Wednesday, January 9, 2013

German and Greek industrial production falls/gold and silver withstand another raid

Good evening Ladies and Gentlemen:

Gold closed down as expected to the tune of $6.70 to finish the comex session at $1654.80.
The price of silver fared better falling by only 22 cents to $30.20.

In the access market:

gold: $1658.10
silver: $30.36

When you see gold and silver shares fall badly yesterday with a sharp rise in gold/silver price you can safely bet that a raid is on for the following day.

In other news, German Industrial production rose by a very tiny .2% instead of projected 1.0%.
However, Greek industrial production plummeted by a rather large 2.9% Other than that, news was a yawner.  Before going into these and other physical stories .........................................................

Let us now head over to the comex and assess trading today.

The total comex gold OI rose by 7467 contracts from  433,837 up to 441,304.  The non active
January contract fell by 4 contracts from  64 down to 60.  We had 4 delivery notices on Tuesday so we are in perfect balance as we neither gained nor lost any gold ounces standing for the January delivery month.
The next big active delivery month is February and here the OI fell by 6732 contracts from 246,404 down to 239,672.  The estimated volume at the gold comex today came in at a very weak 123,067.  The confirmed volume yesterday was better at 191,587.

The total silver comex OI fell in total contrast to gold.  The OI fell by 1136 contracts from 138,678 down to 137,542. The non active January contract silver month saw it's OI rise by 49 contracts from 222 up to 271. We had 0 delivery notices yesterday so we gained the full 49 contracts or an additional 245,000 oz of silver will stand for delivery in January. The next big active month is March and here the OI fell by 1090 contracts from 77,760 down to 76,670.  The estimated volume today at the silver comex came in at 31,548.  The confirmed volume yesterday was much better at 49,502.

Comex gold figures 

Jan 9.2013    The  January contract month

Withdrawals from Dealers Inventory in oz
Withdrawals from Customer Inventory in oz
32,150.0000 ( JPMorgan/1 tonne)
Deposits to the Dealer Inventory in oz
0   (nil)
Deposits to the Customer Inventory, in oz
1,253.85 (.Scotia)
No of oz served (contracts) today
 0    (nil)
No of oz to be served (notices)
60  (6,000 oz)
Total monthly oz gold served (contracts) so far this month
893  (89,300 oz) 
Total accumulative withdrawal of gold from the Dealers inventory this month
Total accumulative withdrawal of gold from the Customer inventory this month

232,315.0 oz

The dealer had no deposits  and no   withdrawals.

We had 1   customer deposits

i) into Scotia:  1,253.85 oz

total deposit:  1,253.85 oz

We had another of our dandy withdrawals from JPMorgan:

a perfect 1 tonne of gold:  32,150.0000 oz (JPM)

Total customer withdrawal:  32,150.0000 oz

We had 0 adjustments:

Thus the dealer inventory rests tonight at 2.282 million oz (70.97) tonnes of gold.

The CME reported that we had 0 notices filed or zero oz of gold. To obtain what is left to be served upon, I take the OI for January  (60) and subtract out today's delivery notices (0) which leaves us with 60 notices or 6,000 oz of gold left to be served upon our longs.

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

89,300 oz (served)  +  6000 oz (to be served upon) =   95,300 oz or 2.96 tonnes.
we neither gained nor lost any  oz of gold standing for the January delivery month.

Generally, January is a very weak delivery period for both gold and silver and thus the 2.96 tonnes of gold is quite a surprise.
Also at the beginning of this month I promised you that we will see advancing amounts of metal standing and it sure looks like that is where we are heading.
You will see the same in silver with increasing amounts standing in that arena.


January 9.2013:   The January silver contract month

Withdrawals from Dealers Inventorynil
Withdrawals from Customer Inventory  180,686,75  (Delaware,HSBC,Brinks))
Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory   905,715.06 (Brinks,Scotia)
No of oz served (contracts)197  (985,000 oz)
No of oz to be served (notices)74  (370,000 oz)
Total monthly oz silver served (contracts)505  (2,525,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month914,342.42
Total accumulative withdrawal of silver from the Customer inventory this month1,636,566.2

Today, we  had good activity  inside the silver vaults.

 we had no dealer deposits and no dealer withdrawals:

We had 2 customer deposits of silver:

Into Brinks:  300,772.94 oz
Into Scotia:  604,942.12 oz

total customer deposit; 905,715.06 oz

we had 3 customer withdrawals:

i) out of Delaware:  984.45 oz 
ii) Out of HSBC: 4784.80  oz
iii) Out of brinks:  174,917.60 oz

total customer withdrawal:  180,686.85  oz

we had 2  adjustments:

Out of Delaware:  14,237.246 oz was adjusted out of the customer account and into the dealer account.

Out of HSBC:  4,973.30 oz was adjusted out of the dealer account and back into the customer account.

I have still not received any answer from the CFTC  regarding the round numbered deposits/withdrawals in gold and silver we have been witnessing lately, especially from the CNT vault. 

When you see massive deposits and withdrawals you know that there is turmoil inside the silver vaults. 

Registered silver remains today at :  39.53 million oz
total of all silver:  150.3 million oz.

The CME reported that we had 197  notices filed for 985,000 oz of silver.  To obtain what is left to be served upon, I take the OI standing for January (271) and subtract out Tuesday's delivery notices (197) which leaves us with 74 or 370,000 oz left to be served upon our longs.

Thus the total number of silver oz standing for the month of January is as follows:

2,525,000 oz (served)  +  370,000 (oz to be served upon)  = 2,895,000 oz
we  gained 245,000 oz of additional silver  standing for January. This is turning out to be a great delivery month for silver as close to 3 million oz is standing.


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

Total Gold in Trust   Jan 9.2013 



Value US$71.398

Jan 8.2013



Value US$71.324  billion

Jan 7.2013:



Value US$70.955  Billion

January 4.2013:



Value US$71.078  billion

Jan 3.2013:



Value US$72.340  billion

Total Gold in Trust   Jan 2.2013  



Value US$73.480 billion

The GLD neither lost nor gained any gold.

and now for silver:

Jan 9:2013:

Ounces of Silver in Trust325,115,347.800
Tonnes of Silver in Trust Tonnes of Silver in Trust10,112.22

Jan 8.2013:

Ounces of Silver in Trust325,115,347.800
Tonnes of Silver in Trust Tonnes of Silver in Trust10,112.22

Jan 7.2013;

Ounces of Silver in Trust323,470,757.600
Tonnes of Silver in Trust Tonnes of Silver in Trust10,061.07

Jan 4.2013:

Ounces of Silver in Trust323,470,757.600
Tonnes of Silver in Trust Tonnes of Silver in Trust10,061.07

Jan 3.2013:

Ounces of Silver in Trust324,239,127.100
Tonnes of Silver in Trust Tonnes of Silver in Trust10,084.96

Jan 2.2012

Ounces of Silver in Trust324,239,127.100
Tonnes of Silver in Trust Tonnes of Silver in Trust10,084.96

we neither gained nor lost any silver at the SLV.

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

Sprott and Central Fund of Canada. 

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

1. Central Fund of Canada: traded to a positive 4.3 percent to NAV in usa funds and a positive 4.4%  to NAV for Cdn funds. ( Jan 9 2013)   

2. Sprott silver fund (PSLV): Premium to NAV fell to 1.86% NAV  Jan 9./2013
3. Sprott gold fund (PHYS): premium to NAV  rose to 2.52% positive to NAV Jan 9/ 2013..

 Now we witness the Central fund of Canada  gaining big time in its positive to NAV, as we now see CEF at a positive 4.3% in usa and 4.4% in Canadian.This fund is back in premiums to it's former self with respect to premiums per NAV. 

The silver Sprott fund announced a big silver purchase and this reduces the premium to NAV temporarily.  It seems that the bankers are picking on Sprott to short their funds trying to cause an avalanche in selling in the precious metals.  They are foolhardy in their attempt.

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.



