Saturday, November 3, 2012

Another farce of a jobs report/Massive raid on silver and gold/

Good morning Ladies and Gentlemen:

Gold closed down $36.40 to $1674.40 while silver followed suit down $1.42 to $30.84 at comex closing time.  In the access market here are the following closing prices:

gold:  $1676.90
silver: $30.91.

The bankers again used the phony jobs report to orchestrate a monstrous raid on our precious metals. They were relentless with a huge supply of non backed paper.  They also used the help of the high frequency traders to further accentuate the downward spiral in price.  This was done in full view of the regulators who seem not to pay any attention to this criminal collusion.  Most of the GATA folk knew and telegraphed  what was going to happen and it surely did with a vengeance.  Gold and silver will be held in check until after the USA election and then you will see these precious metals rise as the fundamentals seem to suggest it should.  We are witnessing a global quantitative easing from Japan, Europe and the USA with Greece set to default to be followed closing behind by Spain.  The raid on Thursday and Friday was nothing but a criminal collusive staged event orchestrated by the bankers trying to extricate themselves from their massive shortfall in gold and silver.  In kind of worked in gold but maybe not in silver.We must wait until Monday's OI figures to see if our longs in silver left the silver arena.

Early Friday, news from Asia China announced a slight rebound in it's manufacturing PMI which gave the green light to players to buy stocks.  Even though Europe's PMI was flat, the periphery countries had PMI numbers contracting again. However all eyes were on the USA jobs report and sure enough the USA reported a gain in the jobs of 171,000.  Hidden in the numbers was a huge 90,000 B/D plug addition.
Also buried in the numbers was hours worked and this declined in number.  We will go over all of these stories and others but first.........

Let us now head over to the comex and assess the damage again on Friday.
The total comex gold open interest succumbed to the initial raid on Thursday falling by 5920 contracts from 457811 contracts down to 451,891.  The bankers were quite successful in gold but you will see below they had their troubles with silver.  The non active November gold contract month saw it's OI fall from 134 down to 123 for a loss of 11 contracts.  We had 14 delivery notices filed on Thursday so we again gained 3 gold contracts or an additional 300 oz of gold will stand in November.  The big December gold contract is a month away and will be surely watched as the month progresses.  Today the OI for December fell by 9,588 contracts from 306,404 down to 296,816 as some of the weaker longs fell prey to the bankers collusive activities.  The estimated volume today was a quite robust 212954 contracts as the bankers supplied the copious non backed paper.  The confirmed volume on Friday was much less at 135,510.

The total silver comex OI refuses to budge despite the bankers annoying tactics.  On Friday the total silver comex OI rests at 139,329 a gain of 86 contracts from Thursday's level of 139,243.  We will have to wait until Monday to see what damage was done to the OI with the Friday raid.  The non active November contract silver month saw it's OI remain exactly the same at 29 contracts.  Since we had zero delivery notices we neither gained nor lost any silver standing.  The big December contract saw it's OI lose 1120 contracts falling from 77,191 down to 76,071.  The estimated volume Friday was quite good at 57,774.  The confirmed volume on Thursday was much less at 33,419.

Comex gold figures 

Nov 2-.2012   


Withdrawals from Dealers Inventory in oz
Withdrawals from Customer Inventory in oz
Deposits to the Dealer Inventory in oz
Deposits to the Customer Inventory, in oz
6430.000 (Scotia)
No of oz served (contracts) today
 112  (11,200 oz)
No of oz to be served (notices)
11  (11,000 oz)
Total monthly oz gold served (contracts) so far this month
252  (25,200 oz)
Total accumulative withdrawal of gold from the Dealers inventory this month
Total accumulative withdrawal of gold from the Customer inventory this month

On Friday, we again had tiny activity inside the gold vaults.

The dealer had no deposits and no withdrawals. 
The customer had one  deposit and no withdrawals.

Customer deposit:

i) Into Scotia 6430.00 oz (possibly 20 kilo bars)

Adjustments: another  major adjustment today

i)  From the Scotia vault:    19,988.910 oz was removed from the customer and enter the dealer at Scotia

ii) From the HSBC vault:  1.946 oz was removed from the dealer due to a counting error.

Thus the dealer inventory rests tonight at 2.587 million oz (80.466) tonnes of gold.

The CME reported that we had   112 notices  filed for the second day notice or 11,200 oz of gold. The total number of notices filed so far this month is thus 252 notices or 25,200 oz of gold.
To determine what is left to be served upon, I take the OI standing for November (123) and subtract out today's notices (112) which leaves us with 11 notices or 1100 oz left to be served upon our longs.

Thus the total number of gold ounces standing for delivery in November is as follows:

25,200 oz (served)  +  1100 oz (to be served upon)  =  26,300 oz (.818 tonnes of gold).  we gained 300 oz of additional gold standing for November.

the number of ounces will probably rise as the month progresses.


Nov 2.2012:

Withdrawals from Dealers Inventorynil
Withdrawals from Customer Inventory 377,884.63 (Brinks)
Deposits to the Dealer Inventorynil
Deposits to the Customer Inventorynil
No of oz served (contracts)0  (nil oz)
No of oz to be served (notices) 29 (145,000 oz)
Total monthly oz silver served (contracts)2  (10,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this monthnil
Total accumulative withdrawal of silver from the Customer inventory this month399,786.73

Again, we had little activity inside the silver vaults on Friday.
 we had no dealer deposit and no dealer withdrawal.

The customer had no  deposits on Friday.

we had the following customer withdrawals:

i) 377,884.63 oz out of Brinks

total customer withdrawal:  377,884.63 oz

we had 0 adjustments

Registered silver remains this weekend  at :  36.161 million oz
total of all silver:  142.467 million oz.

The CME reported that we had 0 notices filed for zero oz . The total number of silver notices filed  this month is thus 2 contracts or 10,000 oz of silver.  

To determine the number of silver ounces standing for November, I take the OI standing for November (29) and subtract out today's notices (0) which leaves us with 29 notices or 145,000 oz ready to be served upon.

Thus the total number of silver ounces standing in this non active month of November is as follows:

10,000 oz (served) +  145,000 oz ( to be served upon)  =  155,000 oz
we neither gained nor lost any silver ounces standing.


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.

Total Gold in Trust   Nov 2.2012

Total Gold in Trust



Value US$:72,365,458,247.71

Nov 1.2012




Value US$:73,708,857,899.26

Oct 31.2012:




Value US$:73,827,815,056.94

Oct 30.2012




Value US$:73,702,957,603.51

we neither lost nor gained any gold at the GLD.  



And now for silver: 

Nov 2.2012:

Ounces of Silver in Trust319,675,305.300
Tonnes of Silver in Trust Tonnes of Silver in Trust9,943.01

Nov 1.2012:

Ounces of Silver in Trust319,037,966.300
Tonnes of Silver in Trust Tonnes of Silver in Trust9,923.19

Oct 31.2012:

Ounces of Silver in Trust319,037,966.300
Tonnes of Silver in Trust Tonnes of Silver in Trust9,923.19

oct 30.2012:

Ounces of Silver in Trust319,037,966.300
Tonnes of Silver in Trust Tonnes of Silver in Trust9,923.19

we  gained 638,000 oz of  silver into the slv.


And now for our premiums to NAV for the funds I follow:  

Sprott and Central Fund of Canada. 

(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)

1. Central Fund of Canada: traded to a positive 3.1 percent to NAV in usa funds and a positive 2.9%  to NAV for Cdn funds. ( Nov 2.2012)  

2. Sprott silver fund (PSLV): Premium to NAV rose big time to 4.86% to NAV  Nov 2/2012  :
3. Sprott gold fund (PHYS): premium to NAV  rose slightly to 2.27% positive to NAV Nov 2.2012. 

 Now we witness the Central fund of Canada  gaining big time in its positive to NAV, as we now see CEF at a positive 3.1% in usa and 2.9% in Canadian.This fund is back in premiums to it's former self and it is  about time. Even the Sprott silver fund is almost back to a normal positive to NAV with its premium  at 4.86%. Investors are seeking out physical supplies..  And now the Sprott gold fund having just done an offering has partially returned to its normal premium to NAV  .

