please be careful if you trade gold and silver against these crooks. There is a lot to cover so first let us head over to the comex and assess trading, inventory movements and delivery notices filed.
The total comex OI (open interest) fell by 3,820 contracts as yesterday we had the orchestrated raid on our precious metals. The new OI rests tonight at 414,044 which I perceive to be in very strong hands. The front options expiry month of January saw its OI fall from 23 to 16 for a loss of 9 contracts. Yesterday we had 10 delivery notices so we gained 1 contract of additional gold oz standing and lost nothing to cash settlements.
The next big delivery month is February and we are 3 weeks away from first day notice. Here the OI fell very noticeably from 215,152 to 203,070. Some rolled and some just quit playing. The estimated volume today at the gold comex was pretty good at 196,924. The confirmed volume yesterday was 165,683 contracts.
The total silver comex OI fell by 1781 contracts from 106,526 to 104,745. We have witnessed that the silver OI has been in this narrow range between 104,000-106,000 for the past month. I would say we are also in strong hands tonight. The front options expiry month of January saw its OI fall from 93 to 57 for a loss of 36 contracts. We had 82 delivery notices yesterday so we again gained 46 contracts or 230,000 oz of additional silver standing and lost nothing to cash settlements. The next big delivery month for silver is March and here the OI fell by less than 1,000 contracts to rest tonight at 56,872. The estimated volume was not bad at 42,308 contracts. The confirmed volume yesterday was quite weak at 33,979.
Inventory Movements and Delivery Notices for Gold: Jan 10 2012:
Gold | Ounces |
Withdrawals from Dealers Inventory in oz | 199 (Brinks) |
Withdrawals from Customer Inventory in oz | 500 (JPM) |
Deposits to the Dealer Inventory in oz | nil |
Deposits to the Customer Inventory, in oz | nil |
No of oz served (contracts) today | 1 (1000) |
No of oz to be served (notices) | 15 (1500) |
Total monthly oz gold served (contracts) so far this month | 1001 (100,100) |
Total accumulative withdrawal of gold from the Dealers inventory this month | 4297 |
Total accumulative withdrawal of gold from the Customer inventory this month | 160,889 |
Considering the fact that we have a huge number of delivery notices to fulfill we are witnessing very little activity inside the gold vaults.
We had no gold deposit to any dealer, however he did have 199 oz of gold leave the dealer Brinks.
We had no customer deposit.
A customer at JPMorgan had another of those perfectly round 500.00 oz of gold withdrawal.
We had an adjustment of 98 oz whereby a customer leased a gold brick to a dealer.
The registered gold rests tonight at 2.527 million oz or 78.6 tonnes of gold
The CME notified us that we had only one delivery notice filed for 100 oz. The total number of delivery notices filed so far this month total 1001 for 100,100 oz of gold. To obtain what is left to be served upon, I take the OI standing (16) and subtract out today's deliveries (1) which leaves us with 15 notices or 75,000 oz.
Thus the total number of gold oz standing in this delivery month is as follows:
100,100 (oz served) + 1500 oz (to be served) = 101,600 oz or 3.16 tonnes.
If we had the last 3 months (December's delivery month and the two non delivery months) we have a total of
73.84 tonnes of gold delivery notices filed compared to a registered or dealer inventory of 78.6 tonnes or 93.94% of available registered gold.
And now for silver
the chart: January 10 2012:
Month of January now commences:
Silver Ounces Withdrawals from Dealers Inventory nil Withdrawals fromCustomer Inventory 1,984 (HSBC) Deposits to theDealer Inventory nil Deposits to the Customer Inventory 1,777,720 (HSBC,Brinks,Scotia) No of oz served (contracts) 42 (210,000) No of oz to be served (notices) 15 (75,000) Total monthly oz silver served (contracts) 548 (2,740,000) Total accumulative withdrawal of silver from the Dealersinventory this month 268,115 Total accumulative withdrawal of silver from the Customer inventory this month 1,489,566
the chart: January 10 2012:
Month of January now commences:
| Silver | Ounces |
| Withdrawals from Dealers Inventory | nil |
| Withdrawals fromCustomer Inventory | 1,984 (HSBC) |
| Deposits to theDealer Inventory | nil |
| Deposits to the Customer Inventory | 1,777,720 (HSBC,Brinks,Scotia) |
| No of oz served (contracts) | 42 (210,000) |
| No of oz to be served (notices) | 15 (75,000) |
| Total monthly oz silver served (contracts) | 548 (2,740,000) |
| Total accumulative withdrawal of silver from the Dealersinventory this month | 268,115 |
| Total accumulative withdrawal of silver from the Customer inventory this month | 1,489,566 |
Again we witness a huge influx of silver into the registered comex vaults.
The dealer saw no silver deposit nor any silver withdrawal.
The customer had the following deposit:
1. 536,888 oz into Brinks
2. 610,758 oz into HSBC
3. 630,074 oz into Scotia
total customer deposit; 1,777,720 oz
We had only one withdrawal:
1. From HSBC 1984 oz.
we had one adjustment whereby 14,885 oz was leased from a customer to the dealer.
The registered silver rests tonight at 35.49 million oz.;
The total of all silver is a very high 35.49 million oz.
The CME reported that we had 42 notices filed for 210,000 oz. The total number of notices filed
so far this month total 548 for 2,740,000 oz. To obtain what is left to be filed, I take the OI standing for the January contract (57) and subtract out today's delivery notices (42) which leaves us with 15 notices left to be filed upon or 75,000 oz.
Thus the total number of silver oz standing in this non delivery month is as follows:
2,740,000 oz (served) + 75,000 oz ( to be served) = 2,815,000 oz.
the number of silver oz standing is increasing as the month progresses to its conclusion.
end/
Here is Ted Butler's theory that it is possible that the decline in inventory at the SLV is going into the comex:
(courtesy Ted Butler/Ed Steer)
"Changes in the visible stocks of silver have garnered attention this week...and over the past month or so. COMEX silver warehouse stocks have surged higher while there have been some notable withdrawals from the big silver ETF, SLV. Whether there is a direct connection for silver moving from the SLV to the COMEX warehouses is hard to say, but I suppose it’s possible. As I indicated recently, there are always many possibilities for why silver would come into or out from the COMEX warehouses and it is usually near impossible to know for sure. I also wrote recently that it would not surprise me to see COMEX silver inventories rise by 10 or 20 million ounces and we are now more than half way to the upper level of that range. Even if the COMEX silver inflow is not directly related to the decline in SLV holdings, my main point is that any increase in COMEX totals should not automatically be interpreted as representing a surplus and being bearish on pr ice. That’s because there are so many possible explanations."
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.
Jan 10:2012:
Total Gold in Trust
Tonnes:1,254.57
Ounces:40,335,690.64
Value US$:65,997,485,839.05
Jan 9.2012
TOTAL GOLD IN TRUST
Tonnes:1,254.57
Ounces:40,335,690.64
Value US$:65,110,821,936.85
Jan 7.2011:
TOTAL GOLD IN TRUST
Tonnes:1,254.57
Ounces:40,335,690.64
Value US$:65,173,461,623.03
We lost zero oz of gold again from the GLD. It is very strange that for the past several days we saw gold whacked in price and yet no gold left. A week ago Friday we saw gold rise and yet inventory remained constant. Tuesday a big gain and again no gold enters its vault. Wednesday, another big rise in gold and still no gold enters. Thursday, another rise and still no gold enters the GLD vaults.Friday last, we saw gold hit for $3.30 and still no gold enters or leaves the GLD. Yesterday, another hit for 8 dollars and still no gold enters or leaves. Today, gold rises by $24.00 and still not an ounce of gold leaves the GLD nor any addition to its vaults.
Sprott and Central Fund of Canada.
The two ETF's that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.There is now evidence that the GLD and SLV are paper settling on the comex.
Thus a default at either of the LBMA, or Comex will trigger a catastrophic event.
Jan 10:2012:
Total Gold in Trust
Tonnes:1,254.57
Ounces:40,335,690.64
Value US$:65,997,485,839.05
Jan 9.2012
TOTAL GOLD IN TRUST
Tonnes:1,254.57
Ounces:40,335,690.64
Value US$:65,110,821,936.85
Jan 7.2011:
TOTAL GOLD IN TRUST
Tonnes:1,254.57
Ounces:40,335,690.64
Value US$:65,173,461,623.03
We lost zero oz of gold again from the GLD. It is very strange that for the past several days we saw gold whacked in price and yet no gold left. A week ago Friday we saw gold rise and yet inventory remained constant. Tuesday a big gain and again no gold enters its vault. Wednesday, another big rise in gold and still no gold enters. Thursday, another rise and still no gold enters the GLD vaults.Friday last, we saw gold hit for $3.30 and still no gold enters or leaves the GLD. Yesterday, another hit for 8 dollars and still no gold enters or leaves. Today, gold rises by $24.00 and still not an ounce of gold leaves the GLD nor any addition to its vaults.
Sprott and Central Fund of Canada.
The two ETF's that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.
There is now evidence that the GLD and SLV are paper settling on the comex.
Thus a default at either of the LBMA, or Comex will trigger a catastrophic event.
Jan 10:2012:
Total Gold in Trust
Tonnes:1,254.57
Ounces:40,335,690.64
Value US$:65,997,485,839.05
Jan 9.2012
TOTAL GOLD IN TRUST
Tonnes:1,254.57
Ounces:40,335,690.64
Value US$:65,110,821,936.85
Jan 7.2011:
TOTAL GOLD IN TRUST
Tonnes:1,254.57
Ounces:40,335,690.64
Value US$:65,173,461,623.03
We lost zero oz of gold again from the GLD. It is very strange that for the past several days we saw gold whacked in price and yet no gold left. A week ago Friday we saw gold rise and yet inventory remained constant. Tuesday a big gain and again no gold enters its vault. Wednesday, another big rise in gold and still no gold enters. Thursday, another rise and still no gold enters the GLD vaults.
Friday last, we saw gold hit for $3.30 and still no gold enters or leaves the GLD. Yesterday, another hit for 8 dollars and still no gold enters or leaves. Today, gold rises by $24.00 and still not an ounce of gold leaves the GLD nor any addition to its vaults.
And now for silver Jan 10 2012:
Ounces of Silver in Trust 305,970,641.100 Tonnes of Silver in Trust 
9,516.75
Jan 9.2011:
Ounces of Silver in Trust 305,970,641.100 Tonnes of Silver in Trust 9,516.75
Jan 7.2011:
Ounces of Silver in Trust 305,970,641.100 Tonnes of Silver in Trust 9,516.75
we neither gained nor lost any silver today in the SLV.
end
And now for silver Jan 10 2012:
Ounces of Silver in Trust 305,970,641.100 Tonnes of Silver in Trust 9,516.75
Jan 9.2011:
Ounces of Silver in Trust 305,970,641.100 Tonnes of Silver in Trust 9,516.75
Jan 7.2011:
Ounces of Silver in Trust 305,970,641.100 Tonnes of Silver in Trust 9,516.75
we neither gained nor lost any silver today in the SLV.
end
And now for silver Jan 10 2012:
| Ounces of Silver in Trust | 305,970,641.100 |
| Tonnes of Silver in Trust | 9,516.75 |
Jan 9.2011:
| Ounces of Silver in Trust | 305,970,641.100 |
| Tonnes of Silver in Trust | 9,516.75 |
Jan 7.2011:
| Ounces of Silver in Trust | 305,970,641.100 |
| Tonnes of Silver in Trust | 9,516.75 |
we neither gained nor lost any silver today in the SLV.
end
And now for our premiums to NAV for the funds I follow:
1. Central Fund of Canada: traded to a positive 2.7 percent to NAV in usa funds and a positive 2.8% to NAV for Cdn funds. ( Jan 10 2012.).2. Sprott silver fund (PSLV): Premium to NAV rose big time to 30.34% to NAV Jan 10 2012:
3. Sprott gold fund (PHYS): premium to NAV fell to a 5.66% positive to NAV Jan 10. 2012).
.
just take a look at the premium in silver...30.34%.
and take a closer look at the premium in gold...5.66%
physical metal is starting to distance itself from paper.The bankers are loathe to attack the Sprott funds. They are still shorting Central fund of Canada. Eric is still on the prowl looking for his silver.
end.