Here are your major physical stories:

The following is worth repeating:

With Japanese pension funds having 72 trillion yen as assets World Gold Council's former Tokyo representative Itsuo Toshima stated:

“Bullion’s role as an inflation hedge, long ignored by Japanese fund operators, has come under the spotlight thanks to Abe’s economic policy,” Toshima, who now works as an adviser to pension-fund operators, said in an interview today in Tokyo.
“Gold may be a standard asset-class in the portfolio of Japanese pension funds as Abe’s target is realized.”

your early gold/silver trading from Asia and Europe this morning

(courtesy Goldcore)

“Pension Money Invested In Bullion Is 'Peanuts' ... At The Moment”

Tyler Durden's picture

“Pension Money Invested In Bullion Is 'Peanuts' ... At The Moment”
Today’s AM fix was USD 1,663.50, EUR 1,272.37 and GBP 1,035.35 per ounce.
Yesterday’s AM fix was USD 1,653.75, EUR 1,261.06 and GBP 1,028.07 per ounce.
Silver is trading at $30.40/oz, €23.39/oz and £19.04/oz. Platinum is trading at $1,591.50/oz, palladium at $679.00/oz and rhodium at $1,150/oz.
Gold climbed $11.80 or 0.72% in New York yesterday and closed at $1,658.20/oz. Silver surged to a high of $30.534 and finished with a gain of 0.73%.
Gold is hovering near $1,660/oz Wednesday as investors await policy decisions by the Bank of Japan and the European Central Bank -tomorrow, as physical buying picks up in Asia.
Gold tumbled last week after investors were spooked by the U.S. Fed minutes which grew concerns about quantitative easing being toned down.
Yesterday, the premiums on gold shipments to India rose to their highest level in two months as traders rushed to place orders for the metal ahead of a potential rise in import duty.
The iShares Silver Trust, the world's biggest silver-backed ETF, rose to 10,112.22 tonnes on January 7th, the highest since May 2011. 
Bloomberg reported yesterday that Japanese pension funds, the world’s second-largest pool of retirement assets after the U.S., will more than double their gold holdings in the next two years as the new government pushes for a higher inflation target, according to an adviser to the funds.
Gold in Japan’s currency reached a record 147,780 yen an ounce on the first day of trading in the New Year - January 2nd, after climbing 21% last year.
The World Gold Council's former Tokyo representative expects that Japanese pension funds will likely double their investments in gold-backed ETPs to 100 billion yen by 2015. Assets held by Japanese pension funds in gold-backed exchange-traded products may expand to 100 billion yen ($1.1 billion) by 2015 from less than 45 billion yen at present, said Itsuo Toshima, who represented the Tokyo office of World Gold Council for 23 years through 2011.
New Prime Minister Shinzo Abe’s pledge to spur inflation to 2 percent at the end of the yen’s appreciation means Japanese pension funds now have to hedge against rising prices and a currency decline after two decades of stagnation.
Japanese pension funds are set to diversify some of their massive holdings, worth nearly $3.4 trillion into gold bullion.
Corporate pension funds in Japan will diversify 72 trillion yen in assets after domestic stocks produced little return in the past two decades, according to Daiwa Institute of Research.
“Bullion’s role as an inflation hedge, long ignored by Japanese fund operators, has come under the spotlight thanks to Abe’s economic policy,” Toshima, who now works as an adviser to pension-fund operators, said in an interview today in Tokyo.
“Gold may be a standard asset-class in the portfolio of Japanese pension funds as Abe’s target is realized.”
“Pension money invested in bullion is ‘peanuts’ at the moment,” Toshima said. “If 1 percent of their total assets shift to the metal, the gold market would explode.”
As Japanese pension funds shift to the yellow metal, many pension funds internationally will follow - both corporate and state.
While pension funds internationally manage assets in the trillions, gold remains a tiny market and above ground refined investment grade gold an even smaller market.
For breaking news and commentary on financial markets and gold, follow us on Twitter.


Dave from Denver weighs in on the big news that Japanese pension funds will be buying gold ETF's"

(courtesy Dave from Denver/the Golden Truth)


The Gold Bull Stage 2: Here Come The Pensions

Pension money invested in bullion is 'peanuts' at the moment...If 1 percent of their total assets shift to the metal, the gold market would explode. - Itsuo Toshima, advisor to Japanese pension funds (Bloomberg, link provided below)
I have maintained since 2002 that the precious metals and mining stock market would eventually erupt into bull market frenzy that would at least rival, and likely succeed, the bull market frenzy we saw in tech stocks. Part of what will fuel this frenzy is the enormous flow of institutional investor money, globally, that will eventually find its way into the precious metals and mining stock sector. Because the amount of potential capital from institutions from just a small increase in sector allocation - relative to the total size of the precious metals/mining stock sector - the price effect is potentially enormous.

There are a lot of solid fundamental reasons for this. But from a technical perspective, the total size by market capitalization of the gold, silver and publicly traded mining stocks combined is absolutely minuscule in relation to the total size of global investible institutional assets. To put this in perspective, the market cap of each of the top 15 stocks in the S&P 500 is individually larger than the total market of the entire publicly traded mining stock sector (1). Think about that for a minute. Apple has a bigger market cap than every single mining stock globally combined.

 (1) I get this number by taking the total market cap of all mining stocks globally as of March 2009, calculated by Ibbotson & Assoc of $150 million LINK, and grossing this number up by 25%, which is a blended rate of appreciation between the XAU and the Canadian Venture Exchange, which is the commonly accepted benchmark for junior mining stocks. The market cap of the 15th largest stock in the SPX is $204 million: LINK.

Interestingly, if you think about it, to what extent can Apple possibly achieve even more market penetration and customer-base growth over the next 5 years? It is likely that Apple's market saturation and ability to innovate and create demand has plateaued. At very best, its growth curve has largely flattened. The ole law of diminishing marginal returns - yes, it's a bona fide law of economics/nature - had to get its claws into Apple eventually. Apple stock happens to be the largest holding across all hedge funds.

Now compare that to gold, silver and mining stocks. This visual should help:

(click on chart to enlarge)

Compared to Apple on a relative basis, the "market penetration" into the precious metals sector by institutional investors is quite tiny and there is significant room for institutions to move into and saturate the precious metals sector.

Now, compare this global asset allocation to the last bull market peak for precious metals back in 1980. Back then precious metals represented 6% of total global assets invests. In other words, the amount of global cash invested in precious metals on a relative basis was 6 times greater than it is today. By this measure alone, not only is the precious metals sector unequivocally not in an investment bubble, but it is absurdly undervalued.

I bring this up because it now appears as if the precious metals sector is starting to get the attention of the big institutions. Certainly everyone is now aware that Pimco's Bill Gross was quite vocal in advocating gold during 2012, including his latest comments: LINK

Pimco manages about $2 trillion. The total market value of ALL of the gold held at the Comex, including the customer gold that is not available for delivery, is $18 billion. If Pimco were to allocate 5% of its asset base to buying physical gold, that amount ($100 billion) is 5 times greater than all of the gold held at the Comex. That's just one U.S. institutional investor.

Interestingly, I saw a story posted on Bloomberg late last night about the movement of Japanese pension funds into gold:
Japanese pension funds, the world's second-largest pool of retirement assets after the U.S., will more than double their gold holdings in the next two years as the new government pushes for a higher inflation target, according to an adviser to the funds.
Here's a link to the article: Gold Lures Japan's Pension Funds

Japan's new Prime Minister has explicitly stated that he will implement whatever monetary policy is required to stimulate a 3% inflation rate. The pension funds are responding in kind by moving into gold.

This is just getting started on a global institutional investor basis and it's in its nascence in the United States. Japanese pensions have $3.36 trillion (U.S. dollars) under management. This number in the U.S. is over $20 trillion (Rockefeller Foundation).

So Pimco alone can wipe out the Comex 5 times over with just a 5% allocation to gold. Consider that the total market capitalization of all publicly traded mining stocks is around $200 billion, with the top 5 stocks comprising a large portion of this. Now run the scenario if just U.S. and Japanese institutional investment managers allocate 5% of their portfolios to gold and mining stocks.

You can see where this analysis is headed. This is not my original thinking, as I vividly recall James Dines (The Dines Letter) laying out the case for this sector back in mid-2001, and stating that the eventual bull run in the precious metals/mining stock sector would dwarf the bull run we saw in internet/tech stocks.

The bottom line is that, typically, with big institutional money managers, an investment trend starts slowly and then happens all at once. It is a herd of cattle that you want to be positioned aggressively in front of before the stampede starts. Based on the murmurs being made by the money managers like Bill Gross and by the Japanese pension investors, I would say that the cattle are looking at the open gate and getting ready to make a run for it.


Patrick Heller of Liberty coins comments on slower delivery of some bullion priced gold and silver coins.  He states that supplies are very tight and as such premiums are rising:

(courtesy Patrick Heller/Liberty coins)

Bullion Delays Get Longer
By Patrick A. Heller
January 07, 2013

Since the last time I reported the occurrence of slower deliveries of some bullion-priced gold and silver coins and ingots, supplies have gotten even tighter. As a result, even more premiums are inching upward.

