Saturday, November 10, 2012

Sprott does another silver purchase/EU will not act by Nov 16/2012/European industrial production implodes/

Good morning Ladies and Gentlemen:

Gold closed up Friday to the tune of $4.90 to finish the comex session at $1730.30.  Silver also had a good day finishing up 36 cents to $32.59.

For the third consecutive day, the bankers did everything in their power to knock gold down and failed miserably again. They lost all hope in trying to knock silver down as it was the star throughout the day.
The gold and silver equity shares were trampled on providing the signal to the bankers to continue to supply the  non backed paper.  As you will see below, the bankers took one look at the OI for silver and nearly chocked. It looks to me like our banker friends are beginning to lose control over the paper gold/silver game.




In other news, from Europe, it looks like the EU will not have the Troika report by Nov 12.2012.  According to Mark Grant this is a ploy as they want Greece out of the EU whether voluntarily or by force.
In economic news industrial production throughout Europe imploded with France showing a massive drop of 2.7% month over month and Italy coming in at a drop of 1.5% month over month.  Greece a whopping 7.3% drop!!  This initially caused the Euro/USA cross to plummet and then all European bourses fell into a sea of red.  It recovered a bit with the rally in NY.

On this side of the pond, Eric Sprott again has his sights fixed on the bankers as he again seeks out silver metal.  This is a dagger to our bankers as it removes physical silver from the market and causes massive headaches to our bankers who have a hundred fold of obligations against that one oz of physical metal.

We have these and many other stories to cover but first...........................................


Let us now head  to the comex as assess trading trading on Friday.

The total comex gold open interest rose by 2264 contracts on Friday from 450,393 to rest the weekend at 452,657. This print is of course, basis Thursday night after we had our second day in a row of an outside day reversal. This shows the bankers are digging in their heels offering  non backed paper as more longs enter the frey. The non active November gold contract saw it's OI rise by 21 contracts.  We had only 4 delivery notices filed on Thursday so in essence we gained 25 contracts or an additional 2,500 oz of gold will stand in November.  The big December contract saw it's OI fall by 7,712 contracts from 269,950 to 262,238 as the paper players rolled into February.  The estimated volume today was quite good at 175,850.  The confirmed volume on Thursday was even better at 197,696.

The total silver comex OI rose an astonishing 3,809 contracts, from 137,816 up to 141,625.  We are now close to multi year highs on silver OI.  This no doubt is causing some real consternation to our bankers as we are getting close to first day notice in silver in December.  (remember that December is the only month of the year that we have both silver and gold with an active delivery).  The bankers are surely having their problems trying to contain silver as it rose today and gold was held in check.  You can be sure that we will see some midnight oil sessions this weekend as our bankers try and figure out what to do with respect to silver.  The non active silver contract month of November saw it's OI rise by 2 contracts, from 27 to 29.  We had 10 delivery notices on Thursday so again we gained 12 contracts or an additional 60,000 silver ounces will stand for delivery.  The big December contract month saw it's OI fall by only 771 contracts from 66,072 down to 65,301 as many are still hanging in their refusing so far to roll to a future month.  The estimated volume today was quite large at 58,716.  The confirmed volume yesterday was also large at 57,768.
Our bankers surely have their hands full dealing with this massive onslaught of demand for the silver metal.




Comex gold figures 

Nov 9-.2012   

 






Ounces
Withdrawals from Dealers Inventory in oz
36,166.427(Scotia)
Withdrawals from Customer Inventory in oz
 2,161.003(HSBC,JPM)
Deposits to the Dealer Inventory in oz
nil
Deposits to the Customer Inventory, in oz
nil
No of oz served (contracts) today
 10  (1000 oz)
No of oz to be served (notices)
40  (4000 oz)
Total monthly oz gold served (contracts) so far this month
301  (30,100 oz)
Total accumulative withdrawal of gold from the Dealers inventory this month
36,166.427
Total accumulative withdrawal of gold from the Customer inventory this month


 
38,327.43
Friday, we  had huge activity for a change inside the gold vaults.

The dealer had no deposit but did have one withdrawal.

i) dealer withdrawal: a biggy 36,166.427 oz out of Scotia  (1.12 tonnes of gold)



The customer had no  deposit but  had two withdrawals:

i) out of HSBC:  450.10 oz
ii) out of JPM:  1710.903 oz


total customer withdrawal:  2161.003 oz






Adjustments: none










Thus the dealer inventory rests tonight at 2.551 million oz (79.34) tonnes of gold.

The CME reported that we had   10 notices  filed  or 1000 oz of gold. The total number of notices filed so far this month is thus 301 notices or 30,100 oz of gold.
To determine what is left to be served upon, I take the OI standing for November (50) and subtract out Friday's notices (10) which leaves us with 40 notices or 4,000 oz left to be served upon our longs.

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

30,100 oz (served)  +  4,000 oz (to be served upon)  =  34,100 oz (1.06 tonnes of gold).  we gained 2500 oz of additional gold standing for November.

Silver:

Nov 9.2012:

Silver
Ounces
Withdrawals from Dealers Inventorynil
Withdrawals from Customer Inventory 554,126.129 (HSBC,JPM)
Deposits to the Dealer Inventorynil
Deposits to the Customer Inventory935,196.800 oz(CNT/JPM)
No of oz served (contracts)4  (20,000 oz)
No of oz to be served (notices) 25 (125,000 oz)
Total monthly oz silver served (contracts)40  (200,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this monthnil
Total accumulative withdrawal of silver from the Customer inventory this month2,298,057.1

Friday, we had huge activity inside the silver vaults.
 we had no dealer deposit and no dealer withdrawal.



The customer  had two  deposits :

i) Into CNT:  exactly 149,789.000 oz
(again CNT deposits are an exact number with decimals at 000..maybe a little suspicious.)
ii) Into JPM:  785,407.80 oz

total deposit;  935,196.800 oz



we had the following customer withdrawals:

i) Out of HSBC:  10,001.997 oz
ii) Out of JPM:  544,124.132 oz





total customer withdrawal:  554,126.129 oz



we had 0 adjustments:






Registered silver remains this weekend  at :  36.408 million oz
total of all silver:  143.006 million oz.



The CME reported that we had 4 notices filed for 20,000 oz . The total number of silver notices filed  this month is thus 40 contracts or 200,000 oz of silver.  

To determine the number of silver ounces standing for November, I take the OI standing for November (29) and subtract out Friday's notices (4) which leaves us with 25 notices or 125,000 oz ready to be served upon.

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

200,000 oz (served) +  125,000 oz ( to be served upon)  =  325,000 oz
we  gained 60,000 oz of additional  silver ounces standing in the November delivery month.


end 

At 3;30 pm the CME released it's COT report.
We will now head over to the Gold COT and see what we can glean from it:

Gold COT:




Gold COT Report - Futures
Large Speculators
Commercial
Total
Long
Short
Spreading
Long
Short
Long
Short
196,504
36,331
36,245
144,788
352,530
377,537
425,106
Change from Prior Reporting Period
-11,028
-979
6,894
442
-14,580
-3,692
-8,665
Traders
209
60
72
55
47
298
154


Small Speculators




Long
Short
Open Interest



69,617
22,048
447,154



-3,896
1,077
-7,588



non reportable positions
Change from the previous reporting period

COT Gold Report - Positions as of
Tuesday, November 06, 2012

Quite a report:  remember that this report is from Tuesday Oct 30 through to Tuesday Nov 6)

Our large speculators:
Those large speculators that have been long in gold got fleeced again to the tune of a massive 11,028 contracts. (they  sold 11,028 contracts from their long side)
Those large speculators that have been short in gold covered a very tiny 979 contracts.
Our large specs are not happy campers as they fell victim to the criminal activity of the bankers again.

Our commercials;
Those commercials that have been long in gold and are close to the physical scene added a tiny 442 contracts to their long side.
Those commercials that have been perennially short in gold covered another massive 14,580 contracts from their short side.

Our small specs;
Those small specs that have been long in gold pitched 3896 contracts from their long side.
Those small specs that have been short in gold added another 1077 contracts to their short side.
The small specs are not happy campers as well with weekend.

Conclusion:  hugely bullish for gold and this is probably the reason why we saw such a rise in gold this week.  The commercials went net long this week again to the tune of 15,022 contracts



and now Silver COT, let us see if there is any difference:


Silver COT Report: Futures
Large Speculators
Commercial
Long
Short
Spreading
Long
Short
44,230
10,111
30,677
38,726
88,404
-2,552
-454
3,624
1,787
-2,267
Traders
74
35
44
34
41
Small Speculators
Open Interest
Total
Long
Short
139,313
Long
Short
25,680
10,121
113,633
129,192
-1,131
825
1,728
2,859
903
non reportable positions
Positions as of:
128
105

Tuesday, November 06, 2012
  © SilverSeek.com  


Our large speculators:

Those large specs that have been long in silver pitched a rather large 2552 contracts from their long side and thus were fleeced by the bankers once again.

Those large specs that have been short in silver covered 454 contracts from their short side and they are very happy they did.

Our commercials:

Those commercials that are long in silver and close to the physical scene added a rather large 1787 contracts to their long side.

And now for our famous commercials who have been perennially short in silver:
they covered 2267 contracts from their short side, fleecing our large specs.

Our small specs;

Our small specs that have been long in silver, pitched a rather large 1131 contracts from their long side and these guys are not happy campers this weekend.
Our small specs that have been short in silver, added another 825 contracts to their short side and they too are not too happy.