Ted Butler on the silver manipulation:
Three Elements of Manipulation
| January 9, 2012 - 8:25am
This is an excerpt from the Weekly Review for subscribers of January 7 -Finally, Commissioner Bart Chilton of the CFTC gave an interview this week with Jim Puplava that should interest you. http://www.financialsense.com/financial-sense-newshour/guest-expert/2012/01/06/bart-chilton/concentrated-positions-have-the-ability-to-manipulate-marketsA number of subscribers asked me if I would comment on what Commissioner Chilton had to say. In commenting, I can’t help but try to be as objective as possible. For the record, I commend Chilton for the role he has taken on the important issues, like position limits, concentration and in addressing allegations of manipulation in silver. He is the only commissioner to have done so. I believe there would be no ongoing silver investigation were it not for him. I think he is one of the good guys and I started writing to him about these issues in 2007http://www.investmentrarities.com/ted_butler_comentary/11-13-07.htmlI agree with most of what Commissioner Chilton had to say, particularly about concentration and position limits and manipulation. I’m glad the interview was mostly about potential manipulation in the silver market. I’m going to skip over all the things I agree with Chilton on and confine my remarks to where I disagree with him. Agreement can be boring. Even though the disagreements are few, I believe they go to the heart of the matter.Chilton pointed out that it is difficult to prove manipulation in a court of law. He indicated that there are three elements necessary to prove manipulation – the intent to manipulate, the ability to manipulate and the success in the manipulation. I accept his legal definition. Where I respectfully disagree with him is in the degree of difficulty in establishing all three elements in the silver manipulation. Let’s go through the three elements.Let’s forget for a moment that silver has been under investigation by the CFTC’s Enforcement Division for almost three and a half years and that countless civil lawsuits have been filed against JPMorgan for allegations of silver manipulation in 2008. Let’s just focus on the last year, when silver experienced two separate 35% price declines in a matter of days. Such a decline in a world commodity for no observable supply/demand reason is unprecedented and I would say impossible in a free market. Yet it happened twice in silver within months.As I have written recently, as a result of the second silver price takedown in September, a tight-knit group of commercials traders bought the equivalent of 165 million ounces in net COMEX futures contracts on the price decline. This is equal to 22% of the world’s annual 740 million oz silver mine production. These same traders came close to buying the same amount in the big May silver price decline as well. This is an extraordinary amount of silver futures, much larger than any manipulative long position attributed to the Hunt Bros. in 1980. It is not possible to buy such a large amount of silver by accident. It had to be intentional. There is the element of intent that Commissioner Chilton speaks of. The next element necessary to prove manipulation is the ability to manipulate by a concentrated position or otherwise (collusion among different traders). It would seem that the ability to manipulate is also self-evident, as it has been done on more than one occasion in silver. This also ties into Commissioner Chilton’s third element, namely, success being brought about by intent and the ability to manipulate. It couldn’t have been more successful for the COMEX commercial crooks than the results they achieved (at great cost to innocent investors and traders). I think the problem that Commissioner Chilton and the agency are having is that they have convinced themselves they need proof by wire-taps and emails and other incriminating documentation (like actual confessions) before they can prove manipulation in silver. But the COMEX commercial crooks are not likely to accommodate them. The Commission has something better than that already in hand, namely, the very data that I rely on in analyzing the market. The Commission should stop wishing and waiting for evidence to drop out of the sky and just study the COT and Bank Participation statistics that they produce on a regular basis. Because it appears so easy for the Commission to prove a silver manipulation on the basis of the three elements outlined by Commissioner Chilton, my guess is that there is something else holding the agency back from ending this scam. They just don’t want to end it. Perhaps there is a political motive or the knowledge that JPMorgan and the CME may be too big to sue. It’s hard to see how the three elements can’t be proved by the public data. This is all very troubling. Every federal agency and department has a specific public mission. For example, the Federal Aviation Administration’s mission is to ensure aviation safety. Having come off the safest decade in aviation history, it would appear the FAA is achieving its primary mission. The Department of Defense would appear to be meeting its primary mission of defending the country from foreign military attack. I’m sure the Food & Drug Administration would quickly deal with an outbreak of tampered drugs harmful to public safety. Try as I might, I don’t see the CFTC as coming close to meeting its primary mission of protecting the public and our markets from fraud, abuse and manipulation. Manipulation is the most serious market crime possible. There have been enough credible allegations of manipulation in silver, based upon data from the Commission itself, that the agency appears involved in a never ending silver investigation. But the investigation is never resolved. The critical point is that if there is a silver manipulation (as I and many believe), then it is an active crime in progress. It would be as if commercial passenger jets were dropping out of the sky every other day and the FAA refused to comment. Or if the US was invaded militarily and the Department of Defense went on vacation. Or if citizens were dying from tainted aspirin and the FDA couldn’t be bothered. That would be completely unacceptable and require immediate remedy of the strongest kind. Because preventing manipulation is the CFTC’s number one mission, credible allegations of an active manipulation, particularly one in which the Commission has initiated a formal investigation, must be resolved immediately. The Commission must either terminate such a manipulation or explain why there is no manipulation forthwith. This business of explaining why it’s so difficult to prove manipulation is unacceptable, especially when all the elements of manipulation are present in the public record. When the stock market experienced its infamous flash crash in May 2010, all the regulators, including the CFTC, rushed to make sure it would never happen again. That’s good. What’s not good is that silver has experienced a continuous and more severe series of flash crashes all along and the same CFTC hasn’t lifted a finger to intervene. The laws against manipulation apply to all markets, not just to those randomly selected and deemed by the agency to be important. The rule of law applies to all. That includes silver investors who have been savaged by the COMEX commercial crooks. The CFTC has many important matters to deal with in Dodd-Frank and in helping to sort out the MF Global mess. But nothing comes closer in importance than resolving allegations of an active manipulation in silver, as this is truly a crime in progress. I call on the Commission to immediately end the silver manipulation or explain why there is no manipulation. So should you. Ted Butler January 7, 2012
Let us see some of the bigger stories today that will shape the price of gold and silver.
Bob Janjuah for Nomura securities, who is generally bearish, issued his first statement of the new year.Pay special attention to what he states on the deteriorating conditions within the Eurozone:
(courtesy zero hedge)
And now for our premiums to NAV for the funds I follow:
1. Central Fund of Canada: traded to a positive 2.7 percent to NAV in usa funds and a positive 2.8% to NAV for Cdn funds. ( Jan 10 2012.).2. Sprott silver fund (PSLV): Premium to NAV rose big time to 30.34% to NAV Jan 10 2012:
3. Sprott gold fund (PHYS): premium to NAV fell to a 5.66% positive to NAV Jan 10. 2012).
.
just take a look at the premium in silver...30.34%.
and take a closer look at the premium in gold...5.66%
physical metal is starting to distance itself from paper.The bankers are loathe to attack the Sprott funds. They are still shorting Central fund of Canada. Eric is still on the prowl looking for his silver.
end.
Ted Butler on the silver manipulation:
Three Elements of Manipulation
| January 9, 2012 - 8:25am
This is an excerpt from the Weekly Review for subscribers of January 7 -Finally, Commissioner Bart Chilton of the CFTC gave an interview this week with Jim Puplava that should interest you. http://www.financialsense.com/financial-sense-newshour/guest-expert/2012/01/06/bart-chilton/concentrated-positions-have-the-ability-to-manipulate-marketsA number of subscribers asked me if I would comment on what Commissioner Chilton had to say. In commenting, I can’t help but try to be as objective as possible. For the record, I commend Chilton for the role he has taken on the important issues, like position limits, concentration and in addressing allegations of manipulation in silver. He is the only commissioner to have done so. I believe there would be no ongoing silver investigation were it not for him. I think he is one of the good guys and I started writing to him about these issues in 2007http://www.investmentrarities.com/ted_butler_comentary/11-13-07.htmlI agree with most of what Commissioner Chilton had to say, particularly about concentration and position limits and manipulation. I’m glad the interview was mostly about potential manipulation in the silver market. I’m going to skip over all the things I agree with Chilton on and confine my remarks to where I disagree with him. Agreement can be boring. Even though the disagreements are few, I believe they go to the heart of the matter.Chilton pointed out that it is difficult to prove manipulation in a court of law. He indicated that there are three elements necessary to prove manipulation – the intent to manipulate, the ability to manipulate and the success in the manipulation. I accept his legal definition. Where I respectfully disagree with him is in the degree of difficulty in establishing all three elements in the silver manipulation. Let’s go through the three elements.Let’s forget for a moment that silver has been under investigation by the CFTC’s Enforcement Division for almost three and a half years and that countless civil lawsuits have been filed against JPMorgan for allegations of silver manipulation in 2008. Let’s just focus on the last year, when silver experienced two separate 35% price declines in a matter of days. Such a decline in a world commodity for no observable supply/demand reason is unprecedented and I would say impossible in a free market. Yet it happened twice in silver within months.As I have written recently, as a result of the second silver price takedown in September, a tight-knit group of commercials traders bought the equivalent of 165 million ounces in net COMEX futures contracts on the price decline. This is equal to 22% of the world’s annual 740 million oz silver mine production. These same traders came close to buying the same amount in the big May silver price decline as well. This is an extraordinary amount of silver futures, much larger than any manipulative long position attributed to the Hunt Bros. in 1980. It is not possible to buy such a large amount of silver by accident. It had to be intentional. There is the element of intent that Commissioner Chilton speaks of. The next element necessary to prove manipulation is the ability to manipulate by a concentrated position or otherwise (collusion among different traders). It would seem that the ability to manipulate is also self-evident, as it has been done on more than one occasion in silver. This also ties into Commissioner Chilton’s third element, namely, success being brought about by intent and the ability to manipulate. It couldn’t have been more successful for the COMEX commercial crooks than the results they achieved (at great cost to innocent investors and traders). I think the problem that Commissioner Chilton and the agency are having is that they have convinced themselves they need proof by wire-taps and emails and other incriminating documentation (like actual confessions) before they can prove manipulation in silver. But the COMEX commercial crooks are not likely to accommodate them. The Commission has something better than that already in hand, namely, the very data that I rely on in analyzing the market. The Commission should stop wishing and waiting for evidence to drop out of the sky and just study the COT and Bank Participation statistics that they produce on a regular basis. Because it appears so easy for the Commission to prove a silver manipulation on the basis of the three elements outlined by Commissioner Chilton, my guess is that there is something else holding the agency back from ending this scam. They just don’t want to end it. Perhaps there is a political motive or the knowledge that JPMorgan and the CME may be too big to sue. It’s hard to see how the three elements can’t be proved by the public data. This is all very troubling. Every federal agency and department has a specific public mission. For example, the Federal Aviation Administration’s mission is to ensure aviation safety. Having come off the safest decade in aviation history, it would appear the FAA is achieving its primary mission. The Department of Defense would appear to be meeting its primary mission of defending the country from foreign military attack. I’m sure the Food & Drug Administration would quickly deal with an outbreak of tampered drugs harmful to public safety. Try as I might, I don’t see the CFTC as coming close to meeting its primary mission of protecting the public and our markets from fraud, abuse and manipulation. Manipulation is the most serious market crime possible. There have been enough credible allegations of manipulation in silver, based upon data from the Commission itself, that the agency appears involved in a never ending silver investigation. But the investigation is never resolved. The critical point is that if there is a silver manipulation (as I and many believe), then it is an active crime in progress. It would be as if commercial passenger jets were dropping out of the sky every other day and the FAA refused to comment. Or if the US was invaded militarily and the Department of Defense went on vacation. Or if citizens were dying from tainted aspirin and the FDA couldn’t be bothered. That would be completely unacceptable and require immediate remedy of the strongest kind. Because preventing manipulation is the CFTC’s number one mission, credible allegations of an active manipulation, particularly one in which the Commission has initiated a formal investigation, must be resolved immediately. The Commission must either terminate such a manipulation or explain why there is no manipulation forthwith. This business of explaining why it’s so difficult to prove manipulation is unacceptable, especially when all the elements of manipulation are present in the public record. When the stock market experienced its infamous flash crash in May 2010, all the regulators, including the CFTC, rushed to make sure it would never happen again. That’s good. What’s not good is that silver has experienced a continuous and more severe series of flash crashes all along and the same CFTC hasn’t lifted a finger to intervene. The laws against manipulation apply to all markets, not just to those randomly selected and deemed by the agency to be important. The rule of law applies to all. That includes silver investors who have been savaged by the COMEX commercial crooks. The CFTC has many important matters to deal with in Dodd-Frank and in helping to sort out the MF Global mess. But nothing comes closer in importance than resolving allegations of an active manipulation in silver, as this is truly a crime in progress. I call on the Commission to immediately end the silver manipulation or explain why there is no manipulation. So should you. Ted Butler January 7, 2012
Let us see some of the bigger stories today that will shape the price of gold and silver.