On Monday morning, here is what one major wholesaler was reporting for delayed availability: In gold coins and bars: Half-ounce and tenth-ounce American Eagles, 1-ounce Buffaloes, Canadian Maple Leaves, South African 1 ounce Krugerrands, kilogram-sized gold bars, British sovereigns, Swiss and French 20 francs, Austrian 100 coronas, Mexican 50 pesos and Australian Kangaroos.

In silver coins and bars: U.S. silver American Eagles of all dates, Canadian silver Maple Leaves, 1 ounce Engelhard rounds and rectangles, 10-ounce Engelhard or Johnson Matthey bars, 100- ounce bars of any manufacturer and U.S. 90 percent silver coins.

If you look at the list of what is no longer available for immediate or short-delay delivery against the products that can still be acquired fast, there is one general rule: Products for sale at lower premiums above metal value tend to be in the shortest supply. Higher premium gold coins such as the U.S. gold American Eagles, Austrian Philharmonics and 2013-dated Chinese Pandas are still obtainable with no or minimal delays.

This past week we finally received a multi-hundred coin order of Austrian 100 coronas after a four-week delay. Future orders of this low-premium gold coin will take even longer for delivery.

Perhaps the most notable premium increase is in earlier-dated U.S. silver American Eagles The 1996-dated coins, the lowest mintage year, were already trading at premium prices. Now other dates such as 1986 and 1994-dated coins have developed significant premiums. The primary distributors have apparently already sold out this week’s first release of silver Eagles. Those now wanting to make a purchase may have to wait until the next release to take delivery.

In the first three trading days of 2013, Jan. 2-4, my company’s bullion sales exceeded the company’s total sales for the year 1982. Since gold and silver prices are only three to four times what they were back in 1982, obviously we are selling a far greater quantity of ounces of precious metals. I have heard similar stories of unusually high trading volume from other major bullion retailers.

The last time we saw such a strong surge in demand for physical precious metals was in late 2008. At that time, premiums rose significantly. At the peak, customers were paying 35-45 percent above melt for slightly delayed U.S. 90 percent silver coin because delivery of bars was two to four months delayed. Supplies of bullion-priced gold coins and bars were so tight that buyers jumped to purchase circulated common-date U.S. $10 and $20 gold pieces. It is not out of the question that we could see a return of such frenzied buying within the next few months. 

Patrick A. Heller is the American Numismatic Association 2012 Harry Forman Numismatic Dealer of the Year Award winner. He owns Liberty Coin Service in Lansing, Mich., and writes “Liberty’s Outlook,” a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at Other commentaries are available at Coin Week ( and He also writes a bi-monthly column on collectibles for The Greater Lansing Business Monthly ( radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 a.m. Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at 



I brought this to be attention yesterday but it is worth repeating:

(courtesy Lawrence Williams/Mineweb)

Surging Chinese gold trades buoy Shanghai Gold Exchange

Record trading volumes on the Shanghai Gold Exchange in the first few days of the year presage burgeoning Chinese demand for the precious metal ahead of the Lunar New Year.
Author: Lawrence Williams
Posted: Tuesday , 08 Jan 2013 

According to a note from Germany’s Commerzbank’ Frankfurt-based analytical team, the Shanghai Gold Exchange (SGE) reported a record trading volume in its physical 99.99% gold contract yesterday.
According to the SGE, some 627,000 ounces of gold were traded yesterday alone, more than four times last year’s average trading volume. Furthermore, the bank reports, trading volumes last Friday and today were also more than twice the average level, at around 300,000 ounces of gold each. A total of over 1.3 million ounces of gold were thus traded in the physical gold contract on the SGE in the first four working days of the current year, 8.3% up on the same period last year.
Activity in the gold markets in China can be heavy ahead of the Chinese New Year festivities (in early February this year) – a time when sales of physical gold and gold ornaments and jewellery run at strong levels - and the bank comments that the lower gold prices seen this year will have stimulated buying ahead of the festival.
Last year, Chinese gold imports via Hong Kong, believed to be the principal route for such imports, and the only one for which official statistics are available, were running well above the previous year’s levels being 32% higher than in 2011 for the first 11 months of the year.  However November and December 2010 did see a big surge ahead of the 2012 Chinese New Year which last year was particularly early, falling in January.  Reports have shown that November 2012 imports through Hong Kong were thus around a third lower than in the corresponding month of 2010, but what is encouraging for the gold sector is that it was the highest import figure recorded for 7 months in what was already a strong year and it looks as though imports will have again been picking up sharply towards the year end – figures supported by the latest SGE figures.
Coupled with the Indian Wedding Season, which peaks in November and December it thus looks as though Eastern demand for gold will have been running at a particularly high level towards the end of last year and in the first few days of 2013 which could bode well for the market overall, perhaps countering some of the adverse vibes for precious metals coming out of North America and Europe.


Iran continues to import gold from Turkey:

Banks continue Turkey gold trade despite Iran link

Tuesday, 08 January 2013
By Asli Kandemir
Banks are continuing to exchange gold in Turkey, despite U.S. pressure over the country’s booming gold-for-gas trade with Tehran, which helps Iran cope with international sanctions, bankers said on Tuesday.

Gold exports from Turkey to Iran jumped to $6.5 billion in the first 11 months of 2012 from just $54 million for all of 2011, as the United States tightened sanctions over Iran’s disputed nuclear program.

Turkey is Iran’s biggest natural gas customer, but Western sanctions prevent it from paying Tehran in dollars or euros. Iran is instead paid in Turkish lira - of limited value on the international market but ideal for buying gold in Turkey.

While the shipments are not in breach of existing Western sanctions, they have helped Tehran to manage its finances despite being largely frozen out of the global banking system.

The U.S. State Department said in December that U.S. diplomats were in talks with Ankara over the flow of gold to Iran after the U.S. Senate approved expanded sanctions on global trade with Iran’s energy and shipping sectors in November that would also restrict trade in precious metals.

One senior U.S. official said at the time that the new sanctions, which have yet to take effect, would end "Turkey’s game of gold for natural gas."

"We continue our business as usual," a senior foreign banker said of his bank’s gold trading activities in Turkey, declining to be named because of the sensitivity of the issue.

"We’re always careful in transactions if we have doubts about the source of the money or the identity of the customer; however, we have not faced any extra ban with regard to gold transactions," he said.

Washington says Tehran is enriching uranium to levels that could, with further enrichment, be used in nuclear weapons and believes gold sales to Iran have provided a financial lifeline to a government under the choke of sanctions.

Iran says its nuclear program is for peaceful purposes.

Private deals

Turkish Economy Minister Zafer Caglayan said last week that the gold sales to Tehran would continue, saying the trade was carried out entirely by the private sector rather than between states and was not subject to sanctions.

Couriers carrying millions of dollars worth of gold bullion in their luggage have been flying from Istanbul to Dubai, where the gold is shipped to Iran, industry sources with knowledge of the business told Reuters last year.

Turkish bankers also said the trade with Iran was not being handled through them and that it was business as usual for their gold trading desks.

"Iran is not carrying out its gold trade via the Turkish banking system; it is the private sector selling gold to Iran. We do not face any pressure regarding this issue," said a senior banker from a Turkish bank.

Interbank gold trading is not particularly common among Turkish banks, though lenders usually swap dollars for gold as the central bank allows them to keep a portion of their forex reserve requirements in gold.

Turkey is heavily dependent on imported energy and is Iran’s biggest natural gas customer, buying more than 90 percent of Tehran's gas exports - about 10 billion cubic meters a year - under a 25-year supply deal.

Turkish officials say they have repeatedly made clear to Washington how dependent their rapidly growing economy is on imported energy and that it cannot simply stop importing from Iran, its second-largest gas supplier after Russia.

Turkey’s Deputy Prime Minister Ali Babacan said in November that the lira Iran received from Turkey for its gas was being converted into gold because sanctions meant that it could not transfer cash into Iran.

Goldcorp is planning to adopt an all in cost measure to address transparency in the mining industry.

(courtesy Financial post)

Goldcorp adopts ‘all-in’ cost measure to address transparency, valuation issues

Peter Koven | Jan 8, 2013 8:12 PM ET | Last Updated: Jan 8, 2013 8:35 PM ETMore from Peter Koven

Les Bazso / PNG staff photo
Les Bazso / PNG staff photo Chief executive Chuck Jeannes said the move to all-in costs provides more transparency to investors, while giving other stakeholders (such as governments) a more accurate idea of the industry’s profitability.

