Monday, January 7, 2013

Robosigning (foreclosure) settlement/gold and silver withstand raid/

Good evening Ladies and Gentlemen:

Gold closed down $2.80 to $1645.50.  Silver on the other hand rose by  14 cents to finish the comex session at $30.03.The bankers continue to raid the paper gold and silver into oblivion.  The attacks have been relentless.  No doubt the bankers are looking over their shoulders and seeing the physical metals being picked up by sovereigns such as China and South Korea.  The lower the bankers knock the price down, the more eager these nations of eastern persuasion pick up the physical metal and move them onto their shores.
The LBMA must be in a tizzy.  They have underwritten 100 fold of obligations per one oz of physical metal and many of these one oz physical metals are leaving creating a huge derivative balloon problem.  This is what we are facing today. The bankers know the game is up but still play these silly paper games. The game ends in London England, when investors are refused delivery on physical contract purchases in silver and gold. That act will bring down the huge physical market in England, the LBMA, then bring down the Bank of England and then onto NY shores as the comex will default. The physical default in metals, will bring the huge 1.4 quadrillion paper derivatives crashing down. This time, the bankers will have no escape hole from which to climb through.

In the news today, we have a settlement on the robosigning mess as the bankers again got their wrists slapped. Many stories for you today but first....................

Let us now head over to the comex and assess trading on Friday.
The total comex gold open interest fell by 5301 contracts falling from 434,048 to rest tonight at 428,747.  The front non active January gold month saw it's OI rise by 9 contracts from 167 up to 176.  We had 20 notices filed on Friday so strangely we gained another 29 contracts or 2900 oz of additional gold will stand in January for physical gold.  The next big active delivery month is February and here the OI fell by 4277 contracts fro 252,765 down to 248,488.  The estimated volume today at the gold comex came in at a fair 142,065.  The confirmed volume on Friday, the day of the raid came in at a resounding 277,552.  Whenever the bankers raid, generally volume rises appreciably.

The total silver comex OI finally broke the 140,000 barrier to rest at 138,375  compared to Friday's OI closing of 142,561.  The loss is thus 4166 contracts.  We lost a few newbie longs to do seem to understand the criminal activity orchestrated by the collusive bankers. The non active January contract month saw it's OI mysteriously rise by 91 contracts  despite the raid.  Since we had 7 delivery notices filed on Friday we gained another 98 contracts or 490,000 oz of additional silver will stand in January.  The next active contract month is March and here the OI fell by 3692 contracts from 80,920 down to 77,248.  The estimated volume today was fair at 35,911.  The confirmed volume on Friday was huge at 73,931 but that was when the bankers used all their muscle supplying all of that non backed paper silver to knock the price down.  All under the watchful eyes of our brain-dead regulators.

Comex gold figures 

Jan 7.2013    The  January contract month

Withdrawals from Dealers Inventory in oz
6,599.63 (Brinks)
Withdrawals from Customer Inventory in oz
115,482.8  (JPM) 
Deposits to the Dealer Inventory in oz
0   (nil)
Deposits to the Customer Inventory, in oz
0  (nil) 
No of oz served (contracts) today
 129     (12,900)
No of oz to be served (notices)
47  (4,700 oz)
Total monthly oz gold served (contracts) so far this month
889  (88,900 oz) 
Total accumulative withdrawal of gold from the Dealers inventory this month
Total accumulative withdrawal of gold from the Customer inventory this month

200,165.0 oz
Today, we  had a some big transactions  inside the gold vaults 

The dealer had no deposits  but did have 1   withdrawal.

i) out of Brinks:  6,599.63  oz

We had 0   customer deposits and one big customer withdrawal:

i) out of JPM:  115,482.80 oz

Total customer withdrawal:  115,382.80 oz

We had 0 adjustments:

Thus the dealer inventory rests tonight at 2.288 million oz (71.16) tonnes of gold.

The CME reported that we had 129 notices filed or 12,900 oz of gold. To obtain what is left to be served upon, I take the OI for January  (176) and subtract out today's delivery notices (129) which leaves us with 47 notices or 4700 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:

88,900 oz (served)  +  4700 oz (to be served upon) =   93,600 oz or 2.911 tonnes.
we gained 2900 additional 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 2.911 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 7.2013:   The January silver contract month

Withdrawals from Dealers Inventory914,342.42 (Scotia)
Withdrawals from Customer Inventory  108,648.82  (Brinks)
Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory   8,8846.000 (CNT)
No of oz served (contracts)0  (nil oz)
No of oz to be served (notices)142  (710,000 oz)
Total monthly oz silver served (contracts)308  (1,540,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month914,342.42
Total accumulative withdrawal of silver from the Customer inventory this month1,455,849.8

Today, we  had huge activity  inside the silver vaults.

 we had no dealer deposits but did have one   dealer withdrawal:

i) dealer withdrawal out of Scotia:  914,342.42 oz

We had 1 customer deposits of silver:

Into CNT:  8846.000 oz  (another perfectly round deposit)

total customer deposit:  8846.000 oz

we had 1 customer withdrawal:

i) out of brinks:  108,648.82 oz  
total customer withdrawal:  108,648.82  oz

we had 0  adjustments:

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.  