Bob Janjuah for Nomura securities, who is generally bearish, issued his first statement of the new year.Pay special attention to what he states on the deteriorating conditions within the Eurozone:
(courtesy zero hedge)
And now for our premiums to NAV for the funds I follow:
1. Central Fund of Canada: traded to a positive 2.7 percent to NAV in usa funds and a positive 2.8% to NAV for Cdn funds. ( Jan 10 2012.).
2. Sprott silver fund (PSLV): Premium to NAV rose big time to 30.34% to NAV Jan 10 2012:
3. Sprott gold fund (PHYS): premium to NAV fell to a 5.66% positive to NAV Jan 10. 2012).
3. Sprott gold fund (PHYS): premium to NAV fell to a 5.66% positive to NAV Jan 10. 2012).
.
just take a look at the premium in silver...30.34%.
and take a closer look at the premium in gold...5.66%
physical metal is starting to distance itself from paper.The bankers are loathe to attack the Sprott funds.
They are still shorting Central fund of Canada. Eric is still on the prowl looking for his silver.
end.
Ted Butler on the silver manipulation:
Three Elements of Manipulation
|
January 9, 2012 - 8:25am
This is an excerpt from the Weekly Review for subscribers of January 7 -
Finally, Commissioner Bart Chilton of the CFTC gave an interview this week with Jim Puplava that should interest you. http://www.financialsense.com/financial-sense-newshour/guest-expert/2012/01/06/bart-chilton/concentrated-positions-have-the-ability-to-manipulate-markets
A number of subscribers asked me if I would comment on what Commissioner Chilton had to say. In commenting, I can’t help but try to be as objective as possible. For the record, I commend Chilton for the role he has taken on the important issues, like position limits, concentration and in addressing allegations of manipulation in silver. He is the only commissioner to have done so. I believe there would be no ongoing silver investigation were it not for him. I think he is one of the good guys and I started writing to him about these issues in 2007http://www.investmentrarities.com/ted_butler_comentary/11-13-07.html
I agree with most of what Commissioner Chilton had to say, particularly about concentration and position limits and manipulation. I’m glad the interview was mostly about potential manipulation in the silver market. I’m going to skip over all the things I agree with Chilton on and confine my remarks to where I disagree with him. Agreement can be boring. Even though the disagreements are few, I believe they go to the heart of the matter.
Chilton pointed out that it is difficult to prove manipulation in a court of law. He indicated that there are three elements necessary to prove manipulation – the intent to manipulate, the ability to manipulate and the success in the manipulation. I accept his legal definition. Where I respectfully disagree with him is in the degree of difficulty in establishing all three elements in the silver manipulation. Let’s go through the three elements.
Let’s forget for a moment that silver has been under investigation by the CFTC’s Enforcement Division for almost three and a half years and that countless civil lawsuits have been filed against JPMorgan for allegations of silver manipulation in 2008. Let’s just focus on the last year, when silver experienced two separate 35% price declines in a matter of days. Such a decline in a world commodity for no observable supply/demand reason is unprecedented and I would say impossible in a free market. Yet it happened twice in silver within months.
As I have written recently, as a result of the second silver price takedown in September, a tight-knit group of commercials traders bought the equivalent of 165 million ounces in net COMEX futures contracts on the price decline. This is equal to 22% of the world’s annual 740 million oz silver mine production. These same traders came close to buying the same amount in the big May silver price decline as well. This is an extraordinary amount of silver futures, much larger than any manipulative long position attributed to the Hunt Bros. in 1980. It is not possible to buy such a large amount of silver by accident. It had to be intentional. There is the element of intent that Commissioner Chilton speaks of.
The next element necessary to prove manipulation is the ability to manipulate by a concentrated position or otherwise (collusion among different traders). It would seem that the ability to manipulate is also self-evident, as it has been done on more than one occasion in silver. This also ties into Commissioner Chilton’s third element, namely, success being brought about by intent and the ability to manipulate. It couldn’t have been more successful for the COMEX commercial crooks than the results they achieved (at great cost to innocent investors and traders).
I think the problem that Commissioner Chilton and the agency are having is that they have convinced themselves they need proof by wire-taps and emails and other incriminating documentation (like actual confessions) before they can prove manipulation in silver. But the COMEX commercial crooks are not likely to accommodate them. The Commission has something better than that already in hand, namely, the very data that I rely on in analyzing the market. The Commission should stop wishing and waiting for evidence to drop out of the sky and just study the COT and Bank Participation statistics that they produce on a regular basis.
Because it appears so easy for the Commission to prove a silver manipulation on the basis of the three elements outlined by Commissioner Chilton, my guess is that there is something else holding the agency back from ending this scam. They just don’t want to end it. Perhaps there is a political motive or the knowledge that JPMorgan and the CME may be too big to sue. It’s hard to see how the three elements can’t be proved by the public data.
This is all very troubling. Every federal agency and department has a specific public mission. For example, the Federal Aviation Administration’s mission is to ensure aviation safety. Having come off the safest decade in aviation history, it would appear the FAA is achieving its primary mission. The Department of Defense would appear to be meeting its primary mission of defending the country from foreign military attack. I’m sure the Food & Drug Administration would quickly deal with an outbreak of tampered drugs harmful to public safety.
Try as I might, I don’t see the CFTC as coming close to meeting its primary mission of protecting the public and our markets from fraud, abuse and manipulation. Manipulation is the most serious market crime possible. There have been enough credible allegations of manipulation in silver, based upon data from the Commission itself, that the agency appears involved in a never ending silver investigation. But the investigation is never resolved. The critical point is that if there is a silver manipulation (as I and many believe), then it is an active crime in progress. It would be as if commercial passenger jets were dropping out of the sky every other day and the FAA refused to comment. Or if the US was invaded militarily and the Department of Defense went on vacation. Or if citizens were dying from tainted aspirin and the FDA couldn’t be bothered. That would be completely unacceptable and require immediate remedy of the strongest kind.
Because preventing manipulation is the CFTC’s number one mission, credible allegations of an active manipulation, particularly one in which the Commission has initiated a formal investigation, must be resolved immediately. The Commission must either terminate such a manipulation or explain why there is no manipulation forthwith. This business of explaining why it’s so difficult to prove manipulation is unacceptable, especially when all the elements of manipulation are present in the public record.
When the stock market experienced its infamous flash crash in May 2010, all the regulators, including the CFTC, rushed to make sure it would never happen again. That’s good. What’s not good is that silver has experienced a continuous and more severe series of flash crashes all along and the same CFTC hasn’t lifted a finger to intervene. The laws against manipulation apply to all markets, not just to those randomly selected and deemed by the agency to be important. The rule of law applies to all. That includes silver investors who have been savaged by the COMEX commercial crooks.
The CFTC has many important matters to deal with in Dodd-Frank and in helping to sort out the MF Global mess. But nothing comes closer in importance than resolving allegations of an active manipulation in silver, as this is truly a crime in progress. I call on the Commission to immediately end the silver manipulation or explain why there is no manipulation. So should you.
Ted Butler
January 7, 2012
Let us see some of the bigger stories today that will shape the price of gold and silver.
Bob Janjuah for Nomura securities, who is generally bearish, issued his first statement of the new year.
Pay special attention to what he states on the deteriorating conditions within the Eurozone:
(courtesy zero hedge)
Bob Janjuah Ushers In The New Year: "Here We Go Again!"
- Bank of England
- Bob Janjuah
- BOE
- Bond
- Central Banks
- default
- ETC
- European Central Bank
- Eurozone
- Fail
- Greece
- International Monetary Fund
- Price Action
- recovery
- Unemployment
- United Kingdom
- Volatility
Bob Janjuah, despite never leaving, is once again back:
It has been a while since I last wrote. At one point I thought I was having a period of "writer?s block?, but over the Christmas break I had a "Eureka? moment. I don?t have "writer?s block?. Instead I realised that I was trying to write something "different? at a point in time where actually the key issues are, pretty much, the same as they have been for some years now. As such, I have abandoned this attempt and instead present my latest thoughts, even if you have "heard all this? before:
1 - Key Issues:
Unchanged from last year/the last few years: Too much debt, insufficient "real? selfsustaining growth, and the same old failed thinking from (Western) policymakers, which over the last 20 + years has created the biggest debt disaster in modern history. Western policy makers, at the national and G20/IMF level, still seem to have no response to solvency problems other than printing more money, loading on more debt, and hoping that "time? sorts it all out. In other words, the extension of ponzi schemes which are being used to cover up our lack of competitiveness and real productivity growth through the use of money debasement and leverage.
As ever, the bigger this effort gets the harder the fall once the inevitable collapse happens. Of course NOTHING moves in a straight line, so investors must understand and accept that even in a secular period of weak growth and bearish market moves we can still have occasional risk squeezes and short periods of "OK? data within a broader declining/weak trend. What is clear is that the financial crisis that began in 07/08 heralded the end of a policy era, and instead the collective fear amongst policymakers and their desire to protect and preserve self-interests has led to (Western) policymakers embracing some ugly version of pseudo capitalism that is best labelled neo-communism.
Turning very briefly to some specific issues:
- The worst of the eurozone mess is still ahead of us. This is in spite of the attempts by the ECB and national eurozone central banks to rule out QE with one hand, yet at the same time engaging in the worst form of policy behaviour and de facto QE with the other and with a hard Greece default likely this quarter.
- Yet again, and certainly for the 3rd year in a row, we are being told that the US is over the worst and that a sustainable recovery is here. We are expected to believe yet another 'decoupling' fairytale, only this time around apparently neither Asia/EM nor the eurozone really matter to the US economy. We are highly suspect of this line of thinking! Mini business cycles are to be fully expected - as Kevin and I have said for years. This is not the same as a real and sustainable recovery. The US economy bulls very happily downplay the "post-Japan tragedy? very overdue pop in the global supply chain, the dangerous running down of savings by the US consumer, and the inventory build-up. I have high conviction that the US economy will be seen as a risk, rather than as a saviour, within the next quarter or two. Furthermore the potential fiscal time bomb in the US will be a big issue to consider this year, especially as the temporary payroll tax and extended unemployment benefit deals reach maturity in the next few months, and also more generally as we get closer to the US elections. A complete breakdown in politics in 2012 in Washington around the deficit and debt issues may not be certain, but the risks are, to me, worryingly high.
- Investors should fully expect Fed QE3 in Q2 2012, BoE QE3 around the same time and maybe even explicit ECB QE in/around Q2 as well. I am pretty sure all of this will be bullish for risk assets, for about two to three months (the half life of QE is pretty clear I think), but in the real economy and even in markets, this latest (and last?) monetary shot will soon thereafter be seen to fail (see below), with deeply negative consequences, likely before Q3 is over;
- Growth in the Asia/EM block is and will continue to moderate, if left to its own devices. Not great, but not disastrous. Unfortunately, when Western policymakers deliver QE in Q2, then much like we saw post the Fed's QE2, the USD will weaken and global commodity prices (especially food and energy) will spike as per last year. As a result the US/Western consumer will again see his/her disposable income crushed, which in turn will crush overall growth (especially in the US, as per Q1 and Q2 2012), and Asia/EM will be forced into another monetary tightening cycle to combat inflation (as per late 2010/2011), which in turn will risk a much harder landing in Asia//EM than would normally need to be the case. This in turn will further damage global growth.
2 - Key Investment Outlook:
The secular outlook remains unchanged - for 2012, it is again Risk-Off, long core high quality bonds and strong balance sheets/short risk and weak balance sheets. This worked tremendously well in 2011, and should work at least as well in 2012. In 2012 balance sheet strength and reliable cash flows will be far more important than reaching for growth and maximisation of earnings. As per 2011, I really like Australian government bonds as well as the AUD. Ditto non-eurozone Scandinavian government bonds and their currencies.
The tactical outlook is always more difficult to nail, but as of now:
- I think we are very close (days) from a top of some sorts in equities and the risk-on trade. Depending on price action, I reckon the time to get short risk is around/by January 13th - as a proxy guide the S&P should be within 3% to 5% of current levels (1277 S&P).
- I think Q1 is going to be extremely bearish for risk, for equities, for the periphery, for the euro, for credit spreads, etc. The real pain may only be seen in March, when I expect the hard Greece default to happen. In Q1 I expect the S&P will trade down to/below 1000, and core US, UK and German government Bond yields will be closer to 1.5% than 2%.