It looks like England may have trouble in finding gold and silver for its clients.
It is worth watching the premium for gold at the Sprott funds which is a good indicator of shortage as investors bid up the premiums. 


Friday night we received the Commitment of Traders report which shows position levels of our major players.

Let us travel to our gold COT and see what we can glean from it:

The gold COT: 

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

Small Speculators

Open Interest



non reportable positions
Change from the previous reporting period

COT Gold Report - Positions as of
Tuesday, October 30, 2012

 quite a report!!

Our large speculators:

My goodness these guys were fleeced badly.

Those large speculators that have been long in gold pitched a humongous 14,563 contracts.
Those large speculators that have been short in gold covered 2742 contracts from their short side.

This is the second week in a row that the large specs have pitched a huge quantity of their longs.

Let us now look at the commercials:

Those commercials who have been long in gold added a monstrous 11,487 contracts to their long side.  This could also be the commercials buying long contracts to offset their short side.

Those commercials who have been short in gold from the beginning of time, added a tiny 1586 contracts to their short side.

Our small specs:

Those small specs who have been long in gold added a rather large 3632 contracts to their long side and these guys did the opposite to what the larger specs did with respect to their long positions.  The large specs were fleeced.  The small specs were not swayed as they stayed in for the fun.

The small specs who have been short in gold added 1712 contracts to their short side.

Conclusion:  Immensely bullish as our commercials have gone net long this week to the tune of 9901 contracts.  Maybe this is a set up for a huge bull run once the election is over!!

and now let us head over to the silver COT and see if there is any difference here!

Note:  the huge difference between silver and gold!!!!!

Silver COT Report: Futures
Large Speculators
Small Speculators
Open Interest
non reportable positions
Positions as of:

Tuesday, October 30, 2012

Our large speculators;

Those large speculators that have been long in silver refused to buckle like their conpadres in gold.  They pitched a tiny 681 contracts with the mighty raids of last week. The bankers were not impressed.

Those large speculators that have been short in silver supplied a bit of the non backed paper by adding 1238 contracts to their short side.

And now for our commercials:

Those commercials that have been long in silver and are close to the physical scene added 1153 contracts to their long side.

Those commercials that have been short in silver from the beginning of time, only covered a tiny 614 contracts despite the huge drop in price.  The commercials seem to be a big trouble here.

Our small specs:

The small specs that have been long in silver pitched a tiny 626 contracts from their long side.
The small specs that have been short in silver also supplied a small percentage of the non backed paper to the tune of 778 contracts.


The commercials went again net long to the tune of 1767 contracts as they are seeing the writing on the wall.  Again this COT report from a commercial point of view is very bullish.
Silver must advance in price shortly.

Here are you major physical stories:

Mark O'Byrne  CEO of Goldcore talks to Geoffrey Candy of Mineweb on silver demand.  You will find this very interesting:

courtesy Goldcore/Mineweb

GoldCore Comments on Silver

Friday, November 2nd
Today’s AM fix was USD 1,708.25, EUR 1,325.77, and GBP 1,061.29 per ounce.
Yesterday’s AM fix was USD 1,723.25, EUR 1,330.59, and GBP 1,065.64 per ounce.
Silver is trading at $31.96/oz, €24.90/oz and £19.94/oz. Platinum is trading at $1,564.25/oz, palladium at $608.90/oz and rhodium at $1,110/oz.
Gold fell $7.50 or 0.44% in New York yesterday and closed at $1,713.70. Silver rose to $32.652 before it fell back to a low of $32.177 and finished with a loss of 0.16%.
Gold inched down near $1,700/oz on Friday after a drop through its support level at $1,710-$1,712 initiated stop loss selling. The Nonfarm Payroll number for October is released at 1230 GMT. 125,000 are expected for Nonfarm Payrolls, while the Unemployment Rate number is expected at 7.9%. Better than expected employment data could be negative for gold as it may rescind additional QE from the US Fed.
The data released today follows US figures yesterday that showed a growth in private employment, improvement in consumer confidence, reduction in jobless claims and mixed signals from the manufacturing industry. The dollar strengthened on the news and this put pressure on commodities priced in dollars.
The economic damage from Superstorm Sandy could run as high as $50 billion said forecasting firm Eqecat. The numbers Eqecat published Thursday are more than double its previous estimate. The US fiscal cliff is growing exponentially.
GoldCore’s Mark O’Byrne was recently interviewed for Mineweb’s Metal’s Weekly Podcast. The full interview follows below:
GEOFF CANDY: Welcome to this week's edition of's Metals Weekly podcast. Joining me on the line is the founder and head of research at GoldCore, Mark O'Byrne. Mark we wanted to talk to you about silver because silver prices fell roughly speaking, 4,5% this week and clearly there's been a lot of talk about what's been going on, and perhaps some sense of fatigue setting in terms of quantitative easing particularly on the gold side. This has perhaps fed into silver to some extent as well. How do you see the lay of the land with regards to the silver market at the moment?
MARK O'BYRNE: As you said it was down 4,5% this week and in the month of October we are actually down 6,7%. But we do see it as a correction within a longer term secular bull market for both gold and, indeed, the silver market. Basically both gold and silver had good moves up in the August and September periods. And then as we entered into October, which is traditionally one of the weakest months for gold and indeed for silver, we actually warned coming into the end of September that if there is to be a correction it's most likely to be in October and that has materialised. But, we do believe that this is short-term weakness and that the long-term fundamentals will drive the gold and silver market prices higher in the coming months and particularly because November is one of the strongest months for both gold and silver. So, we do believe though we're probably not near the lows. I think we'll possibly hit the lows in the next week or two and then we're in for a period of strength in November. But, remember December, January and February are traditionally quite strong months for precious metals and I think we may see another intermediate peak coming into March 2013.
GEOFF CANDY: Now you talk of these traditional peaks, how much of that is related to jewellery demand out of Asia and clearly in a year where we've not seen particularly stellar growth in that sector of that market, given the high prices, especially in the likes of rupee terms., how does that impact on precious metals prices and in particular on silver?
MARK O'BYRNE: Yes, traditionally demand for jewellery in Asia, particularly from India, has been a fundamental driver and the Indian festival season in particular with regards to gold was a driver of that. And that may have led to the strength that you see in the month of November because we're coming into that month again and then obviously more recently since the liberalisation of the Chinese gold market, the Chinese demand coming into the Chinese New Year is another factor that people are believing is exerting pressure on the price coming into year end. So, I think that's still a factor, but, possibly less of a factor there than it was before.
When you talk exclusively about jewellery - Asian demand has changed so much and there is obviously more coin and bar demand from Asia and I suppose Asians in general are becoming a little bit more sophisticated in the way they buy gold and they're trying to buy it in more cost effective ways oftentimes and also obviously we have the advent of the ETF and indeed the advent of many other types investment vehicles whether it be digital gold or gold certificates which have become more popular in the western world. So the jewellery demand is still a factor but it seems to be more of a factor whereby it's almost supporting the price on the dips. It's not what is driving the price on to record levels. It's just more an underlying support for the marketplace and we believe that will continue to be the case because the Chinese and particularly Indian buyers tend to be much more price sensitive. They seek value and tend to buy in the dips whereas our experience of western buyers is, unfortunately, they do tend to buy near intermediate highs and they aren't very good at buying on the price corrections.
GEOFF CANDY: That does beg the question though then, are we perhaps seeing over time either a flattening out of the cycles to some extent or a shift in what is the traditionally higher or better performing ones and those that aren't?
MARK O'BYRNE: I don't know. Possibly from India because obviously the amount of gold ownership in India is huge - they are the largest owners of gold in the world, so it's a very developed marketplace. But China on the other hand has a similar population of nearly 1.3bn people if you include the Chinese Diaspora and its interesting because the per capita consumption of those 1.3bn people is increasing very sharply but from a near zero base because they were banned from owning gold from 1950 to 2003. Their per capita ownership levels of gold are still nowhere near the levels seen in India. So it is believed in time that they will reach levels seen say by their compatriots in Hong Kong and by expats in Singapore and around Asia. Gold is very deeply ingrained in the Chinese psyche because of their experience of hyperinflation within the lifetime of many Chinese people. So I think it's very difficult to say but I think the Asian demand story is never going to go away. It may decrease from the record levels seen recently but I and I think most analysts would be surprised if it decreased a whole lot, especially given the uncertainties that are out there with regards to both the Chinese and Indian economies and indeed the global economy.
GEOFF CANDY: I want to get into those fundamental factors as well in just a second but in terms of silver particularly and the other side of the silver demand coin outside of investment, outside of jewellery, it is the much more industrial metal than perhaps gold as a precious metal as well, and we have seen a fairly large over supply of in the photovoltaic market as well, that clearly must have had some effect - how do you see that playing out as a demand for silver and in general how it would impact prices?
MARK O'BYRNE: Well this photovoltaic demand is interesting because there have been huge increases in demand in that sector (the solar energy sector) and that demand has come off a little. The share price of a lot of these solar energy companies have gone to the wall and the share prices have come off quite significantly. I think there was a nascent bubble there and that demand has fallen as you say, but I do think that long-term there is likely to be a degree of demand in the photovoltaic sector. But, it may fall from these levels but I think there will always be a base amount of demand in that sector.
And, while people have tended to focus on that sector more recently, it is important to note that silver is still used in huge amounts of industrial applications. People would be amazed at the little bits of silver that are in microwaves and fridges and all sorts of everyday appliances. It's also used massively in the medical sector in an increasing number of applications, there's a huge amount of new, different devices, silver is being used basically in these medical applications because it has anti-bacterial properties that have been known throughout history and even the US army has developed some of the clothing that's used by some of the US military personnel has little particles of silver because it helps the soldiers out in the field who are basically at risk of... you know, if they're wearing these clothes for long periods of time, sweating a lot there's a risk of disease... so basically you have surgical gowns, draperies and indeed actual medicine itself so that is a sector that is very interesting. But more importantly I suppose we will probably go into this now, investment demand is becoming if not as important, I think in time it may become as important as the industrial side and obviously in the 1980s and 1990s after the silver bubble burst demand was more on the industrial side and less investment demand but that shift has begun to change and will continue to see that change in the coming months and years.
GEOFF CANDY: How much of that has to do with the fact that gold prices are so much higher than perhaps they were in the past?
MARK O'BYRNE: I agree absolutely that is a factor, particularly in Asia, it is seen as poor man's gold, more so than in the west. So there is demand that we're seeing, particularly in India, but in other Asian countries as well, people increasingly find it hard to hold gold in any sort of quantities so they are buying silver because the ratio is roughly 53, 54 to 1 as we speak. So, long-term the ratio is 15:1 because geologically there are 15 parts of silver to one part of gold, so we believe long-term that the ratio will gradually return to that level of 15:1 of the very long term because a huge amount of silver has been used in industrial applications in the last 100 years whereas obviously all the gold that's ever been mined continues to be recycled at a much higher level. So that is part of it and there is some money in the western world, investment money is looking at silver as undervalued vis a vis obviously gold above its nominal high from 1980, whereas silver continues to be well below its nominal high for 1980 so I think that will continue to lead to investment demand internationally.
GEOFF CANDY: Where do you see prices going?
MARK O'BYRNE: Well we're not jumping on the bandwagon. As early as 2003 we said that we believed silver would go over $50 per ounce . So $50 per ounce was the nominal high in 1980. We said it would go above that price in 2003 - it reached there a year and a half, two years ago and we believe we'll get back above that level. But we also said that gold and silver would reach inflation adjusted highs and gold's inflation adjusted high is $2,400 an ounce and silver's inflation adjusted high is $140 per ounce and we see no reason to change those long-term forecasts. Indeed the amount of money that's been printed in the world today would suggest that if you've got a parabolic spike as we saw in 1980, prices could go much further higher on the upside you know...
GEOFF CANDY: Just quickly to close off with - what is likely to be the next catalyst for silver prices either on the downside or the upside?
MARK O'BYRNE: Well I think it is the fiscal cliff. Once this election is over, the folks will turn to whether the US Congress can get their act together and address the fiscal cliff, and many people are concerned that even if they do manage to quit the political squabbling, and achieve a degree of consensus, that there are concerns that the scale of the fiscal problems in the US in terms of the national deficit and indeed of the massive unfunded liabilities which are between $50tr and $100tr, there is a risk that this is, I hate to call it insurmountable, but it's a momentous task that they ahead of them, and I think once the markets begin to focus on that again I think the dollar will come under pressure and indeed I think all fiat currencies will come under pressure in the coming years given the degree of fiscal imbalances in most western economies and I think that that bodes well for both gold and silver in the final two months of this year and into 2013 and indeed in the coming years I do think this is a long-term - people talk about the super-cycle in commodities, many commodity markets and indeed a lot of markets have long-term 15 to 20 year cycles in prices. And I think quite possibly that's what we are witnessing in both the gold and silver markets.
GEOFF CANDY: And we're about 10 years in at the moment...
MARK O'BYRNE: Exactly. We are 12 years in so, who knows. I mean we try not to get into price predictions and try and predict the future because it's absolutely unknowable, but we do think price will not peak until at least until 2015 - I think sometime between 2015 and 2020. Hopefully at that stage, you know many of the fiscal monetary problems that are... today will have been addressed and we'll have come through the worst of the crisis and only at that stage I suppose will we have more clarity on the longer-term outlook...
For breaking news and commentary on financial markets and gold, follow us on Twitter.
NYSE Open for Business Shows Wall Street Is No Less Vulnerable – Bloomberg
Obama wins backing from NY mayor – The Financial Times


As I mentioned to you on Thursday, this will not go away for the simple reason that Germany wants it's gold back on German soil.  Jim Willie reported that his sources seem to suggest that the Germans have sent delegations to New York on 5 occasions requesting to see their gold and all 5 times they were rebuffed.  The Germans will try all possible avenues in an attempt to rescue their gold:

(courtesy GATA/Lars Schall)

Bundesbank official assures NY Fed that gold issue will go away

... Just like the gold itself?
* * *
5:42p ET Friday, November 2, 2012
Dear Friend of GATA and Gold:
Our friend the German financial journalist Lars Schall calls attention to remarks delivered Thursday by a member of the executive board of the German Bundesbank, Andreas Dombret, at a reception held at the Bundesbank's office in New York in the presence of the president of the Federal Reserve Bank of New York, William Dudley. Dombret's remarks, appended here, confirm that, as GATA often has reported, Germany's gold reserves are held in large part at the New York Fed to facilitate their presumably secret trading, since, as Dombret notes, "Frankfurt is not a gold-trading center."
Dombret's remarks seem meant to pretend that the clamor and controversy over the foreign vaulting and secrecy around the German gold reserves will end quickly, preserving the trust between the Bundesbank and the Federal Reserve.