Conclusion:  Hugely bullish as our commercials went net long this week to the tune of 4054 contracts.



end 




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 10.2012




Total Gold in Trust

Tonnes:1,338.71

Ounces:43,040,927.06

Value US$:74,782,395,223.22






Nov 8.2012:




TOTAL GOLD IN TRUST

Tonnes:1,339.62

Ounces:43,069,995.75

Value US$:73,918,506,552.89






nov 7.2012:


TOTAL GOLD IN TRUST

Tonnes:1,337.21

Ounces:42,992,478.82

Value US$:73,710,981,765.66






Nov 6.2012:







TOTAL GOLD IN TRUST

Tonnes:1,334.49

Ounces:42,905,271.36

Value US$:72,521,752,497.25






Nov 5.2012:



TOTAL GOLD IN TRUST

Tonnes:1,332.38

Ounces:42,837,442.99

Value US$:72,086,567,425.32






Nov 2.2012:


TOTAL GOLD IN TRUST

Tonnes:1,336.30

Ounces:42,963,411.10

Value US$:72,365,458,247.71






Nov 1.2012


TOTAL GOLD IN TRUST

Tonnes:1,336.30

Ounces:42,963,411.10

Value US$:73,708,857,899.26






Oct 31.2012:


TOTAL GOLD IN TRUST

Tonnes:1,336.30

Ounces:42,963,411.10

Value US$:73,827,815,056.94







Oct 30.2012


TOTAL GOLD IN TRUST

Tonnes:1,336.30

Ounces:42,963,411.10

Value US$:73,702,957,603.51








we  lost .91 tonnes of gold on Friday which followed a gain of 2.41 tonnes of  gold at the GLD on Thursday which followed a gain of 2.71 tonne on Wednesday.
My goodness, these guys are busy!!  



end 

  



And now for silver: 



Nov 10.2012:



Ounces of Silver in Trust323,935,348.500
Tonnes of Silver in Trust Tonnes of Silver in Trust10,075.52



Nov 8.2012:



Ounces of Silver in Trust320,934,008.300
Tonnes of Silver in Trust Tonnes of Silver in Trust9,982.16



nov 7.2012:


Ounces of Silver in Trust320,934,008.300
Tonnes of Silver in Trust Tonnes of Silver in Trust9,982.16






Ounces of Silver in Trust320,546,726.700
Tonnes of Silver in Trust Tonnes of Silver in Trust9,970.12






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



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


we  gained a monstrous 3.001 million oz of silver into the SLV.
these guys were busy campers yesterday as well.
 


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 5.7 percent to NAV in usa funds and a positive 5.8%  to NAV for Cdn funds. ( Nov 10.2012)   

2. Sprott silver fund (PSLV): Premium to NAV fell to 2.55% to NAV  Nov 10/2012  :
3. Sprott gold fund (PHYS): premium to NAV  fell to 2.63% positive to NAV Nov 10.2012. 

 Now we witness the Central fund of Canada  gaining big time in its positive to NAV, as we now see CEF at a positive 5.7% in usa and 5.8% in Canadian.This fund is back in premiums to it's former self and it is  . 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.

 


end 


Here are you major physical stories:


 Here is your early morning trading of gold and silver from Europe.

Of note:

1. Japan again widened its QE doing the opposite of England.
2.  the interview with Max Keiser is interesting.


(courtesy Goldcore)





Precious Metals Set For Higher Weekly Close And Seasonal Year End Rally

Tyler Durden's picture




Precious Metals Set For Higher Weekly Close And Seasonal Year End Rally
Today’s AM fix was USD 1,732.75, EUR 1,362.23, and GBP 1,085.55 per ounce.
Yesterday’s AM fix was USD 1,715.00, EUR 1,347.42, and GBP 1,075.84 per ounce.
Silver is trading at $32.19/oz, €25.42/oz and £20.27/oz. Platinum is trading at $1,560.50/oz, palladium at $613.00/oz and rhodium at $1,100/oz.
Gold rose $14.50 or 0.84% in New York yesterday and closed at $1,732.80. Silver dropped to $31.62 in London, then hit a high of $32.412/oz in New York and finished with a gain of 1.76%.
Gold is 3.35% higher and silver 4.53% higher this week in US dollars in the aftermath of Obama's re-election. 
Gold in euros looks set to break out above €1,400/oz and is 4.1% higher and in sterling gold has risen 3.7% so far this week. Silver is 5.25% higher in euros and 4.8% higher in pounds.
Gold and silver are set for higher weekly closes in all fiat currencies which may negate the recent bearish short term technical picture and set the precious metals up for the traditional year end rally. 
The data clearly shows that November is gold's strongest month and one of silver's strongest months. December, January and February are also strong months - prior to a period of weakness is often seen in March.
Gold edged up on Friday heading for its first weekly gain in five weeks as Obama was re-elected with the highest jobless rate since US President FDR in 1936.
The ECB and BOE left interests unchanged as expected.  However, Mario Draghi commented that the euro zone economy shows negligible signs of recovering before the year-end despite easing financial market conditions. 
The Fed’s ‘QE to infinity’ policy remains and it continues its programme from October 24th to purchase $40 billion per month of mortgage debt and is committed to hold interest rates near zero until mid-2015.

Gold in EUR – 4 Weeks (Bloomberg)

The Bank of Japan on October 30th widened its asset-purchase program for the 2nd time in two months, increasing it by 11 trillion yen to $128 billion.
The US fiscal cliff and geopolitical tensions with Iran (Iranian warplanes fired on US drones last week) only heighten the risk and uncertainty in the markets and are driving safe haven money into gold.
China releases various economic data today starting at 0130 GMT with CPI & PPI for October.
NEWSWIRE
(Bloomberg) -- China Starting Gold ETPs Would Mean Demand Gain, WGC’s Liu SaysETPs would give domestic institutions, including pension funds, more opportunities to invest in the precious metal, Roger Liu, the director of Far East investments at the World Gold Council, said today at a conference in New York.
China currently has no domestic exchange-traded products backed by gold
(Bloomberg) – Gold Should Be Thought of as Insurance Policy, Wickwire SaysInvestors should look at gold as an insurance policy for other financial assets, Joseph Wickwire, who manages $4.5 billion at Fidelity Investments, said today at the Bloomberg Portfolio Manager conference in New York.
Macroeconomic imbalances, reflationary policies and geopolitical tensions will drive prices higher in the long term, Wickwire said. Investors with risk-tolerant portfolios should hold the metal to hedge against volatility in other markets, he said.
“Gold pays off when stocks, bonds and currencies disappoint,” Wickwire said. “A little goes a long way.”
(Bloomberg) -- Pension Funds in Japan Increasing Investment in Gold, WGC Says
Jason Toussaint, managing director at the producer-funded World Gold council, said in an interview in New York.
Seeing increased dialogues among U.S. pension funds to look at commodities, including gold, as an investment, Toussaint said.
NEWS
Gold jumps over $10 on Iran fears – Fin 24

COMMENTARY
$100 Silver! Yes, But When? – Silver Seek
end 



Ben Traynor of Bullion vault also weighs in on gold/silver trading this week:

Points of interest:

i) "gold" inflows into the ETF's amounted to 10.5 tonnes in the last 3 days.
ii)  gold traders more bullish now as compared to August 24. 
iii) European thinking is that funding for Greece is over.
iv) Spain still has not asked for help despite higher unemployment which taxes the state with benefit payments.  Spain has 100 billion euros of debt expiring debt year.  On top of that its banks need approximately 200 billion euros to replace the massive run on its banks.

(courtesy Adrian Ash/Bullion vault.)





Gold Headed for Weekly Gain "Despite Dollar Strength" as Survey Shows Most Traders Bullish on Gold



By: Ben Traynor, BullionVault


-- Posted Friday, 9 November 2012 | Share this article | Source: GoldSeek.com

London Gold Market Report

SPOT PRICES in the wholesale gold bullion market traded above $1730 an ounce Friday morning in London, having earlier touched a two-week high, while stocks fell and the Dollar and US Treasury bonds gained, with analysts suggesting weak growth and monetary policy are likely to persist.

Silver bullion traded close to $32.30 an ounce for most of this morning, 4.3% up on the week, while oil and copper prices ticked lower.

"Precious metals continue to push higher, with the rest of the complex being led by gold," says Marc Ground, commodities strategist at Standard Bank.

"In spite of Dollar strength, the market appears to continue to take comfort from Obama's re-election and the implied support this gives to continued monetary accommodation from the Fed."

Heading into the weekend, gold bullion looks set to record its first weekly gain since the start of October, having risen more than 3% since the start of the week.

"Renewed inflows into gold ETFs are responsible for the increase in price," says a note from Commerzbank, "having totaled 10.5 tonnes in the past three days alone."

Gold's 1.7% jump on Tuesday could have been caused by a gold purchase made by the Soros Fund, Standard Bank's Yuichi Ikemizu writes in his daily 'Bruce Report' today, citing a rumor circulating among New York traders.

Gold traders are at their most bullish since August 24, according to newswire Bloomberg, which reports that 25 of 33 analysts polled say they expect gold bullion to rise next week. Friday August 24 saw the first of five consecutive weekly gains for spot gold.

Here in Europe, the European Central Bank is "by and large, done" with assisting Greece, ECB president Mario Draghi told a press conference Thursday.

"On Greece, we certainly cannot do monetary financing," Draghi said, though he added that the ECB did agree a part of Greek debt restructuring back in February that it will forego profits on holdings of Greek debt bought under its Securities Markets Programme.

"What happens is that these profits naturally accrue to the central banks that are members of the Eurosystem...[who may then] transfer these profits to the governments and then it is up to the governments to decide whether they want to re-use these profits for Greece. And the governments actually committed themselves to do so at that time."

"Markets continue to trade on a weak note given lingering [US] fiscal cliff concerns and worries about whether Greece will get the funding it needs to meet debt payments" says Nick Verdi, Singapore-based currency strategist at Barclays.

Draghi also answered a series of questions on whether he would like to see Spain request a bailout by saying it is up to the Spanish government and not the ECB. The ECB's sovereign bond buying program, Outright Monetary Transactions, requires a government to have agreed to an adjustment program before the ECB will buy its bonds in the secondary market.

Benchmark yields on 10-Year Spanish government bonds touch a one-month high this morning, a day after Spain auctioned longer-term bonds for the first time in 18 months, according to newswire Reuters.

"The five-year sale was awful," said one trader, citing a wide discrepancy between the highest yield accepted for the bond and the average yield.

Spain has over €100 billion of debt due to mature next year.

The ECB voted to leave its key interest rate on hold at 0.75% Thursday.

"We have penciled in an interest-rate cut in December," says Howard Archer, economist at research firm IHS Global Insight.

The Euro fell to a one-month low against the Dollar Friday, while Euro gold prices traded within 2% of last month's all-time high.

Elsewhere in Europe, German inflation held steady at 2% last month, according to figures published this morning.