- For the balance of H1, based on my US, UK and eurozone Q2 QE call, I would expect to see risk assets recovery hard (especially commodities);
- At some point in early Q3 a huge opportunity will present itself to those who want to get short risk, as by the Summer I fully expect the (coordinated) Western QE to result in global real economy failure. However, for now, I think H1 will contain significant volatility, so I will worry about H2 nearer the time. Suffice it to say that my S&P 800 target for 2012 still holds.
- In terms of where my outlook herein for markets may prove to be wrong, I think most likely that it will be by being too bearish (risk) too soon, by around a quarter or so, driven by a failure on my part to recognise not just the willingness but also ability of policymakers to "kick the can? down the road for a little bit longer. Let?s see!
Apologies to all for not telling you anything new or very different. One day, when we collectively abandon the neo-communist experiment in the West that relies on more debt and printing money in order to maintain the status quo, then I will hopefully have a different and far more positive view of the years ahead. I look forward to this time. But for now, expect more of the same as in 2011. And I know it?s a few weeks early, but as I am unlikely to write anything for at least a month, Kung Hei Fat Choi. The year of the dragon will soon be upon us.
Over in Europe, we had minor auctions in the stronger northern Euro block. The big developments however
occurred at the ECB which has now soaked up the entire 210 billion LTRO plus additional dollars
as loaning between these banks are now zero. Each bank perceives the other banks as insolvent. The Italian 10 year bond yield remained constant at 7.15% which of course is very dangerous as it would be difficult for Italy to continue funding at higher yields. The Unicredit situation is also weighing heavily on the banks. A failure here will set of contagion like effect you have never seen before.
(courtesy zero hedge)
Euro Meanders In Overnight Session As Record ECB Deposit Soak Up Entire LTRO
- Bond
- Borrowing Costs
- China
- European Central Bank
- Fail
- Fitch
- France
- Greece
- International Monetary Fund
- Italy
- Netherlands
- NFIB
- ratings
- White House
- Wholesale Inventories
There was not much to note in the overnight session, where aside from artificial market-boosting developments out of China (noted here) which have carried over into a risk-on mood for the US market, however briefly, Europe has been virtually unchanged following two quiet auctions by Austria and the Netherlands. Austria sold a total of €660m of 4% 2016 bonds, and €600m of 3.65% 2022 bond. Avg. yield 2016 bond 2.213% vs 1.96% in the previous auction, in other words the shorter borrowing costs roses, and the longer ones fell. Holland sold a total of €3.105b of 0.75% 2015 bonds; the target was up to €3.5b. with an average yield 0.853%. End result EURUSD is virtually unchanged for the day at 1.2770 as of this writing despite some serious short covering earlier (as expected), while the Italian BTPs remain unch at 7.15%. What is probably more disturbing and is to be expected, is that now virtually all the free cash from the December 21 LTRO (all €210 billion of it) and then some has been allocated to the ECB, where the Deposit Facility usage rose by nearly €20 billion overnight to a new record of €482 billion, €217 billion more than the December 21 notional. The question that should be asked is just what do banks know that lemming long-only investors don't. Hint - ask UniCredit.
end.
Unicredit bank rose today to $2.40 euros per share from 2.35 Euros. The plunging shares are acting like a deterrent to other banks to raise capital to shore up their tier one asset base:
(courtesy Bloomberg)
UniCredit Plunge Seen Deterring Other European Banks From Stock Sales
By Elisa Martinuzzi and Sonia Sirletti - Jan 10, 2012 5:30 AM ET
45 percent drop in UniCredit SpA (UCG) shares over four days after Italy’s biggest bank announced a rights offer may deter European lenders from asking investors for help to meet requirements that they replenish capital.
“Every bank will be trying to avoid doing a rights issue even more now,” said Peter Braendle, a fund manager at Swisscanto Asset Management in Zurich. “The decline is really amazing. It doesn’t send a good signal.”
Shares of Milan-based UniCredit closed at a 23-year low of 2.286 euros yesterday after posting an unprecedented decline since the lender set the terms of its 7.5 billion-euro ($9.6 billion) stock sale on Jan. 4. Today, the shares rose as much as 7.8 percent and were 5.2 percent higher at 2.40 euros at 11:27 a.m. in Milan.
The bank is seeking buyers for new shares at a discounted price of 1.943 euros apiece. The offering, which runs through Jan. 27, was guaranteed by a group of 26 underwriters, led by Bank of America Corp. and Mediobanca SpA (MB), which have agreed to buy any leftover stock.
UniCredit decided to sell new shares after the European Banking Authority gave the region’s lenders until June 30 to raise 115 billion euros to increase core Tier 1 capital to 9 percent as a buffer against the sovereign-debt crisis. The EBA set a Jan. 20 deadline for banks to submit money-raising plans to supervisors. Those that fail to raise enough capital on their own will have to turn to their governments, or, as a last resort, the European Financial Stability Facility.
‘Huge Challenge’
The rights to buy new stock rallied 52 percent today after sliding 65 percent yesterday, their first day of trading.
Banks are selling profitable businesses and curbing lending to improve capital ratios and avoid government bailouts, even after the European Central Bank provided unprecedented three- year loans to avert a credit crunch. Italian banks borrowed 210 billion euros from the central bank in December from 153.2 billion euros in November, Bank of Italy data shows.
Italian banks are struggling to attract foreign capital as debt contagion threatens to engulf the nation and drive the economy deeper into contraction. The lenders’ biggest investors, Italy’s banking foundations, are strapped for cash.
“The sharp fall in UniCredit’s stock underscores the huge challenge for Italian and euro-zone banks to raise fresh money from shareholders,” said Nicholas Spiro, managing director of Spiro Sovereign Strategy in London. “As long as Italy’s problems loom large in the minds of investors, it will be extremely difficult for other Italian lenders to raise equity.”
Santander, Commerzbank
UniCredit was told last month by the EBA to raise 8 billion euros in additional capital, the lender said. Banca Monte dei Paschi di Siena SpA, Italy’s third-largest bank, said it has a capital shortfall of 3.3 billion euros. The shares have dropped 24 percent since Jan. 4, valuing the bank at 2.27 billion euros. Unione di Banche Italiane ScpA said it needs 1.4 billion euros, and Banco Popolare SC (BP) requires 2.7 billion euros to comply with the EBA’s target.
The credit rating of Italy, along with that of France, Germany and a dozen other euro-zone countries, was put under review for a possible downgrade by Standard & Poor’s on Dec. 5.
Spain’s Banco Santander SA (SAN), which had a capital shortfall of 15.4 billion euros, the largest under the latest round of EBA stress tests, avoided tapping shareholders in part by exiting profitable operations outside its home market. Santander said yesterday it had plugged the capital gap by selling assets and swapping preferred shares for stock.
Commerzbank Outlook
Commerzbank AG (CBK), Germany’s second-largest bank, needs 5.3 billion euros in capital, the most among the six German lenders deemed to have a deficit. The Frankfurt-based firm is fighting to avoid a second taxpayer-funded rescue by lowering costs, disposing of assets and retaining earnings. “Capital raising” is listed as an option, according to slides published late yesterday for a presentation that Eric Strutz, the bank’s chief financial officer, was scheduled to hold in New York.
Monte Paschi said in December that the EBA’s target is “not appropriate” for retail banks. The Siena, Italy-based lender is considering measures including the conversion of hybrid bonds to core capital and changes in its accounting methods to meet the threshold. The firm is weighing the sale of assets and securitization transactions for as much as 1.8 billion euros, La Stampa newspaper reported Jan. 3.
For some banks, selling stock is complicated by a lack of funds among their biggest shareholders.
88 Foundations
“Monte Paschi cannot ask for money from existing investors, because they haven’t got any,” said Fabrizio Spagna, chairman of Axia Financial Research. “In such a situation, it would be hard to find banks available to underwrite the offer. If the situation of Italian banks should worsen, I expect and hope that Italy intervenes to save the banks.”
Fondazione Monte dei Paschi di Siena, which owns 48.4 percent of the bank, had to renegotiate an agreement with creditors last month after the Monte Paschi shares it used as collateral for the loan plunged in value.
Italy’s 88 regional foundations, which oversee 49 billion euros of assets, half of which is invested in banks, have backed banks’ capital-raising efforts over the past four years.
Italian lenders had called for more time to meet the mid- 2012 deadline for raising the money. The EBA capital measures are inappropriate in their “method, merit and timing,” Giovanni Sabatini, director general of Italy’s banking association, said Dec. 6.
Book Value
Banks should look to the private, rather than the public, sector to bolster reserves by cutting bonuses, retaining earnings or issuing shares, the EBA said in a Dec. 9 statement. Regulators won’t allow firms to cut lending to companies to meet the 9 percent capital requirement, the agency said.
“Only the narrowest of actions” to run down loans and other assets will be allowed, the EBA said.
Capital requirements for banks are set as ratios of their reserves compared with assets weighted according to their riskiness. Regulators can make an exception if a bank is transferring part of its loan book to another company, so that overall lending to the real economy isn’t reduced, the EBA said.
UniCredit, which holds about 39 billion euros of Italian sovereign debt, will need to convince investors that its current valuation of 0.18 times tangible book value doesn’t reflect the bank’s potential. The stock slide since Jan. 3 was caused by “technical factors” and other issues not directly related to the bank itself, UniCredit Chief Executive Officer Federico Ghizzoni told employees yesterday.
UBS AG analysts today upgraded their rating on UniCredit to “buy,” citing the stock’s slide and the bank’s measures to reduce the profitability gap with other lenders, according to a note sent to clients today. UBS is among the group of banks that have guaranteed the offer.
“With every quarter that the economy worsens, it reflects on banks’ balance sheets,” said Joao Soares of Bain & Co., who has advised Italian, Irish and Portuguese banks. “We’re in a spiral. As things stand right now the situation is more likely to deteriorate than improve. It would be very beneficial to banks to get more time to raise capital.”
To contact the reporters on this story: Sonia Sirletti in Milan at ssirletti@bloomberg.net; Elisa Martinuzzi in Milan at emartinuzzi@bloomberg.net
To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net
end
The Italian 10 yr bond yield: (down 4 basis points)
Snapshot
| SUMMARY | ONE-YEAR CHART INTERACTIVE CHART | ||
|---|---|---|---|
| Value | 7.12 | ||
| Change | -0.040 (-0.560%) | ||
| Open | 7.16 | ||
| High | 7.17 | ||
| Low | 7.11 | ||
end.
The London's Financial times reports massive lending of euros to Italian banks from the ECB in December:
(courtesy London Financial times)
Italian banks borrow record €210B: The FT reported that ECB lending to Italian banks reached €210B at the end of December, up from €153.2B earlier and the highest on record. The paper added that Italy accounted for 24.3% of total ECB liquidity at the end of December, compared with less than 10% as recently as last June.
(London's financial times)
New collateral rules help French banks: The FT said that French banks have been among the biggest beneficiaries of the looser collateral rules at the ECB. The paper noted that ECB has quietly increased the list of collateral it accepts by more than a third. It said that almost all the 10,599 debt instruments it added were from banks, with more than 8,000 of them from French banks. According to the paper, far from running out of collateral, French banks now appear to have an almost unlimited credit line at the ECB.
Today we heard from Fitch which uttered this warning:
Italy is Biggest Risk to Euro, Fitch
By ART PATNAUDE And EMESE BARTHA
LONDON—Fitch Ratings said Tuesday that among all the countries in the euro zone, Italy poses the greatest risk to the currency bloc, as the lack of a region-wide plan to prevent the crisis from spreading has been coupled with the country's large debt burden and high borrowing costs.
The factors are a major reason why Italy's credit rating is likely to be downgraded by the end of January, said David Riley, head of global sovereign ratings at Fitch, speaking at a conference in London.
Italy is planning to sell €440 billion ($561.67 billion) in government bonds and Treasury bills in 2012. This is a "daunting" task given its current costs of borrowing, Mr. Riley said.
Italy's 10-year government bond was yielding 7.13% Tuesday, a spread over the German bund of about 5.25 percentage points, according to data provider Tradeweb.
Even an Italian government-bond yield of four percentage points over the German bund, coupled with zero real gross domestic product growth, could prove "explosive" for the country, Mr. Riley said. A spread of 1.50 percentage points and growth of 1.5% would leave the country solvent, Fitch said.
However, the current market levels aren't just a potential danger for Italy, but for the euro-zone as a whole, Mr. Riley said. The lack of an agreement from European leaders on how to implement a "credible firewall" to prevent contagion puts the region at risk.
This is "one of the reasons why we have Italy on watch negative, it's one of the reasons why when we conclude that review, there is a significant chance [Italy's] rating will fall," Mr. Riley said.