And yet the Bundesbank continues to refuse to answer whether it has any gold swap arrangements with the Fed or any other agency of the U.S. government:
If the Bundesbank won't answer about that to the Germany people, why should they have any trust in their own central bank or any central bank?
The clamor and controversy probably won't be going away before the Bundesbank and Fed answer that question truthfully. And of course if that ever happens, the clamor and controversy will have only just begun.
The section of Dombret's remarks about the gold issue, copied from the Bundesbank's Internet site, is appended.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
Excerpts from Remarks by Andreas Dombret
Member of the Executive Board
Deutsche Bundesbank
Reception of the Bundesbank Representative Office, New York
Thursday, November 1, 2012
... Please let me also comment on the bizarre public discussion we are currently facing in Germany on the safety of our gold deposits outside Germany -- a discussion which is driven by irrational fears.
In this context, I wish to warn against voluntarily adding fuel to the general sense of uncertainty among the German public in times like these by conducting a "phantom debate" on the safety of our gold reserves.
The arguments raised are not really convincing. And I am glad that this is common sense for most Germans. Following the statement by the president of the Federal Court of Auditors in Germany, the discussion is now likely to come to an end -- and it should do so before it causes harm to the excellent relationship between the Bundesbank and the U.S. Fed.
Let's get back to facts and figures: I would like to remind you that our gold reserves are part of the German currency reserves. These were accumulated over time thanks, in part, to Germany's economic boom in the 1950s and 1960s. Germany's growing economic strength, especially its strong external position, resulted in rather large trade account surpluses, most of them acquired in U.S. dollars. At that time, the International Monetary System, known as the Bretton Woods system, was dominated by the U.S. currency. As long as this system was in force, which was up until 1971, the U.S. Fed was obliged to exchange its currency for gold.
Any current account surplus thus resulted in an increase in Germany's gold reserves. This gold was stored in U.S. vaults for obvious reasons. This was not only the case for the gold held by the Bundesbank -- it was, in fact, common practice. By the way: It was the only practical thing to do, since running a trade account deficit meant a decrease in gold stocks.
Thus, we are now looking back at 60 years not only of fruitful cooperation in many fields and international fora, but also of storing gold and trading via the New York Fed. As a matter of fact, it is sensible for us to do so in New York, as Frankfurt is not a gold-trading venue.
Throughout these 60 years we have never encountered the slightest problem, let alone had any doubts concerning the credibility of the Fed. And for this, Bill [Dudley, president of the Federal Reserve Bank of New York], I would like to thank you personally. I am also grateful for your uncomplicated cooperation in so many matters. The Bundesbank will remain the Fed's trusted partner in future, and we will continue to take advantage of the Fed's services by storing some of our currency reserves as gold in New York.
At the same time, you can be assured that we are confident that our gold is in safe hands with you. The days in which Hollywood Germans such as Gerd Frobe, better known as Goldfinger, and East German terrorist Simon Gruber masterminded gold heists in U.S. vaults are long gone. Nobody can seriously imagine scenarios like these, which are reminiscent of a James Bond movie with Goldfinger playing the role of a U.S. Fed accounting clerk.
While gold is important, we have to combat a crisis of confidence in the euro area. This is the task we need to concentrate on. And we will do so.

* * *

how to buy silver and gold bullion coins and where to store it

(courtesy Graham Summers/phoenix research capital)

Why and How to Buy Bullion... Plus Where to Store It

Phoenix Capital Research's picture

In terms of storing your wealth or preparing for what’s to come, I think everyone should have SOME gold and silver bullion on hand.

How much you purchase is up to you. But you should have several months’ worth of expenses in gold and silver bullion. Why Gold and Silver? Because if the banks are closed or if paper money is worthless, you don’t want to be walking around with an ounce of gold (worth $1k+) to buy groceries. Instead, you will want some precious metals of smaller denomination to purchase/ barter with, hence the need for some silver.

Buy some of both now. I cannot tell you which broker to use, but whoever you work with, make sure that YOU store the gold/silver yourself (more on this in a moment) and that you buy bullion that is liquid enough that you can buy or sell it quickly.

In terms of actual gold coins, there are three coins that comprise the bulk of the bullion market. They are Kruggerands, Canadian Maple Leafs, and American Gold Eagles. I’ve been told to avoid Maple Leafs by both a trader and a bullion dealer as they can easily be scratched which damages the gold and reduces the coin’s value.

In terms of silver, the easiest way to get it is via pre-1965 coins (often termed “junk” silver). The bullion dealer I spoke to prices them at 50 cents over spot. However, you can also get silver one-ounce rounds (coin-like medallions) and 10-ounce bars, both of which can be bought at 95 cents over spot. You can buy Silver Eagles coins at $2.50 over spot, though the premium higher.

Again, I cannot tell you which dealer to go with, but look for someone who’s been dealing for years (not a newbie).  You should ALWAYS ask for references from the dealer (former clients you can talk to about their purchases/ experiences).

Some warning signs to avoid are dealers who try to store your bullion. NEVER, I repeat, NEVER store your bullion with someone else. ALWAYS store it yourself. Also, be sure to talk to the dealer for some time and ask him or her numerous questions about the industry, the coins, etc (feel free to test him or her on the information I’ve provided you with eg the three most liquid Gold coins, etc). If they can answer everything you ask in a knowledgeable fashion, their references check out, and you verify everything they say with a 3rd party, you should be OK.

In terms of storing your bullion, you can store it in a safe deposit box or buy a decent home safe from Target or Wal-Mart (or a specific safe store). If you go the safe deposit box route, make sure it’s with a bank that has as little exposure to derivatives as possible. 

Personally, I distrust safe deposit boxes because part of the reason for having gold or silver on hand is in case there’s a run on the banks or a bank holiday is declared. So I like the idea of having at least some bullion in a personal safe somewhere. You can get a decent safe for anywhere between $100 and $1,000. Both Target and Wal-Mart sell decent models for $50-$300.

On a side note DO NOT tell people about your bullion stash OR your safe. Trust virtually NO ONE with this information except your closest loved ones (and I mean CLOSEST).

Best Regards,
Graham Summers


Jeffrey Lewis on how it is taboo to even entertain the idea that the precious metals could be manipulated:

(courtesy GATA/Jeffrey Lewis)

Jeffrey Lewis: The great precious metals managed retreat

4:57p ET Friday, November 2, 2012
Dear Friend of GATA and Gold:
Writing today for Resource Investor, Jeffrey Lewis of notes the irony that even though we're "in the age of the LIBOR scandal, Financial Accounting Standards Board mark-to-market rule changes, high-frequency trading programs front-running retail investors, MF Global's dramatic demise, and Bernie Madoff's outrageous Ponzi scheme ... it continues to be taboo to even entertain the idea that the precious metals markets could actually be managed."
But Lewis more than entertains the idea. A central bank that arranges or backstops price suppression in the monetary metals "can print effectively unlimited amounts of dollars to pay for its losses, and it would never be forced to deliver physical metal it did not have because it would generally be trading futures on the short side," Lewis writes. "Since the seller of a futures contract controls physical delivery, it can simply opt not to deliver and cash-settle instead."