Over in China, industrial production grew by 9.6% in the year to October, official figures published Friday show, up on the previous month and a stronger acceleration that most analysts forecast.

Retails sales growth was also stronger-than-expect last month at 14.5% year-on-year – up from 14.2% in September.

"The domestic economy is evolving in a good direction," China's central bank governor Zhou Xiaochuan said Thursday, ahead of the release of the above data.

"The key question for investors," says Bank of America Merrill Lynch economist Lu Ting, "is whether China's economic growth has truly bottomed out. Based on October data… the answer is firmly yes."

China's consumer price index meantime shows inflation fell to 1.7% last month, down from 1.9% a month earlier.

"The October CPI confirms that inflation is currently not a main concern for the government," says Nomura analyst Zhang Zhiwei.

"Policy easing will likely continue in Q4 to support a growth recovery."

Chinese gold bullion demand is expected to hit 860 tonnes this year, a 1% increase on 2011, according to Philip Klapwijk, global head of metals analytics at consultancy Thomson Reuters GFMS.

"China will overtake India [this year]," Klapwijk told the online Reuters Global Gold Forum Thursday, "both in overall demand terms and as the world's largest jewelry market."

Ben Traynor

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben writes and presents BullionVault's weekly gold market summary on YouTube and can be found on Google+

(c) BullionVault 2012



end


You must see this interview with James Turk being interviewed by Lauren Lyster.
Gold is the ultimate money.  However it is physical metal that is money not paper gold.  He describes the risk of a counterparty risk of a default due to the huge number of paper gold obligations underwritten on increasingly scarce gold metal

(courtesy  James Turk/Lauren Lyster)



GoldMoney's James Turk interviewed on Russia Today's 'Capital Account'

 Section: 
8a ET Friday, November 9, 2012
Dear Friend of GATA and Gold:
GoldMoney founder and GATA consultant James Turk was interviewed Wednesday by Lauren Lyster on her "Capital Account" program on the Russia Today network, discussing gold's superiority to other currencies, the Federal Reserve's failure to deliver on its promise of "quantitative easing" in recent months, and the counterparty risk of "paper gold." Turk's interview comes in the first 13 minutes of the program as posted at YouTube here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

end 

You will love this:

(courtesy Von Greyerz/Kingworldnews) 



Who needs the Mayan calendar? Here's von Greyerz's forecast

 Section: 
9:35p ET Friday, November 9, 2012
Dear Friend of GATA and Gold:
Gold fund manager Egon von Greyerz gets apocalyptic today in an interview with King World News, predicting exchange controls, hyperinflation, the collapse of stock and bond prices, and cats and dogs sleeping together. Of course we'll still probably have some remnants of the good old days, with CPM Group's Jeff Christian and Kitco's Jon Nadler still recommending selling gold, but von Greyerz thinks it should be bought and stored on another planet, or at least in another country. An excerpt from his interview is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.





I would like all of you to read the following Dr Jeffrey Lewis piece as he describes in layman's terms the anatomy of how the crooks fleece longs at the comex:

(courtesy Dr Jeffrey Lewis)



Gold and Silver Futures: Broken Price Discovery


-- Posted Friday, 9 November 2012 | Share this article | Source: GoldSeek.com
By Dr. Jeffrey Lewis


Most futures traders have learned to accept or pay cash in exchange for rolling their futures contracts out when delivery approaches. Just about everybody now knows that physical delivery cannot actually happen in the silver market.

Not even close to enough actual metallic silver exists to satisfy all of the outstanding futures contracts. Those who trade futures are captured by the paper market and would rather not be part of a default – so they ultimately lose.

Most Traders Stay Silent About Manipulation

Traders typically depend on profiting from a market system as it currently exists, and this explains why so many traders, even the most public and vocal among them, tend to remain silent about the unbalanced structure of the paper gold and silver futures market.

Some traders just turn a blind eye to the situation, while some of them even adamantly insist that the impact of manipulation on the silver market is negligible.

Perhaps if you are a deep pocket long trader who looks the other way and plays the chances of receiving premium over position as an incentive to roll the contract, some money could be made. There have been rumors of this happening - although unconfirmed.

Price Suppression Facilitated by Futures Market

Nevertheless, the fundamentally unbalanced process of the seller of a futures contract being able to make a cash payout in lieu of delivering physical metal simply facilitates price suppression.

Not-for-profit agencies that can print enough Dollars to pay for any trading losses they might incur can use this mechanism to keep silver and other strategic commodity prices artificially low.

As long as such agencies continue to be able to cover their trading losses with manufactured and intrinsically worthless paper or electronic cash, the legitimacy or integrity of the COMEX and the Chicago futures exchanges can be maintained a little while longer.

As GATA and others have been pointing out for years, most miners are also complicit in this price suppression process, as well as those who business it is to evaluate and recommend them.

Key Data Releases Still Shock the Market

Meanwhile, momentum traders will remain subject to what happens on almost every major data release. Consider last week's Non-Farm Payrolls release as an example. One minute before the data release all orders are pulled and trading volume is virtually non-existent in the barren pre-release market.

As the data is released, the algorithmic traders get it first, so they slam large orders into the market. A second or so later, real traders respond by adding to these orders at market and the computerized algorithms start to sweep in their profits. This drives the price as stop loss orders are triggered and slower or more cautious traders start to enter the market.

For the last NFP release, it was well known that the number would be pretty much the same as October’s result. Revisions would also not matter much, now that the U.S. election is over. Nevertheless, when the release actually happened, the gold and silver got slammed.

All of this trading occurs in parallel with the historically loose monetary policy adventure devoted to debasing the U.S. Dollar. Not only will this policy lead to further mispricing for just about everything, but its primary risk will be to awaken the beast of hyperinflation in the United States.

For more articles like this, and to stay updated on the most important economic, financial, political and market events related to silver and precious metals, visit http://www.silver-coin-investor.com



'
end




The German gold story just will not go away.

Zero hedge uncovers a memo in the vaults of the Bank of England whereby in 1968 the B. of E complained to the USA of sub standard bars.

This is an amazing story.

Almost all of the USA gold at Fort Knox is official gold but of coin melt variety. The USA melted all of the 1933 double eagles and single eagles plus other years and also confiscated many citizens gold and this was melted into bars with purity of 90%.  Good delivery bars are .999%. The weights were supposedly accurate.  If the bars weighed 110.2 oz, they would record 110.1 x 90% or 99.09 oz.

The Federal Reserve Bank of NY was basically a foreign depository to hold ear- marked gold of nations.  The bars were always good delivery bars but kept in NY due for safety issues.
How on earth did coin melt gold arrive at the Federal Reserve Bank of NY? 


the plot thickens....

(courtesy zero hedge)


end





-END-


Exclusive: Bank Of England To The Fed: "No Indication Should, Of Course, Be Given To The Bundesbank..."

Tyler Durden's picture




Over the past several years, the German people, for a variety of justified reasons, have expressed a pressing desire to have their central bank perform a test, verification, validation or any other assay, of the official German gold inventory, which at 3,395 tonnes is the second highest in the world, second only to the US. We have italicized the word official because this representation is merely on paper: the problem arises because no member of the general population, or even elected individuals, have been given access to observe this gold. The problem is exacerbated when one considers that a majority of the German gold is held offshore, primarily in the vaults of the New York Fed, and at the Bank of England - the two historic centers of central banking activity in the post World War 2 world.
Recently, the topic of German gold resurfaced following the disclosure that early on in the Eurozone creation process, the Bundesbank secretly withdrew two-thirds of its gold, or 940 tons, from London in 2000, leaving just 500 tons with the Bank of England. As we made it very clear, what was most odd about this event, is that the Bundesbank did something it had every right to do fully in the open: i.e., repatriate what belongs to it for any number of its own reasons - after all the German central bank is only accountable to its people (or so the myth goes), in deep secrecy. The question was why it opted for this stealthy transfer.
This immediately prompted rampant speculation within various media outlets, the most fanciful of which, of course, being that the Bundesbank never had any gold to begin with and has been masking the absence all along. The problem with such speculation is that, while it may be 100% correct and accurate, there has been not a shred of hard evidence to prove it. As a result, it is merely relegated to the echo chamber periphery of "serious media" whose inhabitants are already by and large convinced that all gold in the world is tungsten, lack of actual evidence to validate such a claim be damned (just like a chart of gold spiking or plunging is not evidence that a central bank signed an trade ticket, ordering said move), and in the process delegitimizing any fact-basedinvestigations that attempt to debunk, using hard evidence, the traditional central banker narrative that the gold is there and accounted for.
And hard evidence, or better yet a paper trail of inconsistencies, is absolutely paramount when juxtaposing the two most powerful forces of our times: i) the central banking-led status quo (which is de facto the banker-led oligarchy whose primary purpose in the past several centuries has been to accumulate as much as possible of the hard asset-based fruits of people's labor, who toil in exchange for "money" created out of thin air - a process which could be described as not quite voluntary slavery, but the phrase would certainly suffice), and ii) "everyone else", especially when "everyone else" still believes in the supremacy of democratic forces, accountability, and an impartial legal system (three pillars of modern society which over the past 4 years we have experienced time and again have been nothing but mirages). Because without hard evidence, not only is the case of the people against central bankers non-existent, even if conducted in a kangaroo court co-opted by the banker-controlled status quo, it becomes laughable with every iteration of progressively more unsubstantiated accusations against the central banking cartels.
Finally, when it comes to cold, hard facts, which expose central banks in misdeed, even the great central banks have to be silent silent, as otherwise the overt perversion of justice will blow up the mirage that modern society lives in a democratic, laws-based world will be torn upside down.
And while others engage in click-baiting using grotesque hypotheses of grandure without any actual investigation, reporting or error and proof-checking to build up hype and speculation, which promptly fizzles and in the process desensitizes the general public and those actually undecided and/or on the fences about what truly goes on behind the scenes, Zero Hedge travelled (metaphorically) in space - to London, or specifically the Bank of England Archives - and in time, to May 1968 to be precise.
While there we dug up a certain memo, coded C43/323 in the BOE archives, official title "GOLD AND FOREIGN EXCHANGE OFFICE FILE: FEDERAL RESERVE BANK OF NEW YORK (FRBNY) - MISCELLANEOUS", dated May 31, 1968, written by a certain Mr. Robeson addressed to the BOE's Roy Bridge as well as its Chief Cashier, and whose ultimate recipient is Charles Coombs who at the time was the manager of the open market account at the Fed, responsible for Fed operations in the gold and FX markets.
This memo, more than any of the other spurious and speculative accusation about Buba's golden hoard, should disturb German citizens, and of course the Bundesbank (assuming it was not already aware of its contents), as the memo lays out, without any shadow of doubt, that the BOE and the Fed, effectively conspired to feed the Bundesbank due gold bars that were of substantially subpar quality on at least one occasion in the period during the Bretton-Woods semi-gold standard (which ended with Nixon in August 1971).
The facts:  
At least two central banks have conspired on at least one occasion to provide the Bundesbank with what both banks knew was "bad delivery" gold - the convertible reserve currency under the Bretton Woods system, or in other words, to defraud - amounting to 172 barsThe "bad delivery" occured even as official gold refiners had warned that the quality of gold emanating from the US Assay Office was consistently below standard, and which both the BOE and the Fed were aware of. Instead of addressing the issue of declining gold quality and purity, the banks merely covered up the refiners' complaints 
It is this that the Bundesbank, the German government, and the German people should be focusing on. If in the process this means completely ridiculing the Buba's "she doth protest too much" defense strategy that what is happening in the media is a "phantom debate" as per Andreas Dobret's recent words, so be it. In fact, one may be well advised to ignore anything Buba has said on this matter, because in attempting to hyperbolize the matter out of irrelevancy, the Buba is now cornered and will have no choice now but to explain just what the true gold content of the gold even in its possession is, let alone that which is allocated to the Buba account 50 feet below sea level, underneath the infamous building on Liberty 33.
Full May 1968 memo from the BOE to the NY Fed: highlights ours:
MR. BRIDGE
THE CHIEF CASHIER