For several years, investors have complained that the real cost to produce gold is far higher than the "cash costs" reported by gold companies. Now Goldcorp Inc. is doing something about it.
The Vancouver-based miner has begun to report what it calls "all-in" cash costs. Unlike traditional cash costs, which simply add up the cost of digging an ounce of gold out of the ground and selling it, Goldcorp’s all-in cost also includes sustaining capital, exploration expense, and general and administrative expenses.
The result is a much more realistic measure of what it costs to produce an ounce of gold. For 2013, Goldcorp expects by-product cash costs of US$525 to US$575 an ounce. But on an all-in basis, it anticipates costs of US$1,000 to US$1,100 an ounce.
Chief executive Chuck Jeannes said the move to all-in costs provides more transparency to investors, while giving other stakeholders (such as governments) a more accurate idea of the industry’s profitability. He also said that the all-in measure addresses the issue of gold equity valuations weakening despite a strong gold price.
"Many of the sell-side analysts on the line today have done similar analyses and have cited the correlation of increasing all-in costs to the erosion in multiple valuations among the equities," he said on a conference call Tuesday.
The World Gold Council has been pushing the industry to introduce all-in costs for a long time, and Mr. Jeannes pledged to work with the organization to come up with a consistent all-in measure that could become a new industry standard. He said that there is a "healthy debate" going on over what costs should and should not be included.
"I call on our peers in the industry as well as you, our shareholders and analysts, to work toward the adoption of an industry-wide, all-in cost standard," he said.
Goldcorp anticipates all-in costs of at least US$1,000 an ounce despite being a low-cost producer. If high-cost producers used the all-in measure, some of them would be struggling to report any sort of positive margin at the current gold price of US$1,659.

Your early morning overnight sentiment from Europe/Asia:  

Major points:

1. Alcoa kicked off earnings season with in line expectations but many are worried about lousy earnings.

2. Attention is on the debt ceiling with some feeling that the USA has only 35 days left. If no agreement then creeping government shutdowns commence.

3.German Industrial production misses expectations with .2% rise instead of 1%.

4. confidence in Europe that this area is recovering is largely premature

5. Greek industrial output falls a huge 2.9% (down from a revised 5% gain the month before)

6.  Deutsche Bank gives a thorough review of overnight activity

(your early morning market sentiment courtesy of zero hedge)

Micro In Focus; Macro On Backburner; Debt Ceiling Showdown Looms

Tyler Durden's picture

With Alcoa kicking off the earnings season with numbers there were in line and slightly better on the outlook (as usual), attention will largely shift to micro data and disappointing cash flows over the next two weeks, even as the countdown clock to the debt ceiling "drop dead" D-Day begins ticking with as little as 35 days left until debt ceiling extension measures are exhausted and creeping government shutdowns commence. There was little in terms of macro data from the US, even as a major datapoint out of Germany, November Industrial Production, missed expectations of a 1% rise, pushing higher by just 0.2% M/M (up from a -2.0% revised October print), once again proving that "hopes" (as shown by various confidence readings yesterday) of a boost to the European economy are wildly premature. This disappointing print comes a day ahead of the ECB conference tomorrow, when the governing council may or may not cut rates, although it is very much unlikely it will proceed with the former at a time when at least the narrative is one of improvement - pursuing even more easing will promptly dash "hopes" of a self-sustaining trough (forget improvement) for yet another quarter. Putting the German number in context, Greek Industrial Output slid 2.9% in November, down from a revised 5% rise, refuting in turn that this particular economy is anywhere near a trough.
There has been some weakness in European peripheral bonds, without a clear catalyst although some hints exist that the market is starting to look at Spain fundamentals, and actual net and gross funding needs which increased modestly in 2013, even as it is unclear how much of the funding in 2012 was courtesy of a ponzi capital rotation out of the social security fund and into SPGBs. Specifically Rabobank issued a report noting that Spanish banks are hamstrung by the amount of SPGBs they hold and the need to finance their own debt. It concludes that it is in doubt whether yields, lowered by the OMT promise, are sustainable, and that Spain is a "key potential trigger" to reawaken crisis tensions.
While the general overnight sessions has been a snoozer so far, and the complete recap below is from DB:
In terms of markets it was another day of consolidation as we seem to be still in search of a major catalyst following the Fiscal Cliff frenzy of the last few weeks. Indeed yesterday saw the S&P 500 (-0.32%) almost mirror Monday’s performance as sentiment was somewhat weighed by some poor European economic data and also a later-denied rumour that France’s credit rating was facing an imminent downgrade. Nine out of the ten major sector groups finished lower in the US but it was the weakness in Telecoms (-2.69%) that stood out, driven by a 3% drop in AT&T despite news that the company had sold more than 10m smartphones in the fourth quarter.
The S&P 500 finished off its intraday lows, though, as the market awaited what was eventually a decent set of results from Alcoa after the bell. The company reported an EPS of 6cps for Q4 which was in line with market consensus but with revenue numbers that were nearly 6% higher than analysts’ estimates. The forward-looking guidance was also rather upbeat. Indeed the company now sees global aluminium demand growth of 7%, up from 6% last year and running ahead of the 6.5% rate required to meet the company’s forecast. Interestingly Alcoa also  stated that demand in China is “coming back”. AA stocks rallied about 1% in extended hours trading while the company’s 2021 bonds finished 7bp tighter on the day.
Yesterday’s US data made for mixed reading. The NFIB survey showed a slight improvement in overall small business sentiment for January (88.0 vs 87.5 previously) following a fiscal-cliff inspired 5.6pt drop the previous month. Our US economics team points out that current sentiment levels are consistent with those seen during recessions, although an economic downturn is not their base case.
The Federal Reserve published its consumer credit report for November which showed a $16bn increase for the month (vs $12.8bn expected) and a number of headlines highlighted the surge in student loans (+$4.9bn)
Overnight Asian markets are trading firmer probably buoyed by Alcoa’s results and the positive read-through from the CEO’s comments about Chinese demand. Asian credit markets are seeing better two-way flow following the recent rally although primary markets remain the key focus. The Australia and Asia IG iTraxx indices are 1.5bp and 1bp wider on the day as we type. The notable mover has been the Nikkei which has rallied 1.5% intraday (currently +1% as we type) buoyed by a 0.5% depreciation in the yen against the dollar. The moves come after Reuters report in which it was said the BoJ will likely adopt a 2% inflation target at its Jan. 21-22 meeting and issue a statement with the government pledging to pursue bold monetary easing steps.
Back to yesterday’s major newsflow, French 10yr spreads to Bunds finished the day virtually unchanged after having reached an intraday wides of around +65bp following reports of an imminent downgrade in France’s sovereign rating.
The reports were later dismissed by a finance ministry spokesperson (Reuters) but French OATs still underperformed Eurozone peers yesterday as Spanish and Italian 10yr spreads narrowed by 4bp and 6bp respectively. A reminder that all three major rating agencies have a negative outlook on France’s rating. S&P and Moody’s downgraded France to AA+ and Aa1 respectively last year, while Fitch maintains a AAA rating.
Turning to Spain now, ahead of its first auction of 2013 on Thursday, the Spanish treasury said that it plans to issue a total of EUR215 to EUR230bn worth of bonds in 2013, including EUR23bn in financing for the Spanish regions. The treasury chief reiterated that the country’s fiscal position is “sustainable” and added that he expects borrowing costs to fall from the 3.42% average in 2012 and 3.9% average in 2011 (Bloomberg).
Returning to fiscal cliff developments, it was interesting to note that a Washington Post-ABC News poll found that 52% of Republican voters disapprove of the way Boehner handled the fiscal cliff negotiations, a 15ppt point jump from December when the talks were still ongoing. As they were last month, Democrats are overwhelmingly supportive of Obama’s performance in the negotiations. Overall, 44% of voters approved of Congress’ 11th-hour fiscal cliff deal, while 42% disapproved (Washington Post).
Looking at the day ahead, the key data highlights are Germany’s IP print for November and the UK trade numbers. Italy will also provide an update on its budget for the third quarter. It will be a relatively quiet day in the US with MBA mortgage applications and a 10yr note auction the main highlights.


The following commentary is an important read.
Marc to Market explains why Cyprus, although tiny can cause major risks to the Euro.