German and French leaders met Monday to discuss details of a fiscal pact on closer economic policy, although reaction in the markets was muted as key questions were seen to remain unanswered.
Fitch is set to conclude its review of six euro-zone countries that are on rating-watch negative by the end of January, Fitch said. France, which has a negative outlook, won't face a downgrade in 2012, it said.
Fitch rates Italy at A-plus and France at triple-A.
Mr. Riley also noted that a Greek exit from the euro remains a "potential option."
Greece can still plunge the euro zone into a deeper financial crisis, he said, adding that a private-sector contribution of 60% on Greek government bonds wouldn't lead to a sharp reduction in the country's debt burden. Fitch rates Greece at triple-C.
Elsewhere in euro-zone government bond markets Tuesday, Austria, which has the highest yields among the euro zone's triple-A-rated issuers, paid higher funding costs to sell four-year bonds at auction than at the previous auction in November. This reflected investors' unease over the country's exposure to Hungary, which started informal talks with the International Monetary Fund Monday over a loan package. Yields on Austria's 10-year bond, however, remained below levels of the previous auction conducted in July.
Austria's Federal Financing Agency sold €1.2 billion ($1.53 billion) of the 4% September 2016 and 3.65% April 2022 bonds, and allocated a further €120 million to the state. Demand for both implied a two-fold coverage of the amount sold, slightly below previous levels.
In a separate auction, the Netherlands sold €3.105 billion, closer to the upper end of the €2.5 billion-€3.5 billion target range, of a new three-year government bond at an average yield of 0.853%.
end
Now the Italian mafia is the "largest bank" in Italy:
(courtesy zero hedge)
The Mafia Is Now "Italy's Largest Bank"
Whoever says there are no winners in the European banking crisis apparently has never woken up with a horse's head in their bed. According to a new report by Italian anti-crime group SOS Impresa, as reported by Reuters, "Organised crime has tightened its grip on the Italian economy during the economic crisis, making the Mafia the country's biggest "bank" and squeezing the life out of thousands of small firms, according to a report on Tuesday." You mean kinda like Intesa credit cards demanding a 39.95% APR: we knew we had seen that "life squeezing" thing before somewhere. Of course at least with the mafia you know that it will never rely on fake Libor fixings to pretend it is alive, or need an ECB bailout the next day due to being overly invested in US subprime mortgages (unless of course Goldman's rolodex stretches even further than we thought possible). It sure does, however, bring a new definition to the term "shadow banking"... or is that the old one, where nobody cared about repos, money markets, overnight drafts, and hyperrehypothecation and all the complexity could be explained away with a baseball bat. Yet the conclusion, no matter how defined, still strikes us as hilarious: '"With 65 billion euros in liquidity, the Mafia is Italy's number one bank," said a statement from the group, which was set up in Palermo a decade ago to oppose extortion rackets against small business." Because as we pointed out yesterday, it was companies which were responsible for bailing out banks in Europe. How long then until La Cosa Nostra provides a lifeline to UniCredit, but only if half the BOD is replaced with guys in tracksuits and buzzcuts? Actually, not too long we would wager...
From Reuters:
Organised crime groups like the Sicilian Cosa Nostra, the Naples Camorra or the Calabrian 'Ndrangheta have long had a stranglehold on the Italian economy, generating profits equivalent to about 7 percent of national output.
Extortionate lending had become an increasingly sophisticated and lucrative source of income, alongside drug trafficking, arms smuggling, prostitution, gambling and racketeering, the report said.
"The classic neighbourhood or street loan shark is on the way out, giving way to organised loan-sharking that is well connected with professional circles and operates with the connivance of high-level professionals," the report said.
It estimated about 200,000 businesses were tied to extortionate lenders and tens of thousands of jobs had been lost as a result.
Extortion - new vs old school:
Old style gangsters handing out cash in bars and pool halls had been replaced by apparently respectable bankers, lawyers or notaries, the report said.
"This is extortion with a clean face," it added. "Through their professions, they know the mechanisms of the legal credit market and they often know the financial position of their victims perfectly."
Small businesses, who have struggled to get hold of credit during the economic slowdown, may have been increasingly tempted to turn to the mafia, said the report.
Typical victims of extortionate lending were middle-aged shopkeepers and small businessmen who would struggle to find a new job and who were ready to try anything to avoid bankruptcy, it added.
"They are usually people in traditional retail sectors like food, greengrocers, clothes or shoe shops, florists or furniture shops. These are the categories which, more than any other, are paying the price of the (economic) crisis," it said.
Next up: a surge in prostitution, drugs, xenophobia, child labor, and all those great things that Italy thought it had managed to get away from, and which supposedly were no longer the mark of modern "civilized" society. Guess what - they never reallyleft, they were merely on layaway. Only now, the country will be faked-ruled by insolvent banks with Frankfurt HQs, and completely ruled by the mob. And in keeping with the deja vu, how long we wonder until Italy just says no to the currency pseudo-democratic political system and reverts to the one last seen making an appearance some 70 years earlier?
Just take a look at what is happening to prices in Iran. It looks like hyperinflation is about to show its ugly head on this nation:
(courtesy zero hedge)
Hyperinflation Comes To Iran
Hyperinflation has struck again, this time at ground zero of the most sensitive geopolitical conflict in ages: Iran. EA WorldView reports:
An EA source reports that a relative in Tehran ordered a washing machine for 400,000 Toman (about $240) this week. When he went to the shop the next day, he was told that --- amidst the currency crisis and rising import costs --- the price was now 800,000 Toman (about $480). Another EA source says that the price of an item of software for a laptop computer has tripled from 50,000 Toman to 150,000 Toman within days.
And so the opportunity cost for the Ahmedinejad regime to preserve its status quo gradually grinds to zero, as the entire economy implodes (courtesy of a few strategic financially isolating decisions) making further escalation virtually inevitable, in a 100% replica of the US-planned Japanese escalation that led to the Pearl Harbor attack, and gave America the green light to enter the war.
Summary of McCollum's 1940 memo.
end.
Here is what happened to the Iranian rial this past week:
(courtesy Reuters)
Rial down 20% since last week's intervention: Reuters noted that the rial has slid 20% against the dollar in the last week despite central bank intervention. It added that Iranians concerned about the economy said on Tuesday that attempts to send text messages using the word "dollar" appear to be blocked. The article noted that the inflationary pressure from the currency slide comes a year after President Mahmoud Ahmadinejad's government slashed subsidies on food and fuel. It added that the head of the Iran-China Joint Chamber of Commerce, Asadollah Asgaroladi, estimated that annual inflation stood at 40% this month.
end
The Wall Street Journal early this morning issued this report stating that the Greek bailout is in jeopardy because many of the private holders are loathe to take a big haircut on their debt:
(courtesy Wall Street Journal)
Greek Bailout in Peril
France, Germany Press Athens, Bondholders to Reduce Debt
http://online.wsj.com/article/SB10001424052970204124204577150331716910136.html
BY WILLIAM BOSTON, BERND RADOWITZ AND ANDREA THOMAS
BERLIN—Germany and France on Monday pressed Greece and its bondholders to agree on a reduction of Athens's debt burden, warning that Greece's bailout loans from the euro zone and the International Monetary Fund are on hold until a deal is reached with private investors.
German Chancellor Angela Merkel and French President Nicolas Sarkozy met in Berlin on Monday to discuss the euro zone's plans to tackle the debt crisis on the bloc's periphery, and to flesh out their proposals for closer coordination of economic and budget policies among the euro's 17 member countries. But their talks were overshadowed by concerns ...
(see Wall Street Journal for full story).
and this zero hedge story on the same subject where hedge funds are holding Europe ransom on the Greek debt that they hold:
(courtesy zero hedge)
Hedge Funds Now Hold Future Of Europe Hostage
Payback sure is a bitch. After being demonized for everything from the tiniest tick down in the EURUSD, to blowing out spreads in CDS, to plunging stocks across the insolvent continent, hedge funds, long falsely prosecuted for everything, even stuff they patently did not do, are about to have their day in the sun, precisely in the manner we predicted back in June of last year when we posted: "Greek Bailout #2 Is Dead On Arrival:A Few Good Hedge Funds May Have Called The ECB's Bluff, And Hold The Future Of The EUR Hostage." Back then we wrote: "we may suddenly find ourselves in the biggest "activist" investor drama, in which voluntary restructuring "hold out" hedge funds will settle for Cheapest to Delivery or else demand a trillion pounds of flesh from the ECB in order to keep the eurozone afloat. In other words, the drama is about to get very, very real. And, most ironically, a tiny David is about to flip the scales on the mammoth Goliath of the ECB and hold the entire European experiment hostage..." Sure enough, we were right yet again. Ekathimerini writes: "Hedge funds are taking on the powerful International Monetary Fund over its plan to slash Greece's towering debt burden as time runs out on the talks that could sway the future of Europe's single currency. The funds have built up such a powerful positions in Greek bonds that they could derail Europe's tactic of getting banks and other bondholders to share the burden of reducing the country's debt on a voluntary basis." Oh no, they will let it happen, but first Europe will pay, with real interest, for every single incident of hedge fund bashing and abuse over the past 2 years. We estimate the final tally, to US taxpayer mind you, will be about $20 billion, to remove the "nuisance factor" of hold out hedge funds. Congratulations Europe - you have proven to be a continent full of idiot "leaders" once again.
More:
Bondholders need to give up some 100 billion euros ($130 billion) of their investment in the planned bond swap, drawn up in October, but many hedge funds plan to stay out of it.
They either prefer letting the country go under, which would trigger the credit insurance they have bought, or hope to get paid out in full if enough others sign up. That puts them in direct conflict with the IMF, which wants to force Greece's cost of financing down to an affordable level.
"The play is purely 'they'll be forced to pay me'. Greece will want to avoid a wider default. so if it managed to restructure 80 percent of the deal and pay the rest that's still better,» said Gabriel Sterne at securities firm Exotix.
Without a deal, the IMF, the European Union and the European Central Bank -- the so-called troika of official lenders -- will not pay out a second bail-out package Greece needs to survive.
EU Economic and Monetary Affairs Commissioner Olli Rehn said on Tuesday that negotiators were «about to finalize shortly». But time is running out.
Not complying with hedge fund hostage demands? Why the end of the Eurozone of course.
Without the money, the country is likely to default around March 20, when a 14.5 billion euro bond falls due. A deal needs to come well before that, because the paperwork alone takes at least six weeks.
On Monday German Chancellor Angela Merkel and French President Nicolas Sarkozy, the euro zone's two leading powers, insisted private-sector bondholders must share in reducing Greece's debt burden.
But the hedge funds are resisting, unlike European banks holding Greek bonds, who have been pressured to agree by politicians.
Banks represented by the Institute of International Finance (IIF) agreed last year to write off the notional value of their Greek bondholdings by 50 percent, a deal designed to reduce Greece's debt ratio to 120 percent of its Gross Domestic Product by 2020.
But they have been unable to agree on the fine print of the refinancing - the coupon, maturity and the credit guarantees. These will determine the bonds' Net Present Value (NPV), and thereby the actual hit the banks need to take.
There are 206 billion euros of Greek government bonds in private sector hands -- banks, institutional investors, and hedge funds -- and it is likely that hedge funds have been building up their positions in the past months.
Naturally, every passing day makes the HF negotiation position stronger, and that of the European banking cabal, and of the fat idiots in Brussels, that much weaker
The bet is that other creditors will sign up to a voluntary deal, and that Greece will pay out in full the hedge funds who do not to avoid a default and trigger pay-out of Credit Default Swaps, a form of credit protection.
"Time is on your side, since investors, until now, have received full repayment on Greek debt obligations,» said Kristian Flyvholm at asset manager Jyske Invest.
Sterne, whose firm Exotix specializes in illiquid bond investing and counts hedge funds among its clients, said the bet had already worked for some funds. Greece paid out smaller issues maturing in December and January.
The alternative? Europe lets the chips fall where they may.
Europe is increasingly likely to force investors to take a cut on their Greek bondholdings if they do not voluntarily sign up to the deal, Reuters reported in November.
Also, Greece could change its laws, which for the largest part do not contain the so-called Collective Action Clauses (CAC) that force dissenting minorities into line when new conditions are imposed on outstanding bonds.
It is unclear how large hedge fund holdings of Greek debt are. About 20 to 25 percent of Greece's creditors were unidentified, and half of these could be hedge funds, one source close to the creditors told Reuters.