U.S. Assay Office Gold Bars

1.  We have from time to time had occasion to draw the Americans’ attention of the poor standards of finish of U.S. Assay Office bars. In addition in 1961 we passed on to them comments from Johnson Matthey to the effect thatspectrographic examination did not support the claimed assay on one bar they had so tested (although they would not by normal processes have challenged the assayand that impurities in the bar included iron which caused some material to be retained on the sides of crucible after pouring.

2. Recently, Johnson Matthey have put 172 “bad delivery” U.S. Assay Office bars into good delivery form for account of the Deutsche Bundesbank. These bars formed part of recent shipments by the Federal Reserve Bank to provide gold in London in repayment of swaps with the Bundesbank. The out-turn of the re-melting showed a loss in fine ounces terms four times greater than the gross weight loss. Asked to comment Johnson Matthey have indicated verbally that:-

(a) the mixing of “melt” bars of differing assays in one “pot” could produce a result which might be a contributing factor to a heavier loss in fine weight but they did not think this would be substantial ;

(b) a variation of .0001 in assay between different assayers is an extremely common phenomenon;

(c) over a long period of years they had had experience of unsatisfactory U.S. assays

3. It is not, however, possible to say that the U.S. assays were at fault because Johnson Matthey did not test any of the individual bars before putting them into the pot.

4. The Federal Reserve Bank have informed the Bundesbank that adjustments for differences in weight and refining charges will be reimbursed by the U.S.Treasury.

5. No indication should, of course, be given to the Bundesbank, or any other central bank holder of U.S. bars, as to the refiner’s views on them. The peculiarity of the out-turn will be known to the Bundesbank: it has so far occasioned no comment.

6. We should draw the attention of the Federal to the discrepancy in this (and any similar subsequent such) result and add simply that the refiners have made no formal comment but have indicate that, although very small differences in assay are not uncommon, their experience with U.S. Assay Office bars has not been satisfactory.

7. We hold 3,909 U.S. Assay Office bars for H.M.T. in London (in addition to the New York holding of 8,630 bars). After the London gold market was reopened in 1954 we test assayed the bars of certain assayers to ensure that pre-war standards were being maintained. It might be premature to set up arrangements now for sample test assays of U.S. Assay Office bars but if it appeared likely that the present discontent of the refiners might crystalise into formal complain we should certainly need to do this.  In the meantime I would recommend no further action.

31st May 1968

P.W.R.R.
To summarize: Bank of England discovers discrepancies with US Assay Office gold bars, notifies the NY Fed that its gold bars have major "bad delivery" issues, but, and this is the punchline, on this occasion, we'll keep it quiet, because the Bundesbank got these bars. This is merely one documented assay occasion: one can imagine that of the hundreds of thousands of gold bars in official circulation, the "good delivery" quality of bars outside of the US, and perhaps BOE, official holdings has progressively declined over the decades of Bretton Woods. One can also only imagine what has happened to all those "good delivery" bars currently held by the Fed as custodian at the NY Fed. Literally: imagine. Because there is no way to check what the real gold consistency of these gold bars is, and whether the refiners found ongoing future inconsistencies with "good delivery" standards of bars handed off to other "non-core" central banks. And, yes, without further evidence the above is merely speculation.
As to the remaining relevant facts: the US ran out of good delivery gold in March 1968 and only had coin bars remaining. Which is why it closed the gold pool and went to a two-tier price system. The Bundesbank went on to cover some of the outstanding gold debts of the Fed to the gold pool. Subsequently, the US then did several deals with the BOC to get a substantial amount of gold to pay back the Bundesbank which was sent over to England from March until June 1968. One can, again, only speculate on the quality of said gold. The Fed then created unsettled accounts to account for these transfers between itself and the Buba.
In light of the above facts and evidence, one can see why the Buba is doing all in its power to avoid the spotlight being shone on the purity of its gold inventory: after all the last thing the German central banks would want is someone to go through the publicly available archived literature, to put two and two together, and figure out that it does not take one massive "rehypothecation" (see "to Corzine") event for German gold credibility to be impaired: all it takes is death from a thousand micro dilutions over the decades to get the same end result. Because chipping away one ounce here, one ounce there for years and years and years, ultimately adds up to a lot.
We eagerly look forward to the Buba's next iteration of self-defense. We can only hope that this one does not include a reference to a "phantom debate", to "East German terrorist Simon Gruber" or to Goldfinger, as it will merely further destroy any remaining credibility the Bundesbank may have left in this, or any other, matter.
* * *
Look forward to more archive-based disclosure ot what may have happened to Buba's, and not only, gold in the coming days and weeks.

end

Chris Powell comments on the above:



Zero Hedge: Fed, Bank of England deceived Bundesbank on coin-melt bars in 1968

 Section: 
9:27p ET Friday, November 9, 2012
Dear Friend of GATA and Gold:
Citing Bank of England records, Zero Hedge reveals tonight that as the London Gold Pool was collapsing in 1968 the Federal Reserve and the Bank of England conspired to conceal from the German Bundesbank the deficient gold content of U.S. gold bars, apparently made from coin melt, that were being transferred to the Bundesbank to conclude gold swaps. This is, Zero Hedge says, another reason why the Bundesbank might want to cut off inquiry into the security of its foreign-vaulted gold. Zero Hedge's report is headlined "Bank of England to the Fed: 'No Indication Should, of Course, Be Given to the Bundesbank" and it's posted here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

end






Our CME group is not happy with the new swap rules:

(courtesy Tom Schoenberg/Bloomberg)


CME Group Sues to Block Dodd-Frank Swap Reporting Rules

By Tom Schoenberg - Nov 9, 2012 12:01 AM ET


CME Group Inc. (CME), the world’s largest futures market, sued the U.S. Commodity Futures Trading Commission, challenging cleared-swaps reporting requirements imposed under the Dodd-Frank financial reform legislation.
CME, in a lawsuit filed yesterday in federal court in Washington, seeks a permanent injunction against rules requiring registered derivatives clearing organizations, or DCOs, such as itself, to provide nonpublic reports of cleared swap transactions to a new swap data repository established under the act. CME has until Nov. 13 to comply.
The rules "would impose costly, cumbersome, and duplicative requirements on DCOs," CME said in the complaint.
CME said it objects to the reporting requirement because the data is already "directly and readily available" to the CFTC through the exchange. Chicago-based CME calls the rule unnecessary and duplicative and argues that the commission failed to say whether it had conducted a cost-benefit analysis of the regulation.
The case is one of several brought by the financial industry as it pushes back against tighter regulations passed in the wake of the 2008 credit crisis. In September, a federal judge rejected a commission rule curbing derivatives speculation.

Steve Adamske, a CFTC spokesman, declined to comment on the lawsuit.


end




The following is another kiss of death to the bankers as Eric Sprott seeks more silver metal of approximately 842,000 oz of silver.  There is around 100 obligations underwritten against each single oz of silver.  the withdrawal of 842,000 oz of silver causes massive pain to the bankers as they must draw in many of their short positions.  We owe many thanks to Sprott who is driving a spike into the hearts of our ruthless bankers.