1. The amounts needed are still not known.

2. The banks in Cyprus have been known to launder money especially of a Russian source and this is of grave concern to the Germans
3. Cracks appear in the Troika when dealing with Cyprus
4. The President of Cyprus is a communist and this may be one of the reasons that the Troika seems to ignore the wishes of this tiny island

(courtesy zero hedge)

Why Cyprus is Important

Marc To Market's picture

European officials have impressed upon investors that the tail risks of a EMU break up have receded markedly.  Some officials talk even that the crisis is over.  The premium Italy, and to a less extent, Spain, pay over Germany have narrowed to levels that had previously thought possible only if the ECB were to make good on its promise of unlimited (ex ante) purchases.  There have been some signs that foreign investors are participating in the primary and secondary sovereign European bond market.  Ireland is returning to the capital markets.
To be sure, challenges remain. Greece's will and ability to impose more austerity is questioned.  Spain has relied on cuts in public investment over the last several years while other spending has actually risen.  With high issuance this year than last, apparently without the help of another LTRO (with some borrowing, perhaps around 100 bln euros expected to be paid back early--beginning as soon as the end of Jan), Spain's funding challenges are likely to resurface.  Italy's elections next month could still result in a hung parliament, with Monti's centrist movement seemingly contributing to the fragmentation.
However, it is Cyprus that may be the most pressing issue.  Yes it is small and few international investors have any exposure.  However, its significance extends beyond its size.
There are four main issues.  First, the amount of assistance it needs is still not determined and won't be until later this month.  Nor, contrary to reports will the Europe be a in position at the finance ministers' meeting in early Feb to devise an aid package.  This will forces the Cyprus government to rely on "creative" fund raising, such as "borrowing" the money from state-owned institutions and pensions.   Aid now seems unlikely until March at the earliest.
Second, reports (in the German media) at the end of last year warned that Cyprus banks have been used to avoid taxes and launder (primarily Russian) money.  This has prompted concern from the German SPD and Greens.  German Chancellor Merkel has had to rely on support from these opposition parties for her European agenda.   Aid to Cyprus could be rejected by the German Bundestag, which would raise broader concerns.
German elections are likely in September and the SPD's Steinbrueck's campaign is not off to an auspicious start.  However, this issue, could become a wedge.  Moreover, Lower Saxony holds state elections in a couple of weeks and it could see Merkel's ally the FDP further implode and a shake up in the party's leadership. The CDU is polling near 40% and will likely need an ally to form the new government.                                                          
Third, while the Troika (EU, ECB, IMF) had looked like a solid front in the early stages of the European crisis, fissures appeared toward the end of 2012.  These fissures are evident in dealing with Cyprus.  The IMF wants the private sector participate in burden sharing (i.e., debt restructuring/haircut) before tax payers money is brought to bear.  Yet previously European officials have indicated that Greece was unique in requiring a debt restructuring.  Although at first European officials resisted the IMF's participation, now it seems that they are reluctant to proceed without it                                          
Fourth, the EU has been accused of playing political favorites.  For example, some reports suggest that EU officials were aware of at least some of the deception of the conservative Greek government before the 2009, but was reluctant to confront it for fear of bolstering the opposition Socialists.   Now it appears European officials want to distance themselves from Communist president of Cyprus, Christofias.  Merkel, for example, who will visit Cyprus later this week, is not expected to meet him.  Cyprus will hold presidential elections on Feb 17.  If no candidate receives 50% of the vote, which is the most likely scenario given the recent polls, a second round would be held on Feb 24.
While last year we argued against the widespread view of a Greek exit, we are not as sanguine about Cyprus.  Although one does not see it reflected in the survey or policy markets like, we suspect the risks of a Cyprus exit are greater than currently appreciated.


Violence is rising between Protestants and Catholics in Northern Ireland as this region falls behind that of the UK.  The unrest is beginning to cause business leaders to worry.

(courtesy Spiegel on Line)

Flag Riots in Northern IrelandNew Belfast Unrest Worries Business Leaders

Photo Gallery: A Flareup of Violence in Belfast
The latest flare-up of sectarian violence in Northern Ireland has business leaders warning about the damage that could be done to the region's economy. Belfast has made strides in recent years as violence has waned, but peace and the economy remain fragile.

In Northern Ireland, it was hoped that an end to decades of unrest would finally result in an economic turnaround -- one which would be instrumental to establishing lasting peace. And initially, it seemed to work. In the years following the signing of the 1998 Good Friday Agreement, which established a tentative peace between Protestant groups loyal to the United Kingdom and Catholic groups seeking union with Ireland, foreign investment rocketed upwards and business activity in Belfast also picked up.

More recently, however, the Northern Irish economy has been anything but dynamic, with negative effects of the recent downturn in the British economy being even more pronounced in Belfast and its surroundings than elsewhere in the UK. And now, with sectarian violence having flared up in recent weeks, local leaders are warning of its potential negative impact on business.
"Northern Ireland has been lagging behind the rest of the UK and our recovery has been slow," Glyn Roberts of the Northern Ireland Independent Retail Trade Association told SPIEGEL ONLINE. "This has come at the worst possible time and my concern is that these protests are making the situation even worse."
Roberts' concern was echoed by Invest Northern Ireland. "A small number of potential investors have raised concerns about the current level of unrest," the group said in a statement quoted by the Irish Times. "Invest NI is working closely with them to minimize the impact of any negative perceptions."
Worrisome Escalation of Violence
The new wave of protests has been swelling since mid-December, when the Belfast City Council voted to no longer fly the British flag every day from city hall. Instead, the Union Jack will be raised only on designated days. The clashes have become more intense in the new year, with Monday evening marking the fifth straight night of violence between protesters and police.
While the numbers of those involved in the rioting have been small -- limited to the dozens on Monday night -- the escalation has been nonetheless worrisome. Over the weekend, police reported having been fired on. Security officials have also been showered with Molotov cocktails, paving stones, fireworks and paint bombs. Some cars have been attacked with hatchets and sledgehammers. On Monday night, police responded with water canons and so-called "baton rounds," which refers to non-lethal plastic or bean-bag projectiles fired out of a shotgun.
Over 60 police officers have been injured since the unrest began in December and over 100 rioters arrested. "As chief constable, I'm taking the unusual step of calling directly now for protests, if not to be ended, to take a step back, for the violence to come to an end and for responsible voices to be heard," top security official Matt Baggot told reporters on Monday. Given that some involved in the rioting have been as young as 10, he also appealed to parents to prevent their children from taking part.
Of particular concern are indications that pro-British militant groups may be behind the violent attacks on the police. "What (the attacks) quite clearly demonstrate is the fact that paramilitaries have hijacked this flags protest issue and they have now turned their guns on the police," Terry Spence, chairman of the Police Federation for Northern Ireland, told BBC radio.
Roberts said that his organization had been hoping that 2013 would mark yet another upturn in tourism to Belfast and the surrounding region, with several events planned. He noted that development projects in the city, including the Titanic Quarter and the 2012 opening of a Titanic-themed museum, had made for a successful year in terms of visitors even as the economy has stagnated and unemployment has risen.
'Negative Impact'
"The biggest question now is the impact the violence is having on the international image of Belfast," Roberts said. He also said that 2012 was a terrible year for retail sales in the Northern Irish capital and that many Christmas shoppers chose to go elsewhere as the violence began escalating in December.

The latest rioting is just the most recent indication that, even 15 years after the 1998 peace agreement between Catholics and Protestants, tension still remains. June of 2011 saw a similar violent flare up as did last July. Still, hostilities have become rare since two loyalist militant groups, the Ulster Volunteer Force and the Ulster Freedom Fighters agreed to lay down their weapons in 2007.
And as violent as the clashes have been, the limited number of those involved has provided some cause for optimism. "Clearly the violence is a step up in terms of what's happened more recently, but they're simply not getting people out on the street," Peter Shirlow, a professor at Queen's University in Belfast, told Reuters. "Protestants are annoyed about the flag, but they're even more annoyed about the violence. There's no stomach for this. That mass mobilization isn't there anymore."
Roberts too is quick to emphasize the limited nature of the protests. "We should put this into perspective," he said. "It's not widespread and is limited to just a few areas. But my concern remains that all of this will have a negative impact."
cgh -- with wire reports


Your early Tuesday morning currency crosses; 

This morning we continue to see the euro weaken somewhat against the dollar. The yen however strengthens against the dollar.  The pound shows slight weakness against the USA dollar as does the Canadian dollar.  We have a slight risk is on situation with most European bourses in the green as well as gold and silver:

Euro/USA    1.3058 down  .0023
USA/yen  87.53  up  .609
GBP/USA     1.6014 down .0044
USA/Can      .9877  up   .0012


your closing 10 year bond yield from Spain:  




5.134000.06300 1.24%
As of 11:59:42 ET on 01/09/2013.



Your closing Italian 10 year bond yield: 
a drop in yield.