A central bank trading secretly in gold and silver? While it may sound fantastic, in the United States it is actually the law, and has been for a long time, the Treasury Department's Exchange Stablization Fund having been established in 1934 specifically for that purpose, and the ESF's mandate having been expanded since then to authorize secret trading in any market:
All anyone has to do to expose the scheme is to ask central banks about it. Their refusal to answer some simple questions is telling:
Fortunately for central banks, the prerequisite for mainstream and respectable financial journalism is never to put a specific question to a central bank and complain publicly about its refusal to answer. There couldn't possibly be any news in central banking's control of the value of all capital, labor, goods, and services in the world.
This is pretty much what the British economist Peter Warburton figured out about central banks, their investment bank allies, and commodity markets 11 years ago in his groundbreaking essay, "The Debasement of World Currency: It Is Inflation, but Not as We Know It":
"What we see at present," Warburton wrote in 2001, "is a battle between the central banks and the collapse of the financial system fought on two fronts. On one front the central banks preside over the creation of additional liquidity for the financial system to hold back the tide of debt defaults that would otherwise occur. On the other they incite investment banks and other willing parties to bet against a rise in the prices of gold, oil, base metals, soft commodities, or anything else that might be deemed an indicator of inherent value. Their objective is to deprive the independent observer of any reliable benchmark against which to measure the eroding value, not only of the U.S. dollar but of all fiat currencies. Equally, they seek to deny the investor the opportunity to hedge against the fragility of the financial system by switching into a freely traded market for non-financial assets. ...
"How much capital would it take to control the combined gold, oil, and commodity markets? Probably no more than $200 billion, using derivatives. Moreover, it is not necessary for the central banks to fight the battle themselves, although central bank gold sales and gold leasing have certainly contributed to the cause. Most of the world's large investment banks have overtraded their capital so flagrantly that if the central banks were to lose the fight on the first front, then their stock would be worthless. Because their fate is intertwined with that of the central banks, investment banks are willing participants in the battle against rising gold, oil, and commodity prices."
Despite the abdication of mainstream financial journalism, Lewis writes today, the scheme is being found out. "The market seems to be progressively reaching the point where 'everyone knows' that the price of silver, gold, and just about every other commodity is being politically managed to the point where underlying fair value across the board has become remarkably distorted."
Now we just need to reach the point where everyone does something about it. In recent months GATA has solicited several leading and immensely prosperous and powerful figures in the monetary metals world, people whose names you would instantly recognize and who almost singlehandedly, on their own or by helping GATA, could pull the plug on the gold and silver price suppression schemes. But even with introductions from mutual friends, those figures don't want the slightest trace of association with GATA.
To some extent this is understandable. Those people are as respectable as mainstream financial journalists and have a lot to lose at the hands of government, and they have already made their fortunes and achieved their privileged positions and think that they can leave the world to fend for itself.
But if you ever run into any of them at conferences or shareholder meetings, you might ask them why, with so much wealth, they won't help GATA, won't send even a contribution like the $20 sent the other day by credit card over the Internet by a guy in California, who thereby donated to GATA $20 more than, for example, Newmont Mining has donated since GATA was founded in January 1999. If you challenge their indifference, one or two or the rich and powerful guys may at least feel a little guilty about it.
If you're inclined to help GATA, you can donate even $1 via our credit card mechanism on the Internet here --
-- and thereby become more relevant to the struggle for free markets in the monetary metals than the world's biggest gold and silver mining companies. With sufficient support, we'll undertake new freedom-of-information litigation against the U.S. Federal Reserve, Treasury Department, and State Department:
We have beaten the Fed once already --
-- and what we've learned will help us beat the Fed again along with the other secret market riggers in government here and around the world.
Lewis' commentary is headlined "The Great Precious Metals Managed Retreat" and it's posted at Resource Investor here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


and now for your major paper stories which will have an influence on gold and silver:

The Euro/USA retreated from its supporting level of  1.29 to trade within the 1.28 to one barrier.
European manufacturing PMI remained flat despite being contractionary at the .46 level.  The core countries showed a little expansion but the periphery was hit again with Spain registering a fall from 44.6 down to 43.5

This week, the EU must decide whether Greece is to receive more cash.  The vote inside Greece looks too close to call.

On the USA side of things, the uSA will continue to monetize until the labour scene picks up.

(Your overnight sentiment, courtesy of zero hedge)

Overnight Summary: Not An Algo Was Stirring Ahead Of The Jobs Report

Tyler Durden's picture

Judging by complete lack of move in the futures since the last time we looked at them at close of US market (if not so much the EURUSD which moments ago touched its lowest level since October 10 below 1.2865), absolutely nothing has happened in the intervening 14 hours. Which wouldn't be too far from the truth. Europe reported its manufacturing PMIs, which while largely unchanged at the consolidated (Eurozone 45.4 on Exp. of 45.3, last 45.3) and core level (Germany 46.0 vs Exp. 45.7, Last 45.7; France 43.7 vs Exp. 43.5, last 43.5) showed some weakness for the one fulcrum country that everyone looks at: Spain, whose Mfg PMI dropped from 44.6 to 43.5 on Exp of 44.1. But at least the threat the ECB will buy its bonds is there. And Speaking of Spain (whose car registrations tumbled 21.7% in October), the first external condition appeared today, when EU competition commission Joaquin Almunia said seized Spanish banks must fire half their workforce, according to ABC.
In other non-news, the Buba's Dombret said that the Troika must decide impartially if Greece gets more aid adding that Greece must help itself to fix the crisis, and that the insolvent country is far behind in implementing reforms and shouldn't rely on the EU to solve its problems - hardly a ringing endorsement ahead of next week's key vote. In Japan, the BoJ minutes showed that a few members said recession cannot be ruled out due to developments in production, while some members said economic recovery may be after start of 2013 due to slowdown in overseas economy, many members said JPY remains elevated and the government made any pretense of central bank indepenence irrelevant after it said the BOJ must continue doing what the government needs.
Finally back in the US, the Fed's Rosengren said the Fed will not stop monetizing until the jobless rate falls below 7.25%. Luckily, with the NFP report due in 90 minutes, and the labor participation rate set to tumble once more, we may just get that in today's key data highlight which everyone is waiting for.
A breakdown of European PMI via MarkIt:

What to expect today (via SocGen):
The US NFPs will be of particular importance today: not only is it one of the traditional market drivers for the USD and US bond markets, but it will also take on a specific value, just four days before the presidential elections.
Last month, NFP was perceived as a strong report as the unemployment rate dipped by 0.3%, to 7.8%, its lowest rate since January 2009. This report, based on a household employment survey, revealed 873K new job creations, the strongest level since June 1983! The NFP report, based on a business survey, was however more cautious, with 114K job creations. On 5 October, the day the September NFP was released, EUR/USD traded in a very tight range (1.2995-1.3075), while 10Y swap rates increased by 6bp. What can we expect from today's data? Although we admit that 10Y US swap rates may try to test a break of 1.80% on a strong report, we doubt investors will embark on huge positions ahead of a heavy risk event calendar next week, with the US elections and the Greek vote before Parliament on its new austerity measures, worth EUR 13.5bn. For the same reasons, EUR/USD is likely to end the week in the lower bound of its 1.28/1.3150 range.
And a full breakdown of all events in the past 24 hours from DB:
Our man in Washington Frank Kelly hosted a fascinating call yesterday on the election. He suggested that it’s so close that he's biting artificial nails which have replaced his actual ones already bitten off! Overall he goes against consensus and thinks Romney might just squeeze a win as he puts more credibility on the polls where he is ahead. He suggests some of the others are volatile and perhaps not as accurate in their sampling. Interestingly he also said it might go down to how wet and cold the weather is in Ohio - seen by many as the swing state. A cold and wet day might favour Romney and a decent day Obama. It’s nice to think that the future fortunes of the Western World might depend on a few clouds here or there.
Today's employment report might still shape the result, especially in a tight race. After last month's conspiracy theories it will be interesting if unemployment holds below 8% (7.9% expected after last month's surprise 0.3ppt fall to 7.8%). With respect to the payroll number, our US economists are content to keep their estimate of October non-farm payrolls at +125K and the same gain in private payrolls, which is in line with the Bloomberg consensus.
US equities started the month on the front foot with the S&P500 (+1.09%) posting its best day since the QE3-inspired performance on 13th September (+1.63%). Utilities were the only sector to trade down where growing political backlash at the delays in restoring power post-Hurricane Sandy weighed on sentiment. It was a relatively strong data day with the October ISM surprising on the upside (51.7 vs 51.0) despite the disappointing Chicago PMI the previous day. Indeed this is the second >50 ISM print in a row although the details were a little mixed . On the positive side, new orders rose from 52.3 to 54.2 (highest since May) which is perhaps a sign that purchasing managers are looking past the impending fiscal cliff. However, Europe is still weighing on activity, as the new exports orders component slipped 0.5 to 48.0.
In overnight markets, Asian equities are trading broadly higher led by the Hang Seng (+1.4%) and Nikkei (+1.2%). Volumes are generally modest with no major regional economic data or news flow ahead of tonight’s payrolls and next week’s US elections. Chinese equities are lagging with the Shanghai Composite down -0.05% as we type, not helped by domestic reports that lending by the big 4 Chinese banks was 40% lower month-on-month in October.
Asian credit markets are mixed with CDS spreads generally outperforming cash. In corporate stories, Sharp admitted that there is "material doubt" about its ability to stay in business as it now expects a year end (to March) financial loss of JPY450bn ($5.6bn), far worse than the JPY250bn loss it expected in August. Sharp's shares are down 4.7% overnight or -76% since the end of last year. The warning came a day after a 19% drop in Panasonic's share price yesterday on the back of disappointing earnings. Panasonic's rating was subsequently downgraded to BBB by S&P, while Moody’s placed it’s Baa1 rating on review for possible downgrade. Japanese tech corporates are receiving some headlines of late as the sector continues to struggle underneath the weight of competition and currency strength.
Back in Europe, the main headline was that the Greek Court of Auditors sees the pension reforms demanded by the troika as unconstitutional, potentially derailing the government’s efforts to push through its EU13.5bn austerity package through parliament next week. The Court of Auditors, which vets Greek laws before they are submitted to parliament, said planned measures could be against constitutional provisions including the “principles of individual dignity and equality before the law” (Reuters). The article does say however, that it’s not the first time the court has expressed reservation on draft bills, citing a finance ministry official. Broader equity markets shrugged off the headline, but the Athens Composite equity index closed down 5% on the day, and is now down 13% on the week.
Turning to the day ahead, aside from the European PMIs, we get an update on the Italian budget balance as well as quarterly earnings from RBS. In the US, oil-giant Chevron will report earnings. But all eyes will be on the employment report due at 12:30pm London time. Remember that the US clocks haven't yet gone back so it’s an hour earlier than usual for many of us.