(courtesy Sprott Asset Management)




Sprott Physical Silver Trust Prices Follow-on Offering of Trust Units In An Aggregate Amount of US$269,575,000

Nov 9, 2012
TORONTO, Nov. 9, 2012 /CNW/ - Sprott Physical Silver Trust (the "Trust") (NYSE: PSLV / TSX: PHS.U), a trust created to invest and hold substantially all of its assets in physical silver bullion and managed by Sprott Asset Management LP, announced today that it has priced its follow-on offering of 20,500,000 transferable, redeemable units of the Trust ("Units") at a price of US$13.15 per Unit (the "Offering"). As part of the Offering, the Trust has granted the underwriters an over-allotment option to purchase up to 3,075,000 additional Units. The gross proceeds from the Offering will be US$269,575,000 (US$310,011,250 if the underwriters exercise in full the over-allotment option). 
The Trust will use the net proceeds of the Offering to acquire physical silver bullion in accordance with the Trust's objective and subject to the Trust's investment and operating restrictions described in the prospectus related to the Offering.  Under the trust agreement governing the Trust, the net proceeds of the Offering per Unit must be not less than 100% of the most recently calculated net asset value per Unit of the Trust prior to, or upon determination of, pricing of the Offering. 
The Units are listed on NYSE Arca and the Toronto Stock Exchange under the symbols "PSLV" and "PHS.U", respectively. The Offering will be made simultaneously in the United States and Canada by underwriters led by Morgan Stanley and RBC Capital Markets in the United States and RBC Capital Markets and Morgan Stanley in Canada. 
Copies of the U.S. prospectus related to the Offering may be obtained by contacting Morgan Stanley & Co. LLC, 180 Varick Street, 2nd Floor, New York, New York 10014 Attention: Prospectus Department (telephone 866-718-1649 (toll free) or 917-606-8474) or by e-mailing prospectus@morganstanley.com, or RBC Capital Markets, LLC, Attention: Prospectus Department, Three World Financial Center, 200 Vesey Street, 8th floor, New York, New York 10281-8098 (telephone: 212-428-6670, fax: 212-428-6260).  Copies of the Canadian prospectus related to this Offering may be obtained by contacting RBC Capital Markets, Attention: Distribution Centre, 277 Front St. W., 5th Floor, Toronto, Ontario M5V 2X4 (fax: 416-313-6066) or Morgan Stanley & Co. LLC 180 Varick Street, 2nd Floor, New York, New York 10014 Attention: Prospectus Department (telephone 866-718-1649 (toll free) or 917-606-8474) or by e-mailingprospectus@morganstanley.com.  The Offering in Canada is only being made by the Canadian prospectus, which includes important detailed information about the Units being offered. 
This news release does not constitute an offer to sell or a solicitation of an offer to buy the Units, nor shall there be any sale of the Units in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. 
SOURCE: Sprott Physical Silver Trust


end

Finally Eric addressing the Manhattan club in NY:

special thanks to Chris Jansel for sending this to us:

from Chris:




Sprott really lays it out.  Awesome video you might want to share.  This is one of his best presentations i've heard.

http://au.finance.yahoo.com/video/eric-sprott-presents-manhattan-investors-002500904.html


Chris Jansel


end


And now your major paper stories which influences the price of gold and silver:

Your early morning sentiment from Europe and Asia

Major points heading into the NY opening:

1.  Germany has still not decided whether Greece will receive it's 31.5 billion euros promised months ago. Remember it needs to make a big bond payment on the 16th of November.

2. German spokeswoman confirms that she doubts that the German Bundestag and the lower house will pass legislation by next Monday allowing the funds to flow to Greece.

3. Industrial production throughout Europe imploding:

   i) France -2.7% (month over month)
   
   ii) Italy: -1.5%  (over 10% year over year)

   iii)  Greece a whopping -7.3% (month over month)

this causes the Euro/USA cross to plummet and also all bourses to trade in a sea of red.

Spanish 10 year bond and Italian 10 year bond holding at their high levels making the new OMT possible shortly.




and now for your detailed overnight market sentiment courtesy of zero hedge:







Overnight Sentiment: No Dead Cat Bounce

Tyler Durden's picture




With expectations that Europe will once again become a flaming powderkeg after the US elections are over running high, Europe has so far not disappointed. And as usual, the focal catalyst of greatest pain remains Greece, which is only now learning what ZH readers knew days ago, namely that the Greek "austerity" vote was merely theater, and that Europe, i.e., Germany, has certainly not decided to release any of the much needed cash that Greece needs not only to run its society but to make a key bond payment on November 16. Confirming this was German finance ministry spokeswoman Marianne Kothe, who said on Friday that Eurozone finance ministers will probably not be able to decide at their upcoming Eurogroup meeting on Monday whether to disburse a badly-needed €31.5 billion loan tranche to Greece, as MNI reported earlier. "Speaking at a regular government press conference here, Kothe reminded that German Finance Minister Wolfgang Schaeuble needs the approval of the German Bundestag, the lower house of parliament, before being able to approve any further aid for Greece. “It will be difficult to achieve this by next Monday,” she said." In other words, the Greek default is suddenly in the hands of the German people, of whom at last check  about 60% wanted Greece gone. There is yet hope for Greece, with a story overnight running that George Soros is ready to commit "serious funds to aid Greece." Surely that generosity too will end well for the Greek people who by now must feel as if they are in the 5th circle of a NWO globalization hell.
In other news, the European economic basket case refuses to go away: reports overnight showed that Industrial Production continues imploding, with France tumbling -2.7%, on expectations of a -1.0% drop (down from 1.5%), the worst plunge since the 2009 crisis, Italy dropping -1.5% and -10.5% Y/Y, and Greece down 7.3% compared to a year earlier. Europe is stuck between a rock of a low EUR indicating redenomination risk and a hard place of a high EUR now guaranteed to crush any economic status quo, let alone growth.
All of this, and the continued negative sentiment from the past 2 day sell off means that US traders walk in to another sea of red, with futures solidly in the red, the EURUSD back to testing 1.27, Asia lower across the board, Europe unhappy, and Spanish 10 Year once again eyed closely: the next resistance level is 6% here, and once this breaks it slowly but surely puts the (long, long overdue) OMT activation in play.
To summarize: no dead cat bounce. At least not yet.
A more comprehensive recap from DB's Jim Reid follows:
There have been quite a few soothing words around markets recently on the likelihood that the fiscal cliff, Greece and Spain will all be resolved in a market friendly manner but the US election seems to have been the excuse for the market to start to want to see a bit more actual proof rather than hope on a number of these issues. On the US, newswires are reporting that President Obama plans to make a statement today about his plan for spurring economic growth and addressing the deficit which is likely to serve as the opening gambit in the President’s fiscal cliff negotiations. Republican House Speaker John Boehner stepped up the rhetoric late yesterday, posting on Twitter that while “Obamacare is the law of the land….(the Republican) goal has been, and will remain, a full repeal”.
The S&P500 yesterday closed at the day’s lows of -1.22% which also wraps up the worst 2-day performance in 2012. The index also finished firmly below the 200-day moving average with all industry sectors finishing in the red. The market was initially buoyed by the better-than-expected US trade numbers for September (-$41.5bn vs -$45bn expected) but this was eventually outweighed by news that McDonald’s monthly global sales contracted for the first time in almost a decade and also not helped by another poor day for Apple’s share price (-3.6%). A Reuters article yesterday noted that Samsung’s Galaxy S3 has displaced Apple’s iPhone as the world’s best selling smartphone last quarter. Apple’s recent slide continues to attract plenty of focus as the company’s market capitalisation has now fallen 23% since the peak struck 8 weeks ago. This decline is worth around $155bn or 3.8x what Greece is hoping to get from its next bailout tranche! Over the same period the overall market and the tech sector are down 6% and 12% lower, respectively.
Gold bugs are having a decent run with the precious metal rallying every day over the past week in what is the longest streak since August. Gold is up 3.3% this week but interestingly still around 2% below pre-QE3 levels. The search for 'safe haven' assets was also behind the strong performance in government bonds yesterday. Indeed the 30yr UST bond yields fell nearly 8bps to a two month low of 2.751%. A solid 30-year auction yesterday clearly helped. On the subject of safe havens, German bonds are also having good run, with 10yr yields finishing lower in 12 out of the last 16 sessions. On the other hand, Spanish 10yr yields have crept up gradually after having risen higher in 7 of the last 9 trading sessions. The Spanish spread to German government bonds is now at its highest in 6  weeks (449bps).
The market wobbles were also not helped by some fairly downbeat European headlines yesterday suggesting that Euro-area finance ministers may delay a decision on approving the next bailout payment for Greece until late November as they await a full report on the country's compliance with the terms of its bailout. It appears that the Troika won’t be ready with a full report on Greece until after the Eurogroup meeting on Monday (12th).
Turning to the ECB, Draghi’s post-meeting press conference was relatively dovish, but stopped short of providing assurance that the ECB will move to ease imminently.
On the OMT, Draghi reiterated that the ball is in Spain's court. Nothing new here but suggests that the current stalemate is likely to continue. On Greece, Draghi identified a route by which the ECB might be willing to play a role in helping Greece through an amended troika programme via the ELA – essentially allowing the GGBs to redeem, funded by t-bill issuance financed by the ELA via the banks. Sounds like a game of musical chairs! The WSJ yesterday reported that the Eurozone is considering cutting interest on Greek bailout loans to EURIBOR+80bps (currently EURIBOR+150bp) and increasing the repayment period.
Back to markets and the US selloff is once again setting the risk-tone for Asian markets with major bourses in the red. The Hang Seng (-0.43%), ASX200 (-0.49%) and Nikkei (-0.75%) are all trading lower although off their intraday lows. The risk tone perhaps found a floor following a relatively benign Chinese inflation print (+1.7% vs 1.9% last month and 1.9% expected). Chinese equities (+0.02%) are up for the first time this week although is still poised to 2.2% lower on the week. As we go to print the rest of China's main monthly data has been published with Retail Sales, Industrial Production and Fixed Asset Investment all slightly above expectations.
Turning to the day ahead, it will be relatively quiet with France and Italy reporting September industrial production. Over the weekend, the Greek government is set to vote on the 2013 budget. In the US, the UofM preliminary consumer sentiment reading is the main print. President Obama is expected to deliver his statement from the East Room of the White House, although no time for the statement has been given.


end  

Bloomberg reports that Greek Aid may not be made available next week.
This will set a showdown on the 16th of November when Greece has a bond maturing

(courtesy Bloomberg news)



Bloomberg News

Greek Aid Payment Call May Not Be Made Next Week

By Craig Stirling on November 08, 2012

Greek Aid Payment Call Won’t Be Made Next Week, EU Official Says
Greece is under pressure to make more efforts to rein in its budget deficit and deregulate the economy. Photographer: Kostas Tsironis/Bloomberg



Euro-area finance ministers may not make a decision on unlocking funds for Greece until late November as they await a full report on the country’s compliance with the terms of its bailout, a European Union official said.
Finance chiefs won’t make the call to release 31.5 billion euros ($40.1 billion) of aid for Greece that has been frozen since June when they meet in Brussels on Nov. 12, the official said yesterday on condition of anonymity because the deliberations are private.
Ministers will await a final report from the so-called troika that oversees euro-area bailouts on Greece’s efforts to meet the conditions of its second bailout since 2010 before taking action, the official said. While a preliminary version may be available for the Nov. 12 meeting, it won’t be enough for ministers to base their decision on, the official said.
Greece is under pressure to make more efforts to rein in its budget deficit and deregulate the economy. While German Chancellor Angela Merkel last month traveled to Athens to signal her willingness to keep the Greece in the euro, the country is still struggling to reach its debt-reduction targets amid a combination of Greek political resistance to more cuts and recession that has brought record unemployment.
“We’re not out of the woods yet,” German Finance Minister Wolfgang Schaeuble said in Hamburg yesterday. “I don’t see how we can take the decision already next week.”