Italy Govt Bonds 10 Year Gross Yield


4.273000.01300 0.30%
As of 11:59:50 ET on 01/09/2013.


Your 3:00 pm Tuesday currency crosses: 

The Euro continues to lose steam.  The Yen is also trading weaker.  The pound is slightly weaker from this morning and the Canadian dollar is flat from this morning:

Euro/USA    1.3052 down   .0030
USA/Yen  87.71 up .790
GBP/USA     1.6012 down .0046
USA/Can      .9876  up .0011


Your closing figures from Europe and the USA:
England, Germany and the USA in the green.  France basically flat
and Spain modestly in the green:

i) England/FTSE up 45.02  or 0 .74%

ii) Paris/CAC  up 11.57 or  0.31% 

iii) German DAX: up 24.64 or .32% 

iv) Spanish ibex: up 153.4  or 1.81%

and the Dow: up 61.66  points or .46% 


And now for major USA stories:

Morgan Stanley to cut 1,600 investment banking jobs.

(courtesy Bloomberg)

Morgan Stanley Said to Cut 1,600 Investment

Banking Jobs

Morgan Stanley, the sixth-largest U.S. bank by assets, plans to eliminate about 1,600 jobs from its investment bank and support staff in coming weeks, a person familiar with the matter said.
Morgan Stanley, the sixth-largest U.S. bank by assets, plans to eliminate about 1,600 jobs from its investment bank and support staff in coming weeks, a person familiar with the matter said. Photographer: Victor J. Blue/Bloomberg
Jan. 9 (Bloomberg) -- Morgan Stanley, the sixth-largest U.S. bank by assets, plans to cut about 1,600 jobs from its investment bank in coming weeks, a person familiar with the matter said. Betty Liu reports on Bloomberg Television's "In The Loop." (Source: Bloomberg)

The cuts total about 6 percent of the New York-based company’s institutional securities group, which includes investment banking and trading units, and support staff, the person said, asking not to be identified because the decision hasn’t been made public. About half the reductions will be in the U.S., the person said.
Morgan Stanley reduced its staff by about 4,200 people in the first nine months of last year through job cuts and unit sales, after saying in December 2011 it would eliminate 1,600 jobs. Chief Executive Officer James Gorman, 54, has pledged to lower costs as return on equity remains below the bank’s cost of capital.
All levels of employees will be affected, and some workers have already been notified, the person said. Morgan Stanley has laid out a plan to cut $1.4 billion of annual expenses by next year.
Morgan Stanley fell 5 cents to $19.60 at 11:04 a.m. in New York. The shares climbed 26 percent in 2012, and trade at about 65 percent of the firm’s book value.
Citigroup Inc. said last month it would cut 11,000 jobs and pull back from some emerging-market nations. UBS AG announced in October that it would fire 10,000 workers and largely exit fixed-income trading.
To contact the reporter on this story: Michael J. Moore in New York at


Bruce Krasting on social security.
(courtesy Bruce Krasting)

Gettin Ugly

Bruce Krasting's picture

I got into a bit of an Internet tussle with Marketwatch 666. This was another of those posts from the defenders of Social Security, and like most of these articles, this one fell back on an old tired line. The author quoted Ronnie Reagan: (I wanted to barf)

Social Security can’t add to the deficit.


So I dashed off a comment:

Social Security does not add to the deficit. Ronnie was right.
Social Security DOES add to the DEBT of the country.
Both statements are true. Which one is the one to focus on?
In 2013 the answer is that it is the debt that matters, not the deficit, and SS is adding to the debt.

The author, R.J Sigmund, comes right back with: (and I’m grabbing for the wastebasket again)

Bruce, the debt is not a problem....the world economy is suffering from a shortage of safe assets, and theonly way to alleviate the shortfall is to increase the debt

Then he goes on to add:

you've conveniently omitted the fact that it also earned more than $117b in interest on the government bonds in the trust fund....

I love it when this happens; folks playing “gotcha”, not even understanding the facts. I come back with my standard response:

Careful where you go with that interest income line. Interest is a NON CASH ITEM. SS needs cash to make benefit payments. So SS has to hock its bonds with Treasury to come up with the CASH needed. Treasury, in turn, must borrow from the public to fund the SS shortfall.

I told them to go to SSA, and look at the bottom line results at SS for 2011:


Every penny of the $45.379B cash shortfall had to be borrowed by the Treasury. Treasury did that by issuing more Debt to the Public. I added some number about what's in store for the future with cash deficits at SS:

2010 SS deficit = $47B,
2011 SS deficit =$48B,
2012 SS deficit = $60B,
2013- 2023 SS deficit = ~$1T

Anyway, I doubt I changed RJ's views on this too much. This is an emotive topic, and I suspect it is going to become more charged in the weeks to come. It’s very hard to have a debate with someone who starts with, “debt is not a problem”. It’s even harder when the debate is ended with: take your ranting back to zero hedge, where you might find some other chicken little types who'll buy into your theories...




Obama replaces Geithner with Jack Lew,(White House Chief of Staff) 

Obama To Appoint Jack Lew As Treasury Secretary Tomorrow, Bloomberg Reports

Tyler Durden's picture

As reported previously, when Bloomberg broke the news two days ago, it now appears that the official appointment of Jack Lew as the new SecTres will take place tomorrow. From Bloomberg: "President Obama will announce tomorrow that White House Chief of Staff Jack Lew is his pick for Treasury secretary, person familiar with the matter tells Bloomberg’s Han Nichols." In other words - goodbye Timmah: best of luck writing your new book, which in the tradition of every ex-public servant who departs the government where they kept their mouths firmly shut, we assume will be all about bashing Tim Geithner.
And for those who missed it:
Bloomberg is out after hours with news that was expected by many, but which was yet to be formalized, until now: namely that following today's flurry of contntious nomination by Obama, the latest and greatest is about to be unveiled - Jack Lew, Obama's current chief of staff, is likely days away from being announced as Tim Geithner's replacement as the new Treasury Secretary of the United States. In other words, Jack will be the point person whom the people who truly run the Treasury, theTreasury Borrowing Advisory Committee, chaired by JPM's Matt Zames (who just happens to also now run the notorious JPM Chief Investment Office which uses excess deposits to gamble - yes, you really can't make this up) and Goldman's Ashok Varadhan, global head of dollar-rate products and FX trading for North America (recently buying a $16 million pad at 15 CPW) will demand action from.
President Barack Obama is close to choosing White House Chief of Staff Jack Lew for Treasury secretary with an announcement as soon as this week, according to two people familiar with the matter.

Selecting Lew to replace Timothy F. Geithner would also require Obama to install a new chief of staff, the first step in a White House staff shuffle for his second term. Many of the president’s senior aides may be taking new roles as the president recasts his team, said the people, who requested anonymity to discuss personnel matters.

While Obama hasn’t made a final decision to pick Lew, his staff has been instructed to prepare for his nomination, said one of the people. Among the leading candidates to replace Lew as Obama’s chief of staff are Denis McDonough, currently a deputy national security adviser, and Ron Klain, who had served as Vice President Joe Biden’s chief of staff.

The next Treasury secretary will play a leading role in working with Congress to raise the government’s $16.4 trillion debt ceiling. The U.S. reached the statutory limit on Dec. 31, and the Treasury Department began using extraordinary measures to finance the government. It will exhaust that avenue as early as mid-February, the Congressional Budget Office says.