Wolf Richter does a great job showing details on what is going on inside France as they rapidly deteriorate
along the lines of Spain.

(courtesy Wolf Richter/

Desperate French Government Threatens To “Requisition” Vacant Buildings

testosteronepit's picture

Prime Minister Jean-Marc Ayrault made it official: the government would requisition vacant buildings regardless of who owned them, including office buildings. It would then convert them to apartments and make them available to the homeless and the “badly housed.”
As a first step, he asked for “an inventory of available buildings.” That list should be on his desk in “a few weeks,” hesaid. He was in a rush to identify these properties “so that we can undertake at least several operations in January and February 2013.” A desperate move to halt the collapse of his numbers. And another broadside at investors.
It’s getting tough for him and President François Hollande. As France sinks deeper into its economic mire, people are losing patience: those who still have confidence in Hollande plunged to 36%, the lowest level of any president six months after taking office (the data go back to 1981). He dropped to 31% among workers —a catastrophe for a Socialist—and to 21% among shop keepers, artisans, business owners, and CEOs [they’d already stirred up the pot: A Capitalist Revolt in Socialist France].
And Prime Minister Ayrault hit 34%. Among his predecessors, only Édith Cresson in 1991 and Alain Juppé in 1995 were lower. Both were sacked, Cresson 11 months into her term, and Juppé two years into his. Only 19% of the shop keepers, artisans, business owners, and CEOs had any confidence in him—despite his “gaffe” that he would be open to discussing the 35-hour workweek to bring down the cost of labor, which was followed by furious backpedalling from the entire Socialist power structure. Among workers, his confidence level dwindled to 29%. An untenable position. He should be polishing his resume.
Instead, he’d requisition buildings.
With his announcement, he backed Housing minister Cécile Duflot. She’d already pointed at the “seriousness of the situation” and declared—as the first major cold wave imposed additional risks on the homeless—that she’d study the possibility of requisitioning vacant buildings for the purpose of converting them into housing for the homeless and the “badly housed.”
To preempt the conservative opposition from having public conniptions, she dragged their former standard-bearer Jacques Chirac out of the closet. Back in 1995 when he was still mayor of Paris, he requisitioned, “as everyone remembers,” about 1,000 offices and apartments.
Requisitioning buildings and apartments is a tactic for all sides of the political spectrum. The law that authorized it was passed in 1945 to deal with the post-World War II housing crunch. And during the 1960s, over 100,000 requisition orders were issued.
Advocacy groups such as Jeudi Noir (Black Tuesday) and Droit au Logement (Right to Housing) have been pressuring the government to do something about the “housing crisis.” To make a public point, they chose a famous symbol as backdrop for their press conference: 1a, Place des Vosges—a building of 1500 sq. meters (16,000 sq. ft.) that has been vacant since 1965.
I used to live not far from there and walked through the Place de Vosges a lot, always wondering why someone would allow such a valuable property to remain empty. At the time, it was visibly going to heck. Yet it’s in an awesome location, facing the garden in the middle of the square, with galleries and cafés on two sides, and no traffic—an immense luxury in Paris. Members of Jeudi Noir squatted that building for a year until they were removed in 2010, a highly mediatized affair.
Instead of doing his utmost to encourage private sector construction, Prime Minister Ayrault has jumped on the bandwagon of the squatters, sending shivers down the spines of those who invest in real estate development and construction. With perfect timing: just when France desperately needs that business to pick up speed—not only to create sorely needed housing units, but also to create jobs [Worse than the Infamous Lehman September: France’s Private Sector Gets Kicked off a Cliff].
Unemployment is over 10%, youth unemployment over 25%. In disadvantaged areas, such as a number of volatile suburbs, unemployment is far higher. For example, in Clichy-sous-Bois, an eastern suburb of Paris, unemployment is 22%, and youth unemployment is astronomical. The pressure in these areas is rising. They’ve blown up before. Jobs would relieve some of it. But requisitioning buildings and scaring investors won’t.
To counter ugly economic trends that started while Nicolas Sarkozy was still president, the government has re-unearthed the catchword “competitiveness”—entailing the cherished and untouchable 35-hour workweek, equally untouchable wages, and sky-high employer-paid payroll charges. An explosive mix. And it just blew up. Read.... Attack On France’s Sacred Cow.


Your 8:00 am early currency crosses: (showing USA strength)

Euro/USA    1.2887  down 0056
Japan/USA  80.269    up .052
GBP/USA     1.6089   down 0043
USA/Can       .9978  up 0009


Your early results for bourses for Europe : (mostly into the green)

i. England/FTSE down 9.11 points or .16%

ii) Paris/CAC up 15.78 points or .45%

iii) German DAX: up 5.38 points or .07%

iv) Spanish ibex: up 43 points or .55%


Your opening Spanish 10 year bond yield:  (starting it's ascent to 6%)



5.602000.00700 0.13%

Your opening Italian 10 year bond yield:  (starting it's ascent to 5%)

Italy Govt Bonds 10 Year Gross Yield

 +Add to Watchlist


4.916000.00700 0.14%
As of 08:11:04 ET on 11/02/2012.


Your closing 10 year Spanish bond yield: (resuming its northerly yield trajectory)



5.661000.07000 1.25%
As of 12:59:57 ET on 11/02/2012.


Your closing Italian 10 year bond yield:  (finally arriving over 5%)

Italy Govt Bonds 10 Year Gross Yield


4.943000.01300 0.26%
As of 12:59:56 ET on 11/02/2012.

Your 3 pm currency crosses: (showing  USA strength)

Euro/USA    1.2827 down .012
Japan/USA  80.173    up .292
GBP/USA     1.6015 down .0115
USA/Can       .9955  down  0009

Your closing bourses from Europe and the uSA

i) England/FTSE up 6.63 points or 0.11%

ii) Paris/CAC up 17.06 points or 0.49%

iii) German DAX: up 21.18 points or 0.38%

iv) Spanish ibex: up 82.5 points or 1.05%

and the Dow:  down 136

In USA news,

The farce continues as the BLS reports 171,000 new jobs added.   The problem:

the plug factor, the B/D added a fictitious 90,000 new jobs. To all newcomers, the B/D means Birth/Death.  Death refers to the loss of a job.  The bureau believes that each death of a job means everyone becomes an entrepreneur and hires other workers (Birth).  This farce has been going on for years.