General Strike

The EU official said Nov. 26 is a possible date for euro- area finance ministers to sign off on the next disbursement of rescue aid to Greece.
A Greek government spokesman declined to comment when asked if a decision on the aid payment would be made at the Nov. 12 meeting.
Greek Prime Minister Antonis Samaras mustered the support of enough lawmakers to secure approval of a bill on pension, wage and benefit cuts needed for bailout funds to flow. The vote occurred on the second day of a 48-hour general strike that shut down hospitals, schools and government services and brought public transport to a standstill. Apparent changes in privatization laws will need to be evaluated, the official said.
The parliament will convene again on Nov. 11 to consider on the 2013 budget. European Commission spokesman Simon O’Connor saidthat the vote will be another “crucial” step toward freeing up rescue funds.
The Greek government is working “in a good and constructive spirit” with the troika, which comprises the commission, the European Central Bank and the International Monetary Fund, he said. “We certainly hope and expect that we will be able to conclude this work in the coming days and to work toward what we hope will be policy decisions on Monday at the eurogroup.”
Greece has received 240 billion euros in aid pledges from the EU and the International Monetary Fund since 2010.
To contact the reporter on this story: Craig Stirling in London at cstirling1@bloomberg.net
To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net
end  



Japan has total sovereign debt approaching 1 quadrillion yen:

(courtesy zero hedge)

Chart Of The Day: One Quadrillion Or Bust

Tyler Durden's picture




Last night, Japan issued an update of its total public debt. The number was ¥983 as of September 30. Trillion. The bad news is that the long anticipated currency legend which will finally say "¥ in Quadrillions" is once more delayed. The good news, is that with the recently expanded BOJ QE8 and QE9, the excess monetization debt capacity, a lot of its going to sweep the aftermath of Fukushima under the rug, will promptly be filled, and we fully expect the December 31, 2012 debt update to finally bring us to the first instance of the word "quadrillion"used in the context of a modern, developed nation.
end

  
Your opening Spanish 10 year bond yield: slight decrease in yield 



SPANISH GOVERNMENT GENERIC BONDS - 10 YR NOTE

GSPG10YR:IND

5.833000.01800 0.31%




end 




Ben Traynor talks about the upcoming train wreck in Spanish bonds.

As Spain funds itself by using shorter and shorter maturities, these have bunched up with maturities at the front end of the curve. This week the Spanish bond auction was termed awful.
This is a train wreck waiting to happen:

courtesy Ben traynor/Bullion vault) 




A Train Wreck in the Bond Markets



By: Ben Traynor, BullionVault


-- Posted Friday, 9 November 2012 | Share this article | Source: GoldSeek.com

Why investors, fearful of currency depreciation, have turned to gold...

NOT SO LONG AGO, everyone seemed to think Greece was about to leave the Euro.

Well, it hasn't. Yet.

And remember when Spain's government was only days away from requesting a formal bailout?

Well, it hasn't. Yet.

Never underestimate the power of Europe's politicians to press the slow-mo button on the single currency car crash.

But how long can all this go on? Things are getting worse, not better. As FT Alphaville reports, Greece is facing another potential default next week, while Spain's auction of 5-Year bonds this week was described by one trader as "awful", with a wide range of bids suggesting little market consensus on how the bonds should be priced. Reuters reports that this was the first time in 18 months that Spain has tried to sell longer-term bonds.

Take a look at the following chart from the Spanish Treasury, showing the maturity profile of Spanish government debt. See the big spike for 2013?


Spain's debt is piling up at the short end. In a video recorded earlier this year, BullionVault founder Paul Tustain likens this phenomenon to a train wreck in the bond markets, with government debt piling up against the buffers until that government is either forced to default, or a devaluation of the debt is orchestrated with central bank assistance – for example with interest rates held below inflation for a sustained period.

Of course, devaluing debt means devaluing currency itself. This is where gold comes in.

Many investors worry that their currency will fail to hold its value. Many of those have turned to gold. At the time of writing, gold in Euros is within 1.5% of its all-time high set last month. For gold priced in Dollars, the gap is closer to 10%, from a high hit over a year ago.
Why the discrepancy? Because the crisis is more intense in Europe, that's why. The value of the Euro is under far greater scrutiny.

Many investors believe the Dollar will one day face a similar test. Some of those have added gold to their portfolio. To find out why, set aside twenty minutes or so and watch Paul's video from the beginning.

Ben Traynor

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben writes and presents BullionVault's weekly gold market summary on YouTube and can be found on Google+

(c) BullionVault 2012




end 


Your opening Italian 10 year yield:

  



Italy Govt Bonds 10 Year Gross Yield

GBTPGR10:IND

5.002000.01600 0.32%
As of 08:21:28 ET on 11/09/2012.


end



Your most important commentary of the day courtesy of Mark Grant:

Grant prepares us to read between the lines as to what will happen in the coming few weeks:

1. It is foolhardy to believe that the EU does not know already what the Troika report states.
Everybody on the planet knows what it says.

2.  Grant believes (and so do I) that the EU is trying to force Greece out of the union.  Greece cannot accept any more austerity so out they go and no more funding!!

3. Germany does not want to be blamed for kicking out Greece.  Germany will state that she tried but  Greece cannot accept any more austerity.  What could Germany have done?
The actual kicking a nation out of the union is a violation of principles.  This is one red line in the sand as finally we have reached one of the crossroads.

4.  The IMF will not provide any more funds because it is not sure it can get it's money back.
The Greek Debt/GDP level will never reach 120% so the IMF will not loan any more money.

5. The IMF has suggested that the ECB take a loss something that they are not prepared to do.

or the stabilization funds to take a hit, again something that they are not prepared to do.
They stated that may entertain turning over their profits from bond interest.

6. Greece has asked for a two year extension so that they could get their house in order.
This will require another 30 billion euros of loans something that Austria, Finland and Holland does not wish to entertain  as they consider loaning money to Greece is nothing short of entering a sink hole.

Thus the second red line in the sand has been drawn by these three nations as they say
"no more"!!


7.  As Grant mentioned on Thursday, Greece's sovereign debt is around 1.2 trillion euros (1.5 trillion usa) and a default of that magnitude will be felt around the world.  I consider it a Lehman x 10.  You can also add the massive credit default swaps underwritten by our major USA bankers and you can visualize the catastrophic turmoil that will ensue.

8. As Yogi Berra stated: 

"when you reach the fork in the road..you take it"

we have now come to the fork in the road.  Does the EU:

i) offer Greece debt forgiveness
ii) offer more money to their debt and kick the can a longer longer and further down the alley
iii) use brute force and kick them out of the union.

Grant states that in his opinion they will be forced out.

a must read



(Mark Grant/out of the Box and onto Wall Street)







Reading Between The Lines

Via Mark J. Grant, author of Out of the Box,



Tomorrow the Wizard turns 620. I was out with him last night in a little pre-birthday celebration and I asked him how it felt to have that many years under his belt. He laughed and replied that being a Wizard had it occurred to me that he might not have started at one? No, I admit, I had not thought of that, which opened up a realm of possibilities that the old codger could actually be far older or far younger than was generally presumed. I then asked him if he planned to be around for his 630th birthday day and he replied that the odds were good. He said he had done a whole statistical model and that very few people died between 620 and 630 and so he was likely to make it to the next milestone. At the end of the evening, with a twinkle in his eye, he informed me that he would not be here on Saturday in any event. He said that he had learned something from the Europeans and that he was going to follow their lead. He informed me that he was going to get on his broomstick, fly across the international dateline and so never have an actual birthday. Then he will return to America and claim that the damn thing never happened. I guess he is still learning a thing or two!

Reading Between the Lines

One of the great faults with paying attention to Europe is to take what they tell you as factual. The media trumpets what they are given by the various sources of information in Europe but a quite skeptical eye is what is needed. They claim that they do not have the “Final Troika Report” on Greece because they have not stamped it “Final” yet and so they blame their indecision on the magic trick that they are performing. Everyone on the Continent has the report but since they can agree on almost nothing they have blamed the lack of the rubber stamp as the culprit. They should just come out and say that, “It is the rubber stamp’s fault” and be done with it.

Red Lines

Every easy trick has now been exhausted when it comes to Greece. You may feel worn out and tired by the length of time this process has taken but that is a remarkably short-sighted viewpoint. You should be happy that you have had the time to carefully consider and plan for what is about to take place because ugly is about to get uglier and you will see retching in the streets; not just in Athens but in Berlin and Madrid. I would say that the odds are about 60/40 that what is happening is that the European Union is trying to force Greece out of the EU by having Greece refuse any more of the austerity measures and not get funded. It is a “Game of Houses” because Germany does not want to take the blame and they want Greece to throw up their hands and leave so Berlin can say, “What can we do?” To actually force Greece out would be a violation of principles that Germany cannot politically afford and so a quite complicated ruse is underway. The severity of the situation is indicated now by the Red Lines that have been drawn by all of the major constituencies so that there is no compromise to be found. As I have stated before we are at the Crossroads, at Breakpoint, because every proposal is met with a hard line drawn in concrete by someone in some corner of the deliberations.

The IMF will not provide any more funds without a 120% debt to GDP ratio by 2020 they claim but what this really means, and what they have come closer to saying recently, is that they will not dish out any more money unless they feel that they will get paid back (Red Line). The IMF has suggested that perhaps the ECB could take the loss and Mr. Draghi has said while they might forego the profits on their Greek Bonds, estimated at about $16 billion, that they will not take a loss as it would violate their charter of not financing individual nations (Red Line). The IMF has suggested that the Stabilization Funds could take a hit which Germany and several other countries have said is impossible because it would probably cause several governments to fall in Europe (Red Line). The Greeks have asked for a two year extension in payments which would require another $40 billion to be handed to Greece as Austria, the Netherlands and Finland have all publically stated“No more money for Greece” and another wall (Red Line). The markets all think that it is just another moment to muddle through but I am telling you, having examined the evidence and considered all of the possibilities, that this is not the case and that my conclusion will very soon prove to be correct. The length of time this process has taken may have numbed some people’s sensitivity to the danger but with $1.5 trillion in total debts that could go into default; the danger is quite real and the shock will be systemic. The ticking time bomb has been loaded and it is about to explode whether you realize it or not.