Geithner plans to leave the administration by the end of January even if the debt ceiling issue hasn’t been settled.
Somewhere, Larry Fink, and Jamie Dimon just exhaled (not to mention Mark Zandi whose stomp to the Great Barrier Reef brought him nothing but more seasonally adjusted disappointment).
So who is Jack Lew?
Here is an extended profile by Sam Stein, which however, will likely leave as many open questions as it answers:
White House Chief of Staff Jack Lew has been an unassuming figure during the Obama years. His media appearances are dull; his presentation is a bit bookworm-ish -- as if Harry Potter grew up and replaced his magic wand with Excel spreadsheets. When he speaks, the tone is usually measured and unemotional.
Behind the scenes, however, Lew has proven to be Obama's most skillful consigliere in matters of political trench warfare. Time and again during the debt ceiling debate, as Republicans attempted to get the administration to bend on top domestic priorities, it was Lew who proved to be a stick in the mud. Then serving as Office of Management and Budget Director, his insistence on playing out the practical impact of those cuts irritated Republicans to no end.
"What is infuriating to Republicans is that no one knows the federal government, the budget, these policies, better than Jack Lew," Kenneth Baer, a former senior adviser to Lew, told The Huffington Post. "Just as I imagine it would be frustrating to hit batting practice off Sandy Koufax."
Below are just a few excerpts from Woodward's book, "The Price of Politics":
[Brett] Loper [House Speaker John Boehner's policy director] found Lew obnoxious. The budget director was doing 75 percent of the talking, lecturing everyone not only about what Obama's policy was, but also why it was superior to the Republicans'.
[Barry] Jackson [Boehner's chief of staff] found Lew's tone disrespectful and dismissive.
Lew was incredulous when he considered the Republican proposal as a whole. The changes they were considering sounded simple. But the speaker's office was laying down general principles and looking to apply them to extremely complex programs. The devil was always in the details.
Boehner was sick of the White House meetings. It was still mostly the president lecturing, he reported to his senior staff. The other annoying factor was Jack Lew, who tried to explain why the Democrats' view of the world was right and the Republicans' wrong.
'Always trying to protect the sacred cows of the left,' Barry Jackson said of Lew, going through Medicare and Medicaid almost line by line while Boehner was just trying to reach some top-line agreement.
[Ohio Governor John] Kasich called [economic adviser Gene] Sperling at the White House, suggesting that he meet with Boehner. Lew, he said, did not know how to get to yes.
Sperling realized it was not a compliment that they wanted him. It essentially meant, 'Lew's being too tough. Can we get Sperling?'
Lew's wonky stubbornness during those negotiations didn't make him a progressive hero. In private caucus meetings, congressional Democrats laced into him for keeping them out of the loop and placing sacred cows on the negotiation table. But it did establish Lew as a true hub of power within the administration, and it showed that he, perhaps more than any other top adviser, had Obama's ear.
"I was in many meetings," Sperling recalled in an interview with The Huffington Post, "where Jack would say, clear as a bell, 'Mr. President, I think we can accept this. I’d have to go through all these little tiny cuts and stuff.' And the president would say, 'Jack ... you know my values. I trust your values.'"
For someone in a position of immense power, Lew remains a difficult figure to pin down philosophically. His youth was spent in New York City where -- as a June 2011 Politico profile noted -- he rallied against the Vietnam War and touted the import of immigration and public housing while serving as the editor of his high school newspaper. At Carleton College, his faculty adviser was Paul Wellstone, then a political scientist and later a famously liberal senator. Lew worked with Rep. Bella Abzug (D-N.Y.), another unapologetic progressive, before gravitating towards more moderate, establishment ground. He went to work with Rep. Joe Moakley (D-Mass.) and then took a job with House Speaker Tip O'Neill (D-Mass.).
Along the way, his view on D.C. politics changed. "[T]here’s a space in Washington that is not deeply populated, which is a bridge between the highly technical and the political,” he would tell Politico. "[I]f you could be fluent in both worlds and respected enough in both worlds, you could have an opportunity to be a translator and to make a difference."
Those who worked with him during that time period recall a type of pragmatism that seems antiquated today.
"It was a much different world, with a lot of collegiality amongst the Senate and House, the Republicans and Democratic staff people," said Lynn Sutcliffe, chief executive officer of EnergySolve, LLC, who worked with Lew while general counsel of the U.S. Senate Commerce Committee. "It was the art of the possible, not the art of promoting oneself or your boss' re-election."
Lew's work would prove influential in forging the famed Social Security deal made between O'Neill and Ronald Reagan in 1983. And when he departed the Hill in 1986 to join the lobbying shop that Sutcliffe once helped run, it was an important enough development to merit a small item in The New York Times.
Lew returned to government during the Clinton years, gradually rising to the ranks of OMB Director. He packed in long hours six days a week, taking off every Saturday to observe the Sabbath (he is an Orthodox Jew), honing the type of negotiating acumen that would prove useful for Obama. In talks with House Republicans, Lew would use fluency in economics -- despite not being an economist -- and a mastery of budget details to essentially out-will the president's priorities into legislation.
"What makes him a tough negotiator is not that he can’t get to yes or that he’s some kind of bulldog," Sperling said. "What makes him a tough negotiator is he knows his stuff so well ... He negotiates well by being a master of the detail."
In the Obama administration, Lew has been comfortable working largely in the shadows. His predecessor as OMB Director, Peter Orszag, matched his budget expertise with a sharp media savviness. His two predecessors as chief of staff, Rahm Emanuel and Bill Daley, were veritable celebrities.
Lew stepped into that position after the high-profile budget and debt ceiling fights of 2011 had passed. But aides and friends stress that he's been handed heavy tasks: not just managing a White House with half of its focus on the reelection campaign, but also restoring damaged relations with congressional Democrats.
"[Senate Majority Leader Harry] Reid didn't know much of Jack Lew until he started having to deal with him because he couldn’t trust Daley," said Jim Manley, Reid's former top spokesman. But once he did, a strong relationship was established. In a private meeting shortly after the debt ceiling deal was concluded, it was Lew who helped convince attendees that the final legislation wasn't such a bitter pill.
"Democrats soon became comfortable with it because he outlined the blow back or ping pong effect that would occur," Manley said. "He knew his facts cold. And he knows his stuff better than Boehner and just about anyone else on Capitol Hill."
Still, it's tough to tell what type of ideological imprint Lew has had on the administration. Aides credit him and Sperling with scoring major victories during the government shutdown debate in the spring of 2011 and the debt ceiling debate later that summer. House Republicans left the former thinking they'd secured $100 billion in savings, only to discover, upon closer inspection, that it was $32 billion. The $1 trillion sequester included in the debt ceiling deal included defense cuts, while leaving out top Democratic priorities like Medicaid (in one late-stage phone call with Republican aides, Lew screamed down attempts to make that program part of the trigger).
But in each instance, the broader debate was waged on Republican terms: additional stimulus spending took a backseat to deficit reduction. One Lew confidant said that Lew personally views himself as a progressive, despite having a reputation as a Clinton-era, new Democrat budget hawk. Sperling would only describe him as someone who straddles, if not outright ignores, the labels and lines.
"I’ve worked with Jack a large part of my adult life and I mean, he is what you see," he said. "He is very serious about deficit reduction but he operates from core progressive principles. In other words, he is not the type of person who either lets conservatives pressure him into backing down on basic issues of fairness, but on the other hand, he is never beholden to litmus tests from progressive groups that he does not believe are reasonable from a policy context."


(from our friends over at the silver doctors website and Jim Sinclair: re Basel III)


Jim Sinclair has sent subscribers another alert this afternoon regarding thedelay in the implementation of the Basel III requirements, which were set to make gold a Tier I asset- making the metal equal with cash or treasury bonds for capital liquidity requirements. 
Sinclair states that the entire reason that Basel III has been delayed is because the Western financial system simply does not have the ability in terms of real liquidity to meet the new requirements.  Sinclair states that the Western financial system cannot meet the requirements now, they will not be able to in 2 years, and that his conclusion regarding Obama’s appointment of Citi derivative dealer to the position of Secretary of the Treasury is:  Father forgive them because they (our esteemed leaders) really do not know what they have gone and done.
Sinclair’s full alert is below:

Silver Bullet Silver Shield Slave Queen Collection  at!!
Slave Queen 2
From Jim Sinclair:
The entire reason for the agreed delay of the Basel Three liquidity requirements is the Western financial system’s balance sheets. They are cartoons because of FASB blessing of debatable values for paper assets such as OTC derivatives with absolutely no market relationship.
Put succinctly, the Western world financial system simply does not have the ability in terms of real liquidity to meet Basel Three requirements. That is the entire story. The tomes written on this should be but one line – bankrupts cannot meet liquidity requirement now or in two years from now.
Add this to the news that a derivative dealer out of Citi has been proposed as Secretary of the US Treasury and my conclusion is that in truth, “Father forgive them because they (our esteemed leaders) really do not know what they have gone and done.”


Panic with food stamps in California:

(courtesy zero hedge)

Panic In California As Thousands Of Food Stamps Cards Suffer Brief Outage

Tyler Durden's picture

This past weekend, as part of a system update to the CalWINsoftware of California's Social Services department, HP accidentally cancelled EBT cards for some 37,000 Californians. We can only imagine the resulting panic and the scramble by all these Californians who suddenly could not live within their means to print trillion, and other denomination, coins, in the shining example of their government. The OC Register reportsthat eighteen counties were affected in the CalFresh chaos (the 'friendly' name given to California's food stamp program - also formerly known as the Supplemental Nutrition Assistance Program or SNAP). While we worry for the strippers and liquor stores, CalWIN and Xerox (the state's primary contractor for administering CalFresh) developed a process to reactivate the cards by Tuesday morning. While this must have been a tough day or two for many, we wonder if Geithner's 'extraordinary' efforts to extend the debt ceiling deadline have perhaps gone a little too far?
Finally, instead of minting coins, perhaps Hewlett Packard can remotely update its software in the Fed printers, which can then proceed to print a few cool extra trillion unsupervised, and voila: all of America's problems are gone.