First the official Dow Jones release on the jobs report followed by zero hedge's truth behind the numbers)

DJ US October Nonfarm Payrolls +171K; Jobless Rate 7.9%
Fri Nov 02 08:30:31 2012 EDT

WASHINGTON--U.S. job growth accelerated in October but the unemployment rate ticked higher, signs of a steady but slow recovery as candidates make a final push ahead of next week's presidential election.
U.S. payrolls increased by a seasonally adjusted 171,000 jobs last month, the Labor Department said Friday. The politically important unemployment rate, obtained by a separate survey of U.S. households, rose one-tenth of a percentage point to 7.9%.
Economists surveyed by Dow Jones Newswires had forecast a gain of 125,000 in payrolls and a 7.9% jobless rate.
Friday's report offers the last broad snapshot of the economy before the Nov. 6 election. The campaign was overshadowed much of this week by Sandy, though severe disruption and damage caused by the superstorm isn't reflected in the October employment figures because they are based on surveys conducted earlier in the month.
President Barack Obama and Republican challenger Mitt Romney, meanwhile, have repeatedly sparred over whose economic policies would lay the best foundation for job creation.
Mr. Romney has called the pace of growth the past four years discouraging, and promised to create more jobs with higher pay. The Obama campaign cites steady improvement after a deep recession as the private sector has added jobs for 32 straight months.
The unemployment rate in September fell to its lowest level since Mr. Obama took office in January 2009, a figure the White House cautiously embraced but that Republicans dismissed as too little too late. October's figures add more fodder to the political debate during the last push to win undecided voters.
The unemployment rate in October rose slightly as the number of people seeking work increased more than the number of jobs available.
But in a sign of stronger growth, September payrolls were revised to a gain of 148,000 from an initially reported 114,000, and August to 192,000 from 142,000. Job growth has picked up markedly since the spring.
Private companies accounted for all of the gains in October payrolls, adding 184,000 jobs during the month.
In the private sector, employment increased in professional and business services, health care and retail. Manufacturers added 13,000 jobs.
Governments, meanwhile, shed 13,000 jobs as federal and state employment dwindled.
Average earnings slipped by 1 cent to $23.58 an hour, while the average workweek was unchanged for the fourth straight month at 34.4 hours in October.
A broader measure of unemployment--which includes job seekers as well as those stuck in part-time jobs--fell one-tenth of a percentage point to 14.6% in October.
A slowly improving labor market has helped boost optimism. The Conference Board, a private research group, said Thursday that its index of consumer confidence rose in October to its highest level since early 2008.


and now the real story from zero hedge:

(courtesy zero hedge)

171,000 Jobs Added In October, Unemployment Rate 7.9%

Tyler Durden's picture

As expected, a whopping beat of expectations of 125,000 with 171,000 jobs added In October, and the Unemployment Rate rising modestly to 7.9%, but below the magical 8.0%. And while the U-3 rose, the U-6, or underemployment, declined from 14.7% to 14.6%. Go figure. And finally, the Birth Death adjustment came just 10K off our forecast, printing at 90K.
From the report:
Both the unemployment rate (7.9 percent) and the number of unemployed persons (12.3 million) were essentially unchanged in October, following declines in September. (See table A-1.)

Among the major worker groups, the unemployment rate for blacks increased to 14.3 percent in October, while the rates for adult men (7.3 percent), adult women (7.2 percent), teenagers (23.7 percent), whites (7.0 percent), and Hispanics (10.0 percent) showed little or no change. The jobless rate for Asians was 4.9 percent in October (not seasonally adjusted), down from 7.3 percent a year earlier. (See tables A-1, A-2, and A-3.)

In October, the number of long-term unemployed (those jobless for 27 weeks or more) was little changed at 5.0 million. These individuals accounted for 40.6 percent of the unemployed. (See table A-12.)

The civilian labor force rose by 578,000 to 155.6 million in October, and the labor force participation rate edged up to 63.8 percent. Total employment rose by 410,000 over the month. The employment-population ratio was essentially unchanged at 58.8 percent, following an increase of 0.4 percentage point in September. (See table A-1.)

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) fell by 269,000 to 8.3 million in October, partially offsetting an increase of 582,000 in September. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job. (See table A-8.)

In October, 2.4 million persons were marginally attached to the labor force, little different from a year earlier. (These data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed  because they had not searched for work in the 4 weeks preceding the survey. (See table A-16.)

Among the marginally attached, there were 813,000 discouraged workers in October, a decline of 154,000 from a year earlier. (These data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.6 million persons marginally attached to the labor force in October had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities. (See table A-16.)
Hurricane Sandy had no impact:
Hurricane Sandy had no discernable effect on the employment and unemployment data for October. Household survey data collection was completed before the storm, and establishment survey data collection rates were within normal range nationally and for the affected areas. For information on how unusually severe weather can affect the employment and hours estimates, see the Frequently Asked Questions section of this release.


Hourly wages fall.  So the "job gains" comes at the expense of loss of hourly wages:

(courtesy zero hedge)

And The Not So Pretty: Record Low Rise In Average Hourly Wages

Tyler Durden's picture

As we first observed in February of 2012, we will not tire of repeating that when it comes to the jobs picture there are two key components: the quantitative, or the headline jobs and unemployment rate numbers everyone is fascinated by at 8:30 am each first Friday of the month, and the qualitative, or the number that gets far less attention, yet which is so very critical to Americans on those occasions they want to use their earned wages to purchase goods and services. And this is where the ugly side of today's jobs report came out. Because while the quantitative data was good, just as we and everyone else had expected from the final datapoint before the election (the good news there is that finally we will revert to reality following November 6), the qualitative data was ugly. How ugly? As the BLS reported, the average hourly earnings in October declined from $19.80 to $19.79 in September, and at $19.57 last October. This was only the fifth sequential decline in this series since the start of the Depression in December 2007. But more important was the Y/Y change in average hourly earnings. At 1.1% (down from 1.4% a month ago), this was the lowest Y/Y increase in this series, topping the collapse in real earnings which started in December 2008, and is now the lowest in history. In other words, more jobs may be added, but on a real basis, wages are not even keeping up with inflation!

Compared to job "gains", it is obvious that all nominal gains are at the expense of wage losses:


Dave from Denver does a great job describing the birth death plug:

(courtesy Dave from Denver/the GoldenTruth)


It's A Complete Farce

Statistics are what the powers that be want you to believe them to be, nothing more and nothing less - Kerry Lutz,  founder of the FinancialSurvivalNetwork
With regard to the quote above, Kerry Lutz had me as a segment guest on his FinancialSurvivalNetwork radio broadcast.  The topic was fraudulent Government statistics and you can listen to it here:  LINK

I honestly don't know how Obama gets up in front of crowds today and claims that the economy is getting better and that jobs are being created.  I find it exceedingly hard to believe that he doesn't know the truth about the Bureau of Labor Statistics preposterous calculation of the monthly non-farm payroll report.  I find it even harder to believe that anyone with functioning frontal lobes would believe the absurd "report."  It is a complete farce that CNBC/Fox Business/News/CNN and all other media sources discuss and debate this particular Government economic statistic as if it has any semblance of credibility.

The Government reported this morning that the economy produced 171,000 new jobs in October, well in excess of the average estimate of 125,000 - the latter number a nonsense estimate based on highly manipulated data, the former a fantasy beyond any remote rationalization.  

The primary driver of the employment report today was the nefariously mysterious "birth/death model."  For today's particular report, the birth/death model contributed 90,000 jobs to the Government's statistical stew.  Let's take a look to see exactly what this is and how it is applied.  The metric is supposed to measure employment growth created from new business formations net of business "deaths."  Here's the key definitional sentence from the BLS website:
The sample-based estimates are adjusted each month by a statistical model designed to reducea primary source of non-sampling error which is the inability of the sample to capture, on a timely basis, employment growth generated by new business formations.
To save you all the brain damage from translating that sentence, here's what it means:   "A primary source of non-sampling error" means that the Government has no possible way of figuring out how many, if any, new businesses were formed during the period of time when the Government worker bees were calling around to try and figure how many people were actually hired and fired in the previous month.  The data gathering for this comes from sampling about 1/3 of all Unemployment Insurance tax accounts.  You can read all about the birth/death model here:  LINK

Essentially, what the Government is doing is using a small universe of businesses that contribute to the unemployment insurance program to determine the extent to which new accounts were opened and closed.  Then it extrapolates out from that based on some unexplained statistical model the number of new jobs, net of jobs lost, that were created by the private sector from new business being formed and closing.  Essentially the Government is "imputing" the number of new jobs that were created from an "imputed" number of new businesses that the Government thinks might have been started during the previous month.  I am begging someone to explain to me how this can be even remotely accurate.