It is going to be either “debt forgiveness” or “more money” or “brute force” and there are quite serious consequences for many nations and many governments whichever path is chosen. “Debt forgiveness” is a sacred promise broken and “more money” is politically impossible in some countries at this point. Europe may have concluded that it is far better to force Greece out by continual demands and ever increasing austerity measures and that the losses from a Greek Exit, which would be borne by all, are a better alternative to the other two roads as the Germans and others could blame the Greeks and not take the responsibility. Three roads, all ugly, which is why the length of the delay and the hesitation to engage. Any of these three paths will lead to extensive pain and a lot of contagion and so I conclude that the Greeks will get forced out by increasing European demands as that is the least politically damaging alternative for many of the nations in Europe. “Blame it on the Greeks” will be the secret password while the Greeks will call Berlin every name in the book.

“The summer day is closed - the sun is set:
Well they have done their office, those bright hours,
The latest of whose train goes softly out
In the red west. The green blade of the ground
Has risen, and herds have cropped it; the young twig
Has spread its plaited tissues to the sun;
Flowers of the garden and the waste have blown
And withered; seeds have fallen upon the soil,
From bursting cells, and in their graves await
Their resurrection. Insects from the pools
Have filled the air awhile with humming wings,
That now are still forever; painted moths
Have wandered the blue sky, and died again”

                   -William Cullen Bryant

end

The following two articles written by Wolf Richter are very important:

the first:



You have to read this.  Frightening!!

(courtesy Wolf Richter/www.testosteronepit.com)



Merkel Has A Dream

testosteronepit's picture




On Wednesday, German Chancellor Angela Merkel set foot in the European Parliament for the first time since 2007 and addressed the only democratically elected European institution—by design, an emasculated one that cannot even originate its own laws, though it is allowed to vote on proposals by the other European institutions. There, she laid out her plans to bring European nations together to where their budgets and other matters would become part of her “domestic policy.”
But first, the current problems should be focused on, she said to the drumbeat of economic deterioration—a day when Greece reported that unemployment jumped to 25.4% in August from 24.8% in July and from 18.4% August last year. It was 7.5% in August 2008 when borrowed euros were still growing on trees. Young people got slammed: 32.9% of the 24-to-34-year-olds and 58% of the 15-to-24-year-olds were unemployed. Revolutions have been triggered by the utter frustrations in those age groups.
So, as tens of thousands of Greeks filled the streets in protest, Parliament approved the austerity package demanded by the bailout gang from the EU, the ECB, and the IMF, the beloved Troika. Another €13.5 billion in spending cuts and tax increases would be imposed on the people so that the next bailout payment of €31.5 billion would wash over the land—actually, most of it would head straight back to the ECB to service Greece’s existing debt.
The Troika should have sent the money in June, but after the election chaos, it sent its inspectors instead. They’d write up a big report behind which all politicians could take cover. In August, Greece ran out of money, and desperate measures began [ Greece Prints Euros To Stay Afloat, The ECB Approves, The Bundesbank Nods, No One Wants To Get Blamed For Kicking Greece Out ].
The report would be finished by September, and if it said so, Greece would get the €31.5 billion. Then rumors surfaced that the White House wanted to have the report delayed until after the election. So the meeting of the European finance ministers on November 12 became the decision date. Turns out, the report still won’t be ready, and the next decision date might be  November 26.
Greece might not make it that long. It ran out of money months ago. The government is delaying payments to its suppliers, businesses are shutting down, the healthcare system is cracking... and unemployment in November will be much worse than it was in August.
Even in the previously calm core of Europe, the ground is shaking. Thursday, it was the lifeblood of the German economy,exports. They fell 2.5% in September; exports to the Eurozone plunged 9.1%. And industrial orders, which had been skidding for months, caught up with industrial production in September, dragging it down 1.8%.
Hence, today’s corporate austerity programs: Commerzbank, Germany’s second largest bank, might chop off 5,000 to 6,000 of its 56,000 employees; and Siemens announced that it would shave off €6 billion in costs over the next two years and trim its workforce of 410,000 people—due to the “slowing global economy and more headwinds,” explained CEO Peter Löscher.
Accompanied by this drumbeat, Merkel explained her dream to the European Parliament. It was all about a big power shift from democratically elected national parliaments to European institutions. The European Commission of bureaucrats and appointed politicians would become the actual government of Europe with executive powers over national budgets. The European Council, similarly composed of bureaucrats and appointed politicians, would become an “upper chamber,” she said. And she threw a bone to her listeners: the European Parliament would receive a bit more power as well.
“We need to be ambitious and demanding and should not shy away from a change in the contractual foundation,” she said. So treaty changes. Or just treaty violations, which has been one of the strategies so far. The new system would “coordinate more strongly” a variety of national prerogatives, such as taxes.
Then the instincts of the powerful political animal broke the surface: she proposed a fund to deal with the pandemic of youth unemployment. Because “Europe is all of us together,” she said. “Europe is domestic policy.”
Her domestic policy. The Greeks, for example, didn’t vote for her, and they might not want her to run their show. They didn’t vote for the European Commission either. They might despise Greek politicians, but at least they’re their politicians. Merkel’s dream had no such room for doubts. Together, she said, Europeans would create “a Europe of stability and strength” where some day all European countries would have the same currency. And why not with her on top of the heap?
The EU has already created a ballooning superstructure of governance manned by 41,000 bureaucrats and mostly unelected politicians. But now, the European Court of Auditors released its annual report—a damning document that outlines how up to 4.8% of the EU budget seeped through the cracks and disappeared. Read.... The Art Of Siphoning Off EU Money

end 


And now the second paper on German fears about the lack of competitiveness inside France and how it is going in opposite directions to everybody else;

(courtesy Wolf Richter)



Germany's Fear And Desperation Leak Out

testosteronepit's picture





A hullabaloo erupted between France and Germany that both governments are trying to silence to death. According to unnamed sources of Zeit Online and Reuters, German Finance Minister Wolfgang Schäuble broached an unprecedented topic with the members of Germany’s Council of Economic Experts on Wednesday when they presented their Annual Report. In its 49-year history of advising German governments, the Council has never delved into policy proposals for other countries. And yet, Schäuble asked them: Could they produce a reform concept for the troubled French economy?
The French, who are currently engaged in national soul-searching and navel-gazing to halt their declining “competitiveness,” were not amused. The office of President Francois Hollande wrapped itself in silence. Prime Minister Jean-Marc Ayrault brushed it off. The German Ministry of Finance declined to comment on “unofficial discussions.” Council Chairman Wolfgang Franz backpedalled: “That’s largely misinformation,” he said. “An order for a Special Report is not even in the most distant sight.” He figured that the French government “wouldn’t tolerate something like that.”
Nevertheless, he said, the government is highly interested in reform ideas that would make the monetary union more stable. And it is in this context that the Council would “think about France” in December. After which they would talk again with Schäuble, he said.
But the Council is already “increasingly worried” about the economic developments in France, admitted Council member Lars Feld when he presented the Annual Report to Schäuble. “The largest problem isn’t Greece anymore, or Spain or Italy, but France because France has done nothing to rebuild its competitiveness and is even heading in the opposite direction.” He didn’t mince words. “France needs labor market reforms,” hesaid. “It is the country among Eurozone countries that works the least each year; so how do you expect any results from that?”
The problems are piling up in France. While central government spending—56% of the economy!—is expected to remain relatively constant and provide some stability, the private sector is deteriorating with breathtaking speed. Every day, new evidence seeps out.
On Friday, it was an Insee poll of CEOs in the manufacturing sector. They’re cutting investments in plant and equipment in the second half. In 2013, they would reduce their investments by an additional 2%—though in the previous poll in July, they’d planned on increasing their investments by 5%. A harsh reversal [one that has been playing out for months; read... Worse than the Infamous Lehman September: France’s Private Sector Gets Kicked off a Cliff].
Then the Bank of France released an estimate for fourth quarter GDP: it would shrink by 0.1%. For the third quarter, it also estimated a decline of 0.1%. If these figures are confirmed, France entered a recession in July. Five quarters in a row of total stagnation, a first in France’s post-war history!
The Germans are concerned. France bought €101 billion of German goods in 2011, or 10% of total exports. But Germanexports fell 2.5% in September, and exports to the Eurozone crashed 9.1%. Germany has been through this before. Its economy lives and dies by its exports [The Noose Tightens on Germany’s “Success Recipe”].
Schäuble must feel the pressure. But fear of a dip in exports to France might not be enough for him to risk a diplomatic confrontation with his most important neighbor. He certainly wouldn’t want to stir up, without good reason, even more accusations of meddling and Teutonic arrogance. So why this unusual request?
Fear and desperation within the government about a much greater threat. The credit markets, which are currently sleeping through the French private-sector fiasco, might wake up someday—as Greece found out, it can happen suddenly—and demand much higher yields. Even if still digestible for France, it would likely throw Spain over the edge, and Italy would follow. Or the markets might walk away from France entirely.
France is too big to bail out. If the debt crisis suddenly arrived in Paris, only all-out, no-holds-barred, unrestricted bond-buying operations by the ECB could save the euro. But it would violate even the last pretense of treaty-based limitations, and would in the process debase the euro. While this might please some countries, including France, it would enrage German voters who might take out their anger on Chancellor Angela Merkel and her government. And that strikes terror into their hearts.
Alas, she still has big plans. On Wednesday, she addressed the European Parliament, the only democratically elected European institution—by design, an emasculated one. There, she laid out her ideas on how to bring European nations together to where their budgets and other national prerogatives would become part of her “domestic policy.” And she’d be on top of the heap. Read.... Merkel Has A Dream.