Whatever the scale of the hedge fund threat, the proportion of creditors seen likely to sign up for their haircut has slipped. The hopes are now 60 percent can be convinced by the end of the month, the same source said, far less than the 90 percent take-up the IIF was targeting in June.
At that low a level, it is unclear whether the troika of international lenders will consider the uptake big enough to warrant a pay-out of the second bail-out package.
IIF Managing Director Charles Dallara is due in Athens later this week for troika negotiations, and technical staff from the IMF are expected in the Greek capital from January 16.
The IMF itself seemed to throw doubt on the debt swap in an internal memo cited by German magazine Der Spiegel on Saturday.
Ironically, the more we think about it, the more it seems likely the UBS was not posturing when it predicted a Greek CDS trigger to take place in March. Because this may be precisely what will happen.
In that case, step as far away from all moving ventilator blades and fans as possible. Because it is about to get real.
end
Here, Dow Jones reports that Greece is pushing for more concessions as private bond holders are being asked for a 60% haircut. If they use collective clauses that will certainly cause a credit event which is what they are desperately trying to avoid:
Greece pushing for more concessions: Dow Jones, which also discussed the pressure on Greek bondholders to accept a 60% haircut, noted that Greece is trying push creditors to accept more concessions under the current 50% haircut agreement. The article pointed out that Athens is seriously considering using collective-action clauses (CACs) that would stop holdouts from blocking the deal if the participation rate reaches 75%. A troika source noted that the Greek government will retroactively introduce CACs to its existing bonds, though the person added that they would likely only be used as leverage in negotiations.
Debt swap talks progressing, but no deal yet: Reuters cited comments from Greek Deputy Finance Minister Filippos Sachinidis, who told Real FM radio that "There are developments in the talks, we are at a satisfactory point. There is no final text". He added that Greece wants a voluntary agreement in which the private sector will participate and which will ensure the sustainability of the country's debt load.
Again we are witnessing wealthy Greeks withdraw their cash from Greek banks and seek shelter in other foreign jurisdictions. No doubt these citizens are buying gold.
(courtesy zero hedge)
Greece Bank Run Shows No Sign Of Stopping: Deposit Outflows Continue In November
The year is not over yet, and already Greece's banks have lost €36.7 billion of their deposit base in 2011, and a whopping €64.6 billion since the beginning of 2010, which is down from €233 billion to €173 billion in under two years. In October another €3.5 billion was withdrawn from Greek banks and likely either redeposited somewhere deep in the heart of Switzerland, or converted to various inert metals and buried somewhere in the back yard. The good news: the outflow is just over half of October's record €6.8 billion. The bad news: at this rate of outflows, Greek banks will have zero deposits in around 4 years. Which at the end of the day is all the matters, because while the Troica can keep funding capital shortfalls indefinitely, all faith in the country's banks has now been lost and Greece is officially a zombie economy. The fact that the country's deficit as a % of GDP is about to be re-revised even higher is no longer even meaningful: the Greek economy and its banking sectors are now officially dead. We merely feel bad for anyone who still has cash in banks as, just like gold in 1930s America, any residual cash may soon be "sequestered" for national security purposes. After all there are bankers who need record bonuses, and Military sales from Europe and the US that have to proceed using what will likely soon be "commingled" deposit cash.
end
On this side of the pond, Fed President of the San Francisco Reserve Bank, John Williams for the second day in a row pounded the table for additional QEIII:
(courtesy Dow Jones newswires)
DJ Fed's Williams: Fed Should Use All Tools To Help The Economy
Tue Jan 10 10:30:08 2012 EST
NEW YORK (Dow Jones)--While the Federal Reserve should do all it can to help the economy to recover, what it does next depends on how events play out, a key central-bank official said Tuesday."It's vital that the Fed use all the tools at its disposal to achieve its mandated employment and price-stability goals," Federal Reserve Bank of San Francisco President John Williams said.
That said, "the policy actions the Fed takes from here on out will depend on how economic conditions develop," the official observed. "The Fed will do its level best to achieve the goals of maximum employment and stable prices," he said.
Williams's comments came from a speech he was to give in Vancouver, Wash. before a local event. The policy maker will rotate into a voting slot at the Federal Open Market Committee gathering to be held later this month.
He spoke as a wide range of economic data have shown a better state of overall economic activity. And yet, despite the rising optimism, many still expect that the Fed will provide more stimulus to the economy, most likely in the form of balance-sheet-expanding purchases of bonds. Williams has in the past been a strong advocate for action.
In his remarks, the official was cautiously upbeat for the new year, and he doesn't expect inflation to become a problem.
"My forecast calls for [gross domestic product] to rise nearly two-and-a-half percent this year and about three percent in 2013," an improvement from what he believes will be a 1.75% growth rate in 2011. On the prices front, the official said "I expect inflation to come in under one-and-a-half percent this year and next, down from about two-and-a-half percent in 2011."
The "moderate" pace of growth Williams said he expects isn't good enough to bring immediate relief on the jobs front. From the current unemployment rate of 8.5%, the jobless rate will likely "remain over 8% well into next year and still be around 7% at the end of 2014," the official said.
The central banker said uncertainty is a real force holding back growth, and Europe's government-debt crisis is a specter haunting the outlook. He noted his bank's economists "calculate that uncertainty has reduced consumer and business spending so much that it has potentially added a full percentage point to the unemployment rate."
Williams said Europe's leaders are working to resolve their financial problems and "they may be able to muddle through" and arrive at a resolution. "But, if they fail, all bets are off," the policy maker warned.
The bank chief said credit conditions for large parts of the economy remain troubled. He also said budget cutbacks at both the national and local levels in the U.S. are "damping the economy, not boosting it," which increases the need for the Fed to take action to offset the headwind.
While housing prices do not look to fall further, Williams said the central role housing plays in the current economic troubles points to the need for a broader policy response: "I'd like to see federal programs that support the housing market."
end
But look what the new President of the Kansas City Fed, George, stated today. Esther George replaced hawk Thomas Hoenig:
(courtesy MarketWatch)
Fed may have pushed risk-taking too far: George
WASHINGTON (MarketWatch) - The Federal Reserve may have pushed investors too far in search of returns, leading to a "mispricing of risk," said Esther George, the new president of the Kansas City Federal Reserve Bank, on Tuesday. In October, George replaced Thomas Hoenig as president of the Kansas City Fed. Hoenig was famous for opposing the central banks' current zero-interest rate policy stance. In her first speech as a Fed president, George did not say explicitly that she was against the Fed's policy stance. But she highlighted one of Hoenig's chief concerns: the soaring value of farmland that may or may not be a bubble. There may be other sectors experiencing similar conditions that may not be obvious for years, George said. While the Fed's current policy settings are designed to encourage risk-taking and stimulate much needed demand, on the other hand, the mispricing of risk can lead to misallocation of capital and weaker bank balance sheets, she noted. This is a "very delicate balance" for the Fed, George said. George is not a voting member of the Fed's interest-rate setting body this year.
-END-
(Dave from Denver/The Golden Truth)
TUESDAY, JANUARY 10, 2012
Stand-by For Massive Housing Subsidies
What you have is a picture of broken economic systems that are operating on life support," Mr. Prince says. "We're in a secular leveraging that will probably take 15 to 20 years to work through and we're just four years in. - Robert Prince, co-chief investment office, Bridgewater and AssociatesI mentioned yesterday that the head of the NY Fed, Bill Dudley, was going around lobbying for fiscal and monetary "stimulus" for the housing market. Really in effect what this "stimulus" would end up being is a bailout for the Fed's member banks who still have massive exposure a housing market that gets worse by the day. Already Freddie Mac is letting deadbeat borrowers go a year without making mortgage payments: LINK People, the cost of this is coming from YOUR pocketbook.
The problem is actually pretty simple: too many homes were built during the last decade in response to the demand created for homes, which was enabled by the money printing and lending policies spear-headed by Alan Greenspan and later proliferated by Ben Bernanke. The political leaders signed off on this whole-heartedly because it meant re-election votes. But the housing bubbly frenzy created a huge illusion of demand that was never there. Even worse, it put millions of people into homes for which they over-payed and could not afford to keep.
So now we have a system that has substantially more homes in supply than there is rational economic demand. This economic balance will extend for at least a decade, probably longer. This housing stock was financed with debt, a large part of which remains on bank balance sheets and trillions of which are guaranteed by you, the Taxpayer, in the form of $7 trillion in agency debt issued by agencies that are now owned outright by the Government. The golden truth is that we are looking at the slow-motion collapse of the housing market in terms of true valuation and the massive defaulting on probably close 1/3 of the $7 trillion in Taxpayer funded agency debt and $100's of billions of private-label debt sitting on bank balance sheets or guaranteed by bank servicing companies. This is a serious disaster that was made worse by the monetary and fiscal programs enacted by Bernanke and Obama in 2009.
Now the same people who are responsible for creating the massive problem in the first place are now pushing hard to have "new" policies enacted that will help bailout the big banks who are sitting on $100's of billions of real estate and housing exposure, rendering them de facto insolvent even before figuring in other bad assets like foreign Government and bank exposure and off-balance-sheet OTC derivatives.
Six days ago Bernanke sent a letter to Chairman of the House Financial Services Committee in which he stated that the housing market was a roadblock to economic recovery and in which he offered proposals for "stimulating" the housing market. His primary solutions would entail mortgage principal reductions and Government subsidized refinancing programs. Of course Bernanke's fancy paper does not identify at all the cost of implementing his proposals. I would suggest that looking at the amount of delinquent and defaulted but not foreclosed debt at banks and the mortgage agencies would suggest that ultimate cost of Bernanke's proposals would fall somewhere between $500 billion and one trillion. We know from "trial balloons" that have been floated that the Fed has been looking at implementing a $500 billion mortgage purchase program. Now it's Obama's turn to throw hard taxpayer money into the bank bailout kitty.
Here's a copy of Bernanke's letter: LINK
Let's face the golden truth. The housing market is part of a larger overall debt accumulation problem in this country that will take decades to fix, just like it took 6 decades to create the problem. If the free market is allowed to do what it does, the problem will fix itself over time and the ultimate consequences and destruction to our system will ultimately be a lot less severe than if the Federal Reserve and Government takes action to further push the problem into the future.
The strategy being floated by the policy makers will do nothing more than place a lot more of the burden of this problem on those left in the middle class who pay taxes, unfairly subsidize those who made poor borrowing decisions and, worst of all, bail out the banks and bankers who created the problem.
Jim Sinclair did an interview today in which he said, in reference to the move in gold and silver overnight, that "something is taking place [behind the scenes] that is not obvious." He referenced "quiet" buying going on in the metals. I have noticed a lot of volume coming into the extremely undervalued junior mining shares yesterday and today. But, I would suggest that part of what is taking place is that the savvy investors who understand the difference between gold and printed fiat currency are moving printed fiat currency into the metals ahead of what is going to be big year for QE and fiscal spending, deficits and Federal debt accumulation.
(courtesy zero hedge)
Fannie CEO Michael Williams To Quit After 2 Years, Pockets Millions After Receiving $60 Billion In Bail Out Cash
A few months ago we learned that outgoing Freddie CEO Ed Haldeman quit Freddie after just two years of work, pocketing over $4 million primarily to collect over $21 billion in bailout funds from the US government. Now, it is the turn of the other broke GSE: according to a just filed 8K, Fannie Mae CEO Michael Williams is also stepping down without a replacement, so obviously the decision was made in haste and is an indication that nobody at the helm of the two largest mortgageholders want to do anything with what Obama and the Chairsatan have in store for the two behemoths holdings over $6 trillion in mortgages in their books. Incidentally, according to Forbes,Williams made $4.84 million in comp last year. His claim to fame: receiving a total of $60 billion in Treasury bailout cash (net of $17.2 billion in dividend payments) - hard job that one.
On January 6, 2012, Michael J. Williams, President and Chief Executive Officer of Fannie Mae (formally, the Federal National Mortgage Association), notified the company that he will step down from his position and the company’s Board of Directors when a new President and Chief Executive Officer is appointed.
Mr. Williams has been President and Chief Executive Officer of Fannie Mae since April 2009. He previously served as Fannie Mae’s Executive Vice President and Chief Operating Officer from November 2005 to April 2009. Mr. Williams also served as Fannie Mae’s Executive Vice President for Regulatory Agreements and Restatement from February 2005 to November 2005, as President—Fannie Mae eBusiness from July 2000 to February 2005 and as Senior Vice President—e?commerce from July 1999 to July 2000. Prior to this, Mr. Williams served in various roles in the Single?Family and Corporate Information Systems divisions of Fannie Mae. Mr. Williams joined Fannie Mae in 1991. Mr. Williams has been a Fannie Mae director since April 2009.