The word "impute" ("imputing") is actually used in the BLS' description of the birth/death model.  Here's the dictionary of the word "imputation" in reference to its use in business:  "to give (a notional value) to goods or services when the real value is unknown."  In short, to make it up when you don't know the truth and you don't have verifiable data.

The Government goes on to explain/claim that "research" indicates that contribution to jobs growth from birthing/dying businesses is "relatively small and stable."  Hmmm.   Not only is this claim completely unsubstantiated, it's makes no sense in the context of reality.  First, here's a chart of the birth/death data on a monthly basis as compiled by Zerohedge:  LINK  Does that look like the picture of stability?  Second, in the context of the standard economic cycle, it would make sense that in a growing economy a lot of new businesses would be formed and in a declining economy a lot of small businesses would die.  We've had 4 years of a stagnant economy, with little nominal growth and negative real growth (after the adjustment for real inflation).  It would be realistic to assume that new business formation during this period would be in decline and business deaths would be accelerating, especially in comparison with new business formation from say, 1995-2005.    During the latter period we had new technology mushrooming and then many finance-related businesses flourishing - both a product of Fed-driven fiat currency asset bubbles.  We've had none of that except for the expansion of the Government in the last four years.

As John Williams has pointed out many times in the past, the current Government statistical computation models were constructed during a period when we had actual growth in the system.   The models were never adjusted and revised to account for decelerating growth and actual decline, which means that the models are egregiously inaccurate.  This makes sense if you have any background in statistical/econometrics forecasting theories, which I happen to have had the misfortune of being forced to study at the University of Chicago.  Talk about something causing brain damage.

Finally, the birth/death definition page at the BLS website notes that:  "Note that the net birth/death figures are not seasonally adjusted, and are applied to the not seasonally adjusted monthly employment estimates to derive the final CES employment estimates."   To translate, what this says is that the Government conjures up a b.s. estimate for the number of jobs created by new business formation, does not make any "seasonal adjustments" to it, adds it to the unadjusted employment estimate and then runs it thru it's covert "ARIMA time series model" and produces the employment report.  This is the model that John Williams references as being entirely inaccurate.

The way I see it, the Government's monthly employment report - especially when considered in the context of what is going on in the real economy (growing number of people on food stamps, social security disability, long term unemployment insurance and student loans) - is not only completely fictitious, but the fact that everyone discusses the report in a way that gives it some modicum of credence shows that our entire system has diminished into a complete farce.


I will leave you today with this commentary by Rosenberg on the realistic assessment on the hurricane Sandy:

(courtesy David Rosenberg/Gluskin/Sheff)

Rosie On Sandy: One Economist's Realistic Hurricane Post-Mortem

Tyler Durden's picture

Tired of idiotic "expert assessments" how the destruction in the aftermath of Sandy is good for the economy and "creates wealth" (just ask these people or these how much wealthier they feel with their house halfway still underwater, or with not a bite to eat)? Then read the following brief summary by David Rosenberg what the real and full impact of Rosie on the US will be: "the surprise for Q4? A negative GDP print."
From David Rosenberg of Gluskin Sheff
As I read and digest the reports estimating the damage from the devastating storm. I sense that there are far too many economists out there who
are relying too heavily on past major hurricanes as they draw their conclusions from the current experience with Sandy.
I am concerned that as is the case so often, complacency has set in. The consensus view of a mere decimal place impact on Q4 real GDP growth from the storm seems like a pipe dream to me and has not been carefully thought out, in my opinion. Of course the devastation to the capital stock across so many dimensions affects net worth and not GDP, which measures the flow of spending in the economy, but it is indeed the spending portion that has also been seriously impaired, and a good part of it is not coming back and the inevitable pickup in spending of generators. sump pumps, cement and plywood is not going to be enough to provide an offset, at least over the next few months. Logic should prevail more than history here, because there is no appropriate historical comparison, and yes, I include Katrina in that assessment.
Yes, there will at some point be a revival in building activity and repair damage that will support spending and real GDP growth to be sure. But something tells me that this process may be delayed somewhat as the claims get tallied up and the fallout from the disaster continues. That should help out first quarter activity but from a lower level and, of course, assuming that the economy doesn't fall off any fiscal cliff.
The problem is two-fold. One is magnitude. The other is the demographic involved. With regards to magnitude, we are talking about 60 million people being affected, not three, or four or five million spread across corn and cotton fields in the south. There has not been such devastation affecting so many participants in the U.S. economy before. Were talking about New York. New Jersey, Connecticut and Philadelphia here — not Waco. When such masses do not go to the office, they then don't do what they usually do. which is buy their coffee at Starbucks. They don't line up for pizza and sushi. That spending is not coming back. They are eating at home, and pulling out the box of macaroni and the can of tuna fish they bought three months ago. Then there are movies, sundries and even vacations that are not coming back any time soon into the spending sphere. And the cabs that drive people or the sales people at the clothing store that rings up your hill that have been out of work for the past few days aren't making the money they need to buy burgers and shakes and whatever else. So the ripple effect or what economists call the multiplier also has to be taken into consideration here.
And a few days in a quarter when expressed at an annual rate is actually a much bigger deal than a few decimals on a GDP growth figure. The consensus, I think, is in for a big surprise.And keep in mind that the downtrend in mortgage apps, the general weakness in the regional manufacturing surveys, the stalling-out in the improving trend in jobless claims and the fact that chain store sales in October were already running below plan, reveals an economic backdrop that lacked momentum even before the storm took hold.
The other factor I mentioned was the demographic. We don't know how many Starbucks or Coaches there are in Waco or Galveston, but there are 255 in New York City Its not just size. It's also tastes. We are talking about the storm hitting the most free-spending consumers in America. And that is also because these are the states with the highest per capita incomes — the major states of the Northeast have on average household spending power that is 40% higher than in the deep south where storms and floods have historically been prevalent(again rendering comparisons with the past nearly totally useless when it comes to estimating near-term GDP impact). These are the same northern dilettantes who the Confederates wanted to secede from nearly 150 years ago and these high-income/high wealth folks love to shop — not only do they have the means compared to their southern brethren, but their marginal spending propensities are huge and, as such, the impact on GDP from this perspective cannot he over- exaggerated, especially the likely depressing effect on luxury goods and services.
Of course, there is this other little problem that in many cases, basic insurance coverage is not covered for floods. So either Uncle Sam ponies up here or all the economists hinging their forecasts on a boom in building activity may end up being frustrated by the length of time it takes to get started. In the meantime, the spare room in the basement at cousin Jack's place is going to be just fine (and Jack's 30-year old boomerang kids just got kicked to the recreation room) and his wife's meat loaf is going to replace the traditional one night a week out at Il Mulino.
And don't forget one other factor that I did not mention — which is the timing. Normally these major weather shocks happen in August or September. We are already in November and on the precipice of the most important time of the year for the retailing sector, which has already staffed up in anticipation of good tidings this year. This prognosis may have to be revisited because the temptation to shop at Tiffany's may be just a little bit tempered by the repair bill to your principal residence and it is also highly doubtful that cousin Jack is going to buy a tree for his family to put in the living room and one for yours in the basement.
So the surprise for Q4? A negative GDP print. The next question is whether there will be a Q1 rebound. Remember, as I mentioned yesterday, three of the major four ingredients to the NBER (National Bureau of Economic Research) recession all peaked in tandem in July. And it would be a slam-dunk four if the service sector had already followed goods-producing payrolls on the road to perdition.


Well that will do it for this week.
I hope you have a wonderful weekend and I will see you
Monday night.

all the best


Search This Blog