Your 7:30 am early currency crosses: (showing much  USA strength )

Euro/USA    1.2710  down. 0031
Japan/USA  79.11    down .377
GBP/USA     1.5932   down  .0021
USA/Can       1.0013  up  0010




end 





Your early results for bourses for Europe 7:30 am : all into the red)


i. England/FTSE down 27.700 points or .47%

ii) Paris/CAC down 20.12 points or .59%

iii) German DAX: down 73.07 points or 1.01%

iv) Spanish ibex: down  75.00 points or 0.98%


end 



Basel III implementation is delayed again:

(courtesy Jim Sinclair/Ronald Orol/Fox Business news)





Jim Sinclair’s Commentary
Because there is a good reason. Even with FASB allowed crap paper to be valued at any level the financial institution desires, the financial institution cannot meet the liquid requirements.
Fed Delays Basel III Bank Capital Rules By Ronald D. Orol
Published November 09, 2012
WASHINGTON –  U.S. regulators on Friday agreed to delay indefinitely the effective date of a global agreement on greater bank capital buffers known as Basel III. The Federal Reserve and two other bank regulators introduced a proposal in June to implement the global agreement that suggested an effective date for institutions to comply of Jan. 1. However, the regulators agreed that "due to the wide range of views" expressed by interested institutions and others that a delay was necessary. They did not provide a substitute effective date for the rules, arguing that they are "working as expeditiously as possible to complete" them. The agreement is being implemented in response to the financial crisis of 2008. Other international agencies have delayed implementation of bank rules.







Your closing 10 year Spanish bond yield; staying close to the 6% level.




SPANISH GOVERNMENT GENERIC BONDS - 10 YR NOTE

GSPG10YR:IND

5.824000.02700 0.46%
As of 11:59:49 ET on 11/09/2012.



end



Your closing Italian 10 year bond yield:  (now a touch below 5%)




Italy Govt Bonds 10 Year Gross Yield

GBTPGR10:IND

4.974000.04500 0.90%
As of 12:59:58 ET on 11/09/2012.








end 


Your 3:30 pm currency crosses: ( still showing  USA strength), 

Euro/USA    1.2710 down .0031
Japan/USA  79.51  up .018
GBP/USA     1.5903 down .0072
USA/Can      1.0003  flat



Your closing bourses from Europe and the uSA, with England and Germany in the glue but Paris and Spain up slightly due to the Dow's initial gains early Friday morning.  The bourses gained a little as New York opened with gains and this helped Europe stem their losses:


i) England/FTSE down 6.37 points or 0.11%

ii) Paris/CAC up 15.89 points or 0.47%

iii) German DAX: down  41.46 points or .58%

iv) Spanish ibex: up 12.5 points or .16% 

and the Dow:  up a biggy  1 point.



end 


And now for some USA stories.

I strongly believe that Bruce Krasting has got it right on the USA fiscal cliff and how they are going to kick the can down the alley for another year:

(courtesy Bruce Krasting:


CBO on "Ultimate Can Kicking"

Bruce Krasting's picture





The Congressional Budget Office is out with a very well timed report on what the hell should be done with debt, deficits, taxes and the economy.


There is a lot of information in the reports. (link)(link) I doubt that too many of the folks in Congress will bother to read it. I looked through it; I think the following chart is the one the deciders in D.C. will focus on:




Lots of policy options are measured in the chart. Think like a politician, and go to the bottom line. What set of proposals has the biggest bang? My summary from the CBO chart:

-Totally junk the scheduled spending cuts for the military.

-Do away with all of the mandatory non-defense cuts (sequestration).

-Don’t do anything with taxes. Roll over everything for a couple of more years.

-Extend the 2% payroll tax break for two years.

If we kick the can down the road for a few more years, what do we get? The deep thinkers have come up with numbers that look pretty attractive. The CBO thinks that significant benefits could be realized as soon as September 30, 2013.

In terms of jobs, the CBO reckons that as many as 3.4m jobs could be created/saved if everything on the cliff is pushed off to the future.

The economy would be much stronger if the can is kicked. The difference between falling off the cliff and extending everything is 2.9% of GDP. That’s a very big number; it comes to $500Bn of top-line growth.

Well, that sounds good. What would this cost? The CBO puts the tab at an incremental $503Bn in 2013 and another dollop of red ink in 2014 of $682Bn. (The base line debt is ~$850Bn for 2012/13. The can-kick would be on top of the base line numbers)


Who would go for a plan like this? Very Important People like Paul Krugman and Larry Summers, would probably say that the stimulus was too small, but they would come down in favor of it.

The Administration would like this idea. It would give them two years of breathing room.

The Fed would love this plan. This is what Bernanke has been advocating. The IMF and the rest of the G-20 would hail it.

The Republicans would hate it, but what can they do but complain? After all, the Reds did get clobbered in the election. Republicans want to keep the tax rate on those making more than $250k and they definitely want to avoid cutbacks in military spending. If Republicans play hardball, they will lose big. They know that they are cornered. To save face, and to have a say in the outcome, they might go along, provided they got the "big" prize. A chance to change the tax code.

The grand compromise that could make this happen is a legislative commitment to rewrite the tax code. There would have to be a “promise” to achieve the necessary tax-code changes within twelve months. If there were no agreement on the changes in tax laws by 12/31/13, then the country would revert to falling off the cliff.

I think there is going to be a can-kick. I think it will include all the existing tax issues (Bush cuts and AMT). The sequestered cut backs in spending will be pushed out for a year. But, importantly, the 2% payroll tax break will not be extended. As part of the deal, there will be a promise to write the tax code.

We’ll see what Obama has to say in a few hours. Obama is no dope. He knows that the market cap of all US stocks is down by $600Bn the last few days. He knows that the market wants a can-kick. He knows that a tax re-write is necessary. He knows that the economy needs a boost. He knows that there is next to nobody left who gives a damn about the debt picture. He knows that Bernake will buy up all the extra debt. So he will push to kick-the-can.




end

I will close with this great piece from the Golden Truth courtesy of Dave from Denver

(courtesy GoldenTruth/Dave from Denver)



Avoiding The Fiscal Cliff = QE To Infinity

There is no reason to expect that renewed efforts at federal budget deficit reduction will result in anything more than the usual smoke and mirrors, further increasing, not reducing, long-term U.S. sovereign-solvency risk. In reality, the U.S. economy has not recovered, and no recovery is pending. Consumer liquidity remains severely impaired, and broad business activity continues to falter anew. As a result. the actual federal budget deficit going forward will be much worse than the relatively rosy numbers being used as the basis for government negotiations - John Williams, www.shadwostats.com
Everyone can draw their own conclusions about how this so-called "fiscal cliff" situation will play out, but the only way it can possibly be "resolved" is by postponing the inevitable. As Williams states: "Accordingly, global market reaction—to a severely deteriorating outlook for U.S. fiscal conditions—increasingly should reflect massive flight from the U.S. dollar and movement into gold and the stronger Western currencies."
The big news yesterday was the fact that a couple of "official" - supposedly professional - organizations issued a statement proclaiming that if the U.S. goes off the fiscal cliff that it would lead to a recession. This revelation would be funny if it weren't so completely pathetic. Talk about understating the obvious. Notwithstanding the fact that on a real inflation basis, not Govt CPI basis, our economy has remained in contraction since at least 2008, if Congress and the President were to allow the "fiscal cliff" mechanism to occur, it would throw our system into economic armegeddon. I went over the numbers earlier this week as to why this would be the case.
The truth is that not only will the fiscal cliff scenario be kicked down the road like the proverbial "can" (anyone know if that's supposed to be a beer can or a soda can? Maybe a can of beans?), but the increasing chasm between expenses and revenues will have to be filled with even more Treasury debt issuance. Tautologically, this means more QE. More QE means even higher prices for gold and silver. The reason more QE will be needed is the same reason the Fed has continued and expanded QE since its inception in 2008: 1) the banks need liquidity or they will collapse; 2) the Treasury needs a new source of cash or interest rates will go to the moon.
To address the Treasury funding requirements, I've got a graph from Zerohedge which shows the steady decline in foreign Treasury purchases since 2009:
Foreign funding of Treasury paper has declined by 55% since 2009. I have not seen this fact reported anywhere in the mainstream media. It should come as no shock, however, as foreign investors are not idiots. They know that money printing devalues the dollar, so they want less of it. China has somewhat maintained its level of Treasury buying lately, but that's because if they are perceived as fleeing the dollar, the dollar would collapse and China would be, in a sense, shooting itself in the head financially. That will change eventually.
The decline in foreign participation in Treasury auctions has been replaced by the Fed's participation, aka QE. The next chart, which I hypothecated from www.clusterstock.com, shows this fact nicely:
This is an interesting chart. Not only does it show graphically the fact that the Fed is increasing the size of its balance sheet by buying Treasuries in order to make up for the loss in foreign participation, but it shows the concomitant correlation of the price of gold. The orange line shows the projected growth in the Fed's balance sheet if it just maintains the existing QE policy. The red line shows the trajectory of the Fed's balance sheet if it implements the highly telegraphed next phase of QE. Everyone can draw their own conclusion as to the expected trajectory for the price of gold under the "red line" scenario.
And the truth is, the red line scenario is the expected policy move given what is already written on the chalkboard in terms of the giant locker room on Capitol Hill. What about when the impending debt ceiling increase has to be increased again by next summer? See where this is headed? QE to infinity.
The metals/miners market seems to have reverted from "sell the rallies" to "buy the dips." What's even more interesting, the metals have had more days recently in which they go higher when the S&P 500 is getting hit. I think the hedge fund margin calls related to the mini-crash in AAPL have run their course, so I think the SPX will get a trading bounce here and the metals will move with it. As the media hype and political show connected to "The Cliff" intensify, the stock market has a lot of downside risk and I fully expect a portion of the money that leaves stocks will flow into the metals.
As for the NFL, the season is maturing and the favorites are starting to distance themselves from the rest of the field. Up until now, the point spread underdogs have been outperforming the favorites. I think this weekend and forward will see the point spread favorites starting to cover a lot more frequently. The most interesting game is the Houston/Bears game. This is must-watch TV. I like the Texans to prevail. Of the mediocre teams, the Tampa Bay/San Diego game will be interesting to watch. And, of course, I like the Broncos to easily cover the 4 1/2 point spread over Carolina. Have a great weekend.

end


Well that about does it for this week.

I will see you Monday morning
all the best

Harvey
***

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