Graham Summers comments that we should be watching the 30 year bond yield as it finally broke upward trend line:

(courtesy Graham Summers/Phoenix Research Capital)

Barring a Debt Ceiling Solution, the US Will Begin Defaulting on February 15 2013

Phoenix Capital Research's picture

We’ve now have just a little over 30 days until US breaches its debt ceiling.

We would have already done so, except Treasury Secretary Tim Geithner borrowed some $200 billion from emergency funds to buy a few weeks’ time (announcing that he’d be leaving his post before the actual ceiling was breached).

The “solutions” to the debt ceiling discussions range from outright insane ($1 trillion coins) to just staggeringly irresponsible (just get rid of any oversight and grow the debt without restriction).

Let us consider the facts.

The only reason the US is even having these discussions is because we’ve added $1+ trillion in debt to our balance sheet every year since 2008. The reason we were able to get away with this was because Congress hasn’t even implemented a budget since that time. Indeed, the last time a budget was even proposed (by President Obama in that case) it was rejected 97-0.

Let’s say a US family spent all of its savings and income and so began using credit cards to fund its purchases. Then, instead of implementing reforms and a budget, these folks decide to abandon any kind of tracking of their expenses and start spending even more. Eventually this family would begin to stop paying its bills.

What would you tell these folks if their proposed solution to this situation was to stop opening their mail?

At the core of this entire situation is a total lack of financial discipline. Indeed, at this point, the only thing the political class in the developed world seems to pay attention to is the bond markets: only when their bonds collapse and interest rates spike is there any sense of urgency to do anything (with massive debt loads, any increase in interest rates means hundreds of billions of dollars in more interest expenses).

On that note, the US 30-year Treasury appears to just have taken out its trendline:

Bear in mind, the US Federal Reserve has been the primary buyer of US debt. So if the US bond market begins to collapse at a time when the Fed is already buying this much, there isn’t a whole lot the Fed can do to fix the situation (other than just buy more… which inevitably leads to a debt implosion).

This situation has the potential to get very ugly. Remember the impact the failed debt ceiling talks had on the markets in July 2011?

At that time, the only thing that pulled the market back from the edge was the Fed’s announcement of QE 2. But the Fed has already just announced both QE 3 and QE 4. So this option won’t be around to fix the fallout if the US breaches its debt ceiling again now.

For more clear independent insights and interpretations of the global economy and financial markets, swing by


Phoenix Capital Research


Well that about does it for tonight

I will see you tomorrow night



Jack said...

Hey Jack--

I'll make to same offer to you I made to someone else on here.

I'll sell you 50,000 oz of that "rare" physical silver. All 1000 oz +/- bars, FOB my depository.

10 cents over spot.

Come 'n git 'em.


I'll take every ounce of every bar Fred. Upon the following conditions:

1) Spot is 30.28. Price is fixed at 30.38 per ounce or 30,380 per bar. Price cannot be changed, no matter what the market does.

2) Delivery and shipping cost is your problem. You pay it. And the insurance as well.

3) You will email me all the bar numbers and photos of all bars in advance.

4) Payment will be sent to a public escrow account of my choice. Bars will be shipped, by you, to me or my buyer once you have proof of payment.

5) All Bars will be subject to an assay test after receipt. Bars that pass the test will result in a release of escrow payment to you. Otherwise, the bar will be returned to you at my cost.

If you agree to the above, send me an email to

Anonymous said...

Thanks Harvey! 8)

FunkyMonkeyBoy said...


You've agreed to buy 50,000 oz of silver from Fred at $30.38 an ounce. That's approx. a $1.5m transaction.

Who's going to pay the escrow fees?

Liked the way you slipped in the "to me or my buyer" statement.

Smells like a bigger load of bull than Harvey puts out daily. I believe Fred's offer is genuine, but Jack is full of it (hence the conditions and crazy way of going about it). Keep us up to date on this "no way it's going to happen" transaction please.

Jack said...

Escrow is my problem, since I require it.

A honest seller would have no problem with those conditions and wouldn't care who buys it. Do you really think 1.5 million is going to be put to risk without protection?

Or maybe "Fred" doesn't have the physical. What are guys chickens? Put up or shut up.

Anonymous said...


C'mon Freddy Douchebag...lets see what kind of balls you got!

You have an very fair and reasonable offer on the table from someone who is meeting your terms...



Anonymous said...

Regarding Fred's offer he distinctly said FOB his depository.

"FOB shipping point" or "FOB origin" indicates the buyer pays shipping cost and takes responsibility for the goods when the goods leave the seller's premises. "FOB destination" designates the seller will pay shipping costs and remain responsible for the goods until the buyer takes possession.[5]

It seems pretty clear to me that Fred is not offering to pay for shipping or insurance. Why the hell would he? Jack needs to step up and pay the shipping and insurance. But we know he is blowing smoke out his ass anyway.

Anonymous said...

Nicely done, Jack.

Thank you for calling Fred's bluff.

Anonymous said...

Jack didn't call Fred's "bluff". He tried to change the terms of Fred's offer. He's not serious.

Phil said...

These comments are so full of bull shit I can't believe I am wasting my time reading this crap.

It's all about who has the bigger dick and nothing to do with PM's and how we should be investing in them.

Retired Pipefitter said...

@Jack n Fred,

Willing buyers, willing sellers. I'm sure that somebody will buy or sell physiz if agreement is made. Looks like the Internet gave us a free market again... but, Jack and Fred, you free market folks have email links now, so go do your thing elsewhere, please?

Maybe the free market resembles a pissing match at the transaction level, but I'm not really enjoying your negotiations on Harvey's site that isn't really set-up for that.

I enjoy this blog for the different ideas that come out. Can you spot the trolls?

Please, just keep stacking!

Anonymous said...

Be careful now Jack, you know how that Fred likes to "FLY UNDER THE RADAR".

Anonymous said...

I love how Fred now posts anonymous...

What a drinkle.

Anonymous said...

Wow, people still come here.?!

Fred said...


Sorry, Jack, but as I commented to another poster on here, I offer the bars at 10 cents over because I can replace them at less than that.
Putting them on a Brinks truck gobbles up the profit, that's why my terms included "FOB my depository".

And I don't fix the price before some kind of deposit is put up somewhere.
Because if I go buy 50,000 to replace what you bought, then you decide you don't want it after silver goes to 29.75, then I eat the difference.

Not the way to do things.

Fred said...

Just for giggles Jack, who do you use for assays and what method are they using?

enocent said...

Hi HArvey,
if 98% of the contract are never executed. then it looks to me that these contract are used for the gld and silver ETF trackers. these funds meanwhile trade very day to make money. however they do not intend to take delivery. !!!
this is a huge leverage on the physical market. strange that silver is following itspapersilver price. loks like teh dog cathes its tail.!!

thanks for your good work.


Anonymous said...

@10:17 anon are still here aren't you? You douche...

Here is my prediction: within 21 days the price of silver is going to $44.

Jack said...

Ok Fred.

Send me the bar numbers and photos I asked for.

Fred said...


You're too late. I just swapped 30 of the bars for 2013 silver eagles.

Can offer you those at $2.35 over spot FOB my depository and you won't have to assay them!!

Jack said...

No thanks. Send me the bar numbers and photos I've requested for the other 20.

And no more messages here on Harvey's blog. You've had my email since the first message.

No replies to you here "Fred".

Anonymous said...

This is getting pretty obvious that Fred is full of sheist. Nobody believes that Fred has anything for sale but BS. And that's not Barbara Streisand.

Fred said...

To Anon @ 1:22--

If you are so sure I'm not who I represent myself to be and don't have the inventory I claim to have then you can take me up on the $50,000 wager I've posted on here several times and pick yourself up some easy money... or find out I have what I say in which case you'll be out 50K.

All airfare and accommodations are on me.

Easy money for one of us!!

Anonymous said...

I don't doubt you have bullion. I don't believe you really want to sell any for the prices you stated. If you cared about marketing precious metals you would not be flying under the radar. You just like to bloviate and strut around like a big man. Lots of people have impressive holdings of metals. Myself included. But I am not trying to impress anybody or pretend it's for sale. I don't need my ego stroked like you apparently do.

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