And some more on outgoing Mr. Williams compensation, including his thoughts on whether he deserves to be paid more than Obama (no debate there).
Fannie Mae and Freddie Mac were seized by the Bush administration in late 2008 amid mounting losses from mortgages gone sour and are controlled by a government conservator, the Federal Housing Finance Agency (FHFA).
Edward DeMarco, the acting director of FHFA, in 2009 approved compensation packages allowing the top executives at each firm to receive as much as $6 million each in annual compensation.
"What is going on over at Freddie and Fannie and what is the conservator doing to make sure the taxpayers are represented?" Neugebauer asked.
The Texas Republican said business as usual is not acceptable for the so-called government sponsored enterprises because "their business got taxpayers on the hook for a lot of money."
The pair have received more than $130 billion in direct taxpayer aid since being taken over by then Treasury Secretary Henry Paulson. The Obama administration on Monday said that tally could climb to $169 billion next year before slowing shrinking as losses are paid back to Treasury coffers.
"So what we want to make sure is that they understand, and hopefully we will fire a shot here, of whose interests that they need to be most concerned about. It's not the employees or the executives over at Freddie Mac and Fannie Mae, it's the American taxpayers," Neugebauer said.
Asked after the hearing why he deserved to paid more than U.S. President Barack Obama, who earns about $400,000 annually, Williams told Reuters his salary is determined by the government.
"My compensation is determined by the board of directors of FHFA and they determine what the appropriate compensation is for the executives of the company," Williams said.
Lawmakers debated with Williams and DeMarco over whether it was "reasonable" for taxpayers to foot more than $24 million in legal bills for former chief executive Franklin Raines and two other former Fannie executives accused of accounting misdeeds.
Asked by Reuters if his own compensation was "reasonable," Williams replied: "I leave it to them (FHFA) to determine what is appropriate compensation."
The Fed gave its report today and showed that it generated a profit of 76.9 billion dollars which is predominately made up of interest on all of those mortgaged back securities or other bonds purchased by the Fed)
(courtesy Bloomberg)
Fed’s Rising Balance Sheet Generates $76.9B
By Craig Torres - Jan 10, 2012 12:00 PM ET
The Federal Reserve will pay $76.9 billion to the U.S. Treasury as part of an annual dividend it remits after covering its own expenses from interest on its ballooning bond portfolio and other gains.
Total assets on the Fed’s balance sheet stood at a near- record $2.92 trillion on Jan. 4. The central bank expanded its portfolio by purchasing $2.3 trillion in U.S. Treasury debt, mortgage-backed securities and housing agency debt to push down longer-term interest rates once its benchmark lending rate hit zero in December 2008. The Fed expanded its portfolio in two rounds of asset purchases, known as quantitative easing.
Because the Fed funds itself by emitting currency on which it pays no interest, or by paying 0.25 percent on the deposits banks keep at the Fed, the central bank enjoys positive interest income. The yield on the 10-year Treasury note was 1.97 percent at 11:27 a.m. today in New York.
The bigger the Fed’s balance sheet, the more interest income it generates. This year’s dividend to the Treasury will be the second largest after 2010’s $79.3 billion. By comparison, the Fed paid $29.1 billion to the Treasury in 2006, when total assets on its balance sheet stood at $874 billion at the end of that year. The Fed’s balance sheet rose to a record $2.928 trillion on Dec. 28.
Last year, Federal Reserve’s 12 regional banks had $83.6 billion in interest income on securities held in their portfolios. An additional $2.3 billion was earned on sales of U.S. Treasury securities; the Fed reported $152 million in gains from foreign currency and income for services of $479 million. The reserve banks paid $3.8 billion in interest expenses on deposits held at the Fed.
Operating Expenses
The Fed said the reserve banks had operating expenses of $3.4 billion last year. The Fed was also assessed $1.1 billion for the cost of new currency and the expenses of the Federal Reserve Board in Washington, which does not generate interest income because it doesn’t operate as a reserve bank. Board expenses totaled about $470 million, according to a Fed official who spoke on a conference call with reporters.
Some $242 million of the income was also used to fund the operations of the Bureau of Consumer Financial Protection and $40 million funded the Office of Financial Research, two new units created by the Dodd-Frank legislation overhauling financial regulation.
To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net.
end
This did not take long..Obama is now asking that the debt ceiling to be raised another 1.2 trillion dollars to 16.4 trillion dollars. I am not sure what Tyler Durden is stating about the debt ceiling maximum being 15.5 trillion. I always thought it was to be 16.4 trillion dollars. If anybody out there understands what the true debt ceiling is please write to me or comment.
Submitted by Tyler Durden on 01/10/2012 14:20 -0500
This did not take long..Obama is now asking that the debt ceiling to be raised another 1.2 trillion dollars to 16.4 trillion dollars. I am not sure what Tyler Durden is stating about the debt ceiling maximum being 15.5 trillion. I always thought it was to be 16.4 trillion dollars. If anybody out there understands what the true debt ceiling is please write to me or comment.
Obama To Ask For Debt Ceiling Increase In "Matter Of Days"
Not even an hour after we asked the question, The Hill gives us the answer: "The Obama administration will be asking Congress to raise the debt limit in the coming days, White House press secretary Jay Carney said on Tuesday. "I'm confident it will be executed in a matter of days, not weeks," he told reporters. The notification by the administration — which had been scheduled for last month — was delayed because Congress has been holding only pro forma sessions. The White House will be asking Congress to raise the U.S. borrowing limit by $1.2 trillion. The move would mark the third and final increase from the debt-ceiling deal reached last year by Congress." Of course, the optics of yet another debt-ceiling increase, even a preapproved one, are simply horrible during campaign season. But such is life. Here is the kicker though: the US has preapproval for $1.2 trillion in debt issuance, as per the August 2011 agreement. So far so good. The problem is that since then the US has issued $900 billion in debt! In other words, somehow the remaining buffer of just $300 billion, or a final debt ceiling of $15.5 trillion, is supposed to last the US until after the presidential election, because this topic flaring up just before Obama is due to hit the debate circuit will be reelection suicide. So our question is: how will the US, which has a gross debt issuance rate of over $100 billion per month on average, last for a year with just $300 billion in dry powder? We can't wait to hear the OMB's explanation.
Hungary finally saw the light!!!
(courtesy zero hedge)
(courtesy zero hedge)
Hungary Folds, Ready To Change Its Laws To Get European Bailout Money
If there is any one more vivid confirmation of Mayer Rothschild words "Let me issue and control a nation's money and I care not who writes the laws" then we have yet to find it. Today Hungary, which had "valiantly" defied Europe and the IMF in ignoring pressure to make its central bank more "malleable" finally folded, following a recent explosion in its bond yields, a surge in CDS to records, and a collapse in its currency. And to think how easy it is to subjugate a state to slave status in our "globalized" days without shedding one drop of blood. Reuters reports: "Hungary's government is ready to consider modifying disputed legislation if the European Commission deems it necessary, Foreign Minister Janos Martonyi told the bloc's executive and European Union partners. "We fully respect the authority of the European Commission, the guardian of the EU treaties," Martonyi wrote in a letter dated January 6 and published by his ministry on Tuesday. "We stand ready to consider changing legislation, if necessary."" As Rothschild foresaw so effectively over 200 years ago, selling out your sovereignty only takes a few pieces of (paper) silver.
More:
Hungary, which wants to secure a multibillion euro financing deal with the International Monetary Fund and the European Union, is locked in a legal dispute with the European Central Bank and Brussels over a new central bank law.
The European Commission last month asked for the law, which it worried will compromise the bank's independence, to be repealed.
Martonyi said the government was ready to conduct dialogue with anyone who raised concrete concerns.
Hungary is merely the first case study of how the annexation of non Eurozone countries will proceed shortly, once it becomes clear that anyone who is not with a failed European experiment, is against it.
end.
Here is more on the MF Global investigation:
Here is more on the MF Global investigation:
The investigation into MF Global is intensifying as federal authorities unearth new details and confront potential obstacles in their hunt for roughly $1.2 billion in customer money that disappeared from the brokerage firm.
While prosecutors and regulators have jointly conducted dozens of depositions with former and current employees, a senior official in the Chicago office of MF Global recently declined to meet with the federal authorities, people briefed on the investigation said.
That official, Edith O’Brien, a treasurer at MF Global, is considered a “person of interest” in the investigation, the people said. Federal authorities suspect that she transferred about $200 million to JPMorgan Chase in London on the eve of the bankruptcy of MF Global, money that turned out to be customer cash.
Authorities had expected to interview Ms. O’Brien last month. She instead balked at meeting voluntarily, asking first to strike a deal with criminal authorities that would excuse her from prosecution, the people said. The criminal investigation is led by the Federal Bureau of Investigation and federal prosecutors in Chicago and Manhattan.
The request by Ms. O’Brien is the first in this case, one person briefed on the investigation said. Still, such requests are common in federal investigations and it does not suggest that she violated Wall Street regulations. Ms. O’Brien has not been accused of any wrongdoing, and there is no indication that she intentionally transferred customer money to JPMorgan.
Ms. O’Brien’s lawyer, Reid H. Weingarten, did not respond to requests for comment.
The investigators are deposing employees as they search for the missing money. Some authorities are now examining whether MF Global used money from futures customers to pay securities customers who were closing accounts as the firm began to collapse, according to a person briefed on the matter.
Federal authorities also suspect that some customer money passed through MF Global’s banks, including JPMorgan Chase, and the clearinghouses that helped unwind the firm’s balance sheet, including the Depository Trust and Clearing Corporation.
While Ms. O’Brien’s testimony could prove crucial, investigators lack access to other important sources that could help unravel the mystery surrounding the missing money. The potential impediments to the case include the lack of access to certain internal documents at MF Global. The firm has withheld the e-mails and other documents from investigators on the grounds of attorney-client privilege.
Louis J. Freeh, the trustee overseeing the bankruptcy proceedings of MF Global, has not waived the legal provision, which shields records from examination by law enforcement.
The trustee’s office said it had not received any complaints from investigators, and would be “inclined to waive privilege” if it were hampering the investigation. Experts say it is common for trustees to assert attorney-client privilege in such cases to protect the interest of the company’s creditors and shareholders, whom the trustee represents.
Mr. Freeh has already agreed to share the confidential documents with a separate trustee overseeing the distribution of customer cash, James Giddens, according to a person with knowledge of the matter.
The agreement allows Mr. Giddens access to the documents that could help expedite the return of customer cash — so long as his office does not share them with law enforcement and others. The agreement continues an earlier deal reached with the firm’s general counsel, Laurie Ferber, the person said.
But federal investigators have been too busy to miss the documents, according to one of the people briefed on the inquiry. Authorities are still sorting through the mountains of paperwork already before them, the person said. Still, at least one regulator worries that any delay could stymie the federal investigation in the coming weeks.
“We don’t have time to play 20 questions regarding what’s privileged and what’s not,” said Scott O’Malia, a Republican commissioner for the Commodity Futures Trading Commission
A patchwork of federal regulators has descended on the case, with the C.F.T.C. taking the lead role. Criminal charges, however, would come from the Justice Department.
More than two months after the funds vanished from client accounts at MF Global, customers have questioned why investigators still have not retrieved all of their money. There are some signs of progress, however. The C.F.T.C., the Justice Department and the Securities and Exchange Commission have collected thousands of documents and are tracing the money.
But reclaiming the missing money may prove harder than locating it. That’s because much of it went overseas, where bankruptcy laws often conflict with those in the United States. The complication could mean much legal wrangling before determining what money belongs to whom.
The search for the missing money is separate but related to the effort to uncover who is responsible for its disappearance.
Government authorities are aiming to build a case from the bottom up, and have largely spent time focusing on lower-level employees at the firm. Jon S. Corzine, the former chief executive of MF Global and a former New Jersey governor, has not yet been interviewed. Neither has his deputy, Bradley Abelow, who was the chief operating officer at MF Global, according to a person close to the case.
Neither Mr. Corzine nor Mr. Abelow has been accused of any wrongdoing in the case.
Spokesmen for the C.F.T.C. and the F.B.I. declined to comment.
The testimony of Ms. O’Brien — a senior official at the firm — was supposed to be an important element of the investigation. Ms. O’Brien has appeared numerous times before the C.F.T.C, often testifying as an expert. Her specialty: the protection of customer money at futures firms like MF Global.
Mr. Corzine told a congressional panel last month that she had assured him on Oct. 28 that the firm was not misusing customer money in its transfer to JPMorgan. After it was discovered that customer money was missing, MF Global filed for bankruptcy on Oct. 31.
Federal authorities have reviewed internal MF Global e-mails that instructed Ms. O’Brien to transfer roughly $200 million to JPMorgan Chase to satisfy an overdrawn account, though there is no indication that she knowingly transferred customer money. MF Global’s sloppy records may have obscured the fact that staff was dipping into customer cash to cover the firm’s own needs.
It is unclear who told Ms. O’Brien to transfer the money.
Just three weeks ago, regulators were optimistic about interviewing Ms. O’Brien, who has been a central character in the saga of the missing money.
That optimism began to wane in recent days, when her lawyer approached federal prosecutors about immunity from criminal charges. It is unclear whether the Justice Department is considering Ms. O’Brien’s request for a deal.
Ms. O’Brien has deep roots in Chicago’s financial world. In the 1990s she worked at Chicago-based Mesirow Financial and in 2000 she was named controller of Web Street Securities Inc. She later found a job at Man Financial, according to a court document. In 2005, Man Financial bought the remains of Refco, which had filed for bankruptcy.
In October, Ms. O’Brien was scheduled to speak at an industry conference at the Art Institute of Chicago a panel titled “Dodd-Frank Boot Camp: Margin and Collateral.”
Susanne Craig contributed reporting.
end
Many of you have written me about an update on the Tropos Affair.
Two weeks ago, when I sent this out this Bloomberg article “China, Japan to Back Direct Trade of Currencies,” I commented on its significance, but not quite as much as came to light since bringing it to your attention.
http://www.bloomberg.com/news/
and then this today:
China and Japan are bypassing the USD in trade, the development of an ASEAN central bank led by China and the reserve status of The dollar is under full attack. I believe this will be the story of 2012. Iran's decision not to accept dollars for oil pales by comparison ... My guess is that Geithner's current visit to Japan and China will be meaningless .. Once you lose the moral high ground it is next to impossible to regain.
http://www.bloomberg.com/news/
I wrote last year that Tropos would rock the markets and we did not have to wait too long to see why.
This unresolved matter regarding Tropos was a major underlying current that influenced the agreement to directly trade currencies between China and Japan bypassing the United States Dollar currency (“USD”).
You may recall that Tropos was the intended recipient of USD$700 billion transmitted via a valid ACATS from the Bank of Taiwan, but the funds were hijacked by the Federal Reserve, and to this day, the money is still retained under the control of the Federal Reserve.
Tropos proceeded pursuant to the tenants of Maritime Law, which is the legal system by which matters relating to international currencies are adjudicated. As part of this process, Tropos had written extensively to the Bank of International Settlements (“BIS”), President Obama, various agencies in the U.S. government, as well as the G-20 countries and various global leaders detailing the behavior of the Federal Reserve. Many of these letters are posted in previous blog reports last summer.
In one of the Tropos letters, it was said: “This bold disregard for lawful transfer through the rogue actions of the steward of the reserve currency of the world is an affront to all global participants. We believe this is a watershed moment that will define the moral position of world participants in the international banking system for some time to come both amongst developing and established countries.”
Tropos went on to say “ if the Federal Reserve can so act without consequence or redress, the international banking system loses the confidence of its constituency and becomes unable to operate, effectively losing public trust in the “private scrip” issued by a given central bank. This has impact on all nations, which must currently use Federal Reserve Notes “private scrip” as the world’s reserve currency. This action by the Federal Reserve is destabilizing global trade, creating chaos and uncertainty in financial matters and requires the focused attention of leaders in the global community”.
Tropos had widely disbursed the letters to the G-20, NATO, the BRIC countries and others. Both China and Japan listened and took action. This is huge.
The fallout out of allowing this “disregard for lawful transfer” is now being played out as countries choose to bypass the USD in trade arrangements. It goes without saying that China and Japan represent a significant part of the world’s trade.
The impact of this currency arrangement between China and Japan will serve to lower the velocity of USD in circulation, since the two countries will not be using the USD. This effectively will weaken the dollar as demand for the USD shrinks. This will be felt this year.
As countries successfully trade among themselves without the USD, the status of the USD as a Reserve Currency suffers as a result. One wonders how long the Tropos Affair will go unresolved and at what cost to the status of the USD as a global Reserve Currency, before it is resolved?
Clearly, global trading nations have taken note and are making their views known by bypassing the Federal Reserve and the use of the USD. No doubt, there are more nations who will follow, especially in Asia. It is no longer just a money question; it has become a geopolitical nightmare that has far reaching consequences for the United States and the Federal Reserve and the citizens who must use the weakened USD currency.
The bottom line result from the weakening of the USD as the Reserve Currency means that gold and silver will benefit, and likely achieve new highs in this coming year as a direct result.
end.
It is time to say goodnight.
I will see you tomorrow night
Harvey
15 comments:
No comments?
I think everyone is disgusted that we live in a world where fraud thrives and honesty shunned.
Go out and do something about it. Start by voting for Ron Paul.
KS
Harvey,
I came across this article this morning. It's about the black market/underground economy/barter system. I'd appreciate your take on this economic system.
http://www.theblaze.com/stories/as-global-economy-falls-black-market-rises/
You saved the best till the last H... that is shocking!
F
PS Is there any word on how to define "swaps" ?
I find it only a bit regrettable that all this daily hard work you do is tainted by the fact that you pretend physical silver premium is 30%, using Sprott as a reference, regardless of many many other possibilities of getting the phyz as well without such a crazy premium.
Why hide this? Is it manipulation on your behalf also?
Why shouldn't I sell PSLV for the 30% premium, and buy another silver physical? Seems like I'd be ahead about 22 - 25%, instantly.....??
1qaz, explain me how you SHORT a physical fund?
I found a website that said PSLV had zero short interest in it. I tried to sell shares short on Etrade and I could not borrow ONE share to short. So it apparently is NOT possible. I personally like Silver Bullion Trust in Canada SBT.U . The premium over NAV today was 7% which is higher than usual. The trust is audited regularly. Investment Safety - Highest Security with Pure Silver Bullion being held on an unencumbered, allocated and segregated basis in bank treasury vault facilities in Canada. Physical holdings are inspected annually by Trust Officers in the company of representatives of Ernst & Young LLP
exactly: there seem to be a plethora of physical funds such as Sprott's, not paper trade, with the real stuff and the possibility of delivery.
I mean nothing is for sure but then Sprott doesn't give more guarantees than any of these other funds.
Therefore, the "30% premium on silver"...maybe we found a marketing genius able to sell the same stuff with a 30% premium, that's all...
Good morning Ladies and Gentlemen:
Gold notices for delivery today:
14 for 1400 oz of gold.
Silver notices: only 1 for 5000 oz.
we now await open interest to see what total oz of each will stand.
Harvey
There are 3 camps imo in this whole which paper investment is best debate imo:
1) you hold all physical gold/silver
#2 & #3 - I will leave aside the possibility you have physical metal in your possession
2) you hold paper shares in either paper gold - gld/phys/mnt/gtu/ or paper silver - slv/pslv/sbt/ or both paper gold/silver - CEF - or via goldmoney/bullionvault.
You at some point plan on redeeming and converting into physical gold or silver. Of course, if you hold CEF/gtu/sbt, you do no have the option of redemption into physical.
Also, can't even qualify for redemption if you don't hold the minimum shares/units/ETR's.
3) you hold either paper gold or paper silver and plan on either taking profits at some point or keeping your shares/units/ETR's. You don't have the intention of redemption b/c you believe your investment is the same as physical possession.
We'll leave out sbt/gtu/cef. These are solely paper trades.
That leaves gld/phys/mnt and slv/pslv and goldmoney/bullionvault. Presuming you qualify, you can get your metal.
The question in my mind is how many of the traders/investors out there are using gld/phys/mnt and slv/pslv to redeem and convert to metal? I would guess not many unless they're the larger larger players who mostly create/redeem gld/slv baskets.
If you look at pslv, no one is redeeming the shares for physical silver. That would cost about $450K for 10,000 oz's. That's about 30K shares in pslv. Yet no one has redeemed 10 1000 oz bars.
So all this hoopla about X or Y being backed by allocated metal and you can take delivery and thus justifies a higher premium is somewhat misleading imo. Why? B/c you can redeem from slv/pslv/gold money/bullion vault. You can get your metal. They all have allocated metal (although with goldmoney you cannot 'reserve' your silver bars in advance). But you cannot from cef/sbt/gtu and thus a higher premium to these may be justified, keeping things constant.
But pslv is different you say. What factors might an investor look at to lead them to pslv?
- tax advantages?
- 10,000 oz's is minimum vs about 49,000 oz's for slv. Goldmoney = 90,000 oz's; bullionvault = $1000
- liquidity - obviously slv is the most liquid silver vehicle out there. Goldmoney/bullionvault don't trade on markets - Buy/hold/sell and perhaps redeem.
- not sure you can hold goldmoney/bullionvault in retirement accounts...whereas you can hold slv/pslv
cont'd:
So it quickly comes down to slv/pslv imo. And pslv has its advantages - tax, if you redeem it's only about $450K today for the min 10,000 oz's and you can trade and potentially gain on the premium if you were lucky enough to get in early vs. now at 30%+ (although who knows, we might see 50% :) )
So pslv might deserve a premium. But one of the highlighted features pointed out is this ability to redeem. Cool, but no one is redeeming.
So in other words, traders/investors imo are using pslv as a trade. Of course, there could be a # of pslv investors who have been holding their shares with the intention of one day redeeming if necessary. Very possible. But they haven't yet.
Leaving out this group, and who knows their real intentions, the rest imo are/will be using pslv as a paper trade.
Which begs the question. If paper trading is the motive, pslv falls right back into the category of slv/sbt/cef/goldmoney/bullionvault. At this point, the focus then is on which provides better tax treatment/which can one hold in a retirement account/etc.
Which means why pay a premium when you can trade slv?
It is ironic imo when the gold/silver preachers are calling for the collapse of the monetary system and hyperinflation and we all move into these paper investments. True, it is each investors decision to hold paper or the actual physical metal. But guess what - no one is redeeming pslv. The smart ones are redeeming from slv and perhaps goldmoney/bullionvault.
And this isn't to focus on pslv. It just so happens pslv turns out to be the focus of this comparison. But it seems to me, generally, those that trade/invest in paper silver investment vehicles are doing so for the purpose of profits. And this is at odds with discussions of rigged markets/systematic concerns/hyperinflation/etc. when at the same time, the common theme seems to be go ahead and get into these paper investment vehicles that you either can't redeem from or if you can, no one seems to be redeeming. Looking at phys, 2011 alone there have been redemptions of about 290K units. Perhaps we'll start seeing that from pslv in 2012.
I think the PSLV argument could be simplified. More people believe it holds real silver with no counter party risk. They want their savings in something real and are willing to pay a premium for the peace of mind it is real, safe, and available. I know of an individual that had all his wealth buried in his back yard. He did not want to pay for storage and did not trust anyone with his metals. A mud slide washed his backyard into some other neighborhood. He never got his metal back. Don't put all your eggs in ANY basket.
"More people believe it holds real silver with no counter party risk. They want their savings in something real and are willing to pay a premium for the peace of mind it is real, safe, and available."
I understand that logic. But to be fair, currency dollars are the ultimate counter party risk.
Here's what I don't get.
a) you don't hold enough pslv shares to even qualify for redemption - so if you want safety for metal available, you can't get it.
b) you hold enough pslv shares to qualify for redemption. You hold pslv shares in case you want to take possession.
i) if you hold a retirement account, you cannot take possession. Actually, you might be able to with the result your retirement plan is no longer a retirement plan and you get the tax hit.
ii) if you hold pslv shares in a non-registered account, you can take possession.
It would be interesting to know what % of pslv unitholders fall into category (b)(ii).
My guess is the majority of those in (b) (ii) will never redeem. This is essentially a paper trade .
But I do understand they may want the option if they get nervous tomorrow ie. MFG style crack-up and want possession, if they can get possession depending on the nature of the fat tail risk.
So what if you don't have enough PSLV to take delivery. Somebody else that needs your shares so they have enough to take delivery will pay you fair value for it. Yes, it would be dumb to put all your funds in it. You should have some other shares of other trusts, you should have some in another country in a safe deposit box, you should have some in your back yard, you should have some mining shares. There is no one investment that is secure.
SILVER BULLION TRUST SBT.U closed today with a premium over NAV of less than 4%. This is a great alternative to PSLV outside the reach of the US government.
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