Registered silver remains today at :  39.522 million oz
total of all silver:  149.354 million oz.

The CME reported that we had zero  notices filed for zero oz of silver.  To obtain what is left to be served upon, I take the OI standing for January (142) and subtract out Monday's delivery notices (0) which leaves us with 142 or 710,000 oz left to be served upon our longs.

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

1,540,000 oz (served)  +  710,000 (oz to be served upon)  = 2,250,000 oz
we  gained 480,000 oz of silver  standing for January. This is turning out to be a very good delivery month for silver.


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 7.2013 



Value US$70.955  Billion

January 4.2012:



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

We neither gained nor lost any gold at the GLD.

and now for silver:

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 vaults.

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

Sprott and Central Fund of Canada. 

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

1. Central Fund of Canada: traded to a positive 3.7 percent to NAV in usa funds and a positive 3.7%  to NAV for Cdn funds. ( Jan 7 2013)   

2. Sprott silver fund (PSLV): Premium to NAV rose to 1.94% NAV  Jan 4./2013 (not updated yet)
3. Sprott gold fund (PHYS): premium to NAV  rose to 2.39% positive to NAV Jan 4 2013.. (not updated yet)

 Now we witness the Central fund of Canada  gaining big time in its positive to NAV, as we now see CEF at a positive 3.7% in usa and 3.7% 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 good news as Shanghai gold trading jumps

Early morning gold commentary/

(courtesy Adrian Ash/Bullion vault)

Shanghai Gold Trading Jumps as US Gold Derivatives Shrink to 3-Year Low

By: Adrian Ash, BullionVault

-- Posted Monday, 7 January 2013 | Share this article | Source:

London Gold Market Report

SPOT GOLD PRICES traded in a $10 range Monday morning, rising above last week's finish at $1656 per ounce as European stock markets cut earlier losses.

Silver prices also whipped in a tight range, holding at $30.25 per ounce by lunchtime in London.

Major currencies and government bonds were also little changed, as were broader commodity prices.

Looking at the broader commodities sector, "In 2012 we had a lot of liquidating by hedge funds," says Rob Haworth, senior investment strategist at US Bank Wealth Management in Seattle, "but there's an incentive to reverse that because of growth in emerging markets and especially China.

"It's going to be a good year for commodities."

US data show speculators raising the size of their bullish commodity bets for the time since November last week.

Speculative betting on the gold price, known as the "net long" position of bullish minus bearish bets, rose 3.1% to the equivalent to 609 tonnes of gold by New Year's Eve.

That was below the 2012 average of 633 tonnes however, and well below the 5-year average of 722 tonnes.

Overall, the total number of US gold futures and option contracts shrank last week to a 3-year low, dropping below 600,000 for the first time since September 2009.

With the Chinese New Year now 5 weeks away, in contrast, the Shanghai Gold Exchange today reported a sharp jump in physical gold trading, with volume breaking more than 22 tonnes.

"For 2013, an unreliable economy compels us to prefer supply-constrained commodities, especially the precious metals," says investment bank Morgan Stanley, forecasting average gold prices of $1853 per ounce this year.

"With loose monetary policy and low real interest rates, we believe that gold and silver will likely continue to perform."

But "I think America will sort itself out and the economy will start moving again positively," reckons Rene Hochreiter, CEO of Allan Hochreiter Ltd. in Johannesberg and winner of the London Bullion Market Association's 2012 price forecasting competition.

"As gold declines, as the world economy improves, so platinum, palladium and silver will start to pick up...Platinum may take another year or so before it beats gold and then it's going to stay above gold for the next upward cycle which could be five or six years," Hochreiter is quoted by Bloomberg News.

Gold prices will now average $1600 per ounce in 2013 believes Hochreiter, after averaging $1669 last year. His 2012 forecast was for $1650 per ounce.

The price of platinum has now been below the price of gold since September 2011, the longest such period in at least three decades.

Western policymakers meantime extended by 4 years today the deadline for new banking regulations, aimed at avoiding a repeat of the 2007-2009 credit crunch.

"The new liquidity standard will in no way hinder the ability of the global banking system to finance a global recovery," said Mervyn King, the UK's chief central banker and head of the Basel committee's oversight group.

Requiring banks to meet just 60% of the new liquidity requirements by 2015, with the full deadline pushed back to 2019, "It's a realistic approach," King said.

Adrian Ash

Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold and silver in Zurich, Switzerland for just 0.5% commission.

(c) BullionVault 2012


Sprott states that gold has friends of Eastern persuasion picking up discounted physical gold as the bankers throw massive paper gold contracts trying to cover their shorts:

(courtesy Eric Sprott/Kingworldnews/GATA)

Fed 'trying their damnedest' to hold gold down but metal will win soon, Sprott says

9:20p ET Sunday, January 6, 2013
Dear Friend of GATA and Gold:
The Federal Reserve is "trying their damnedest" to force the price of gold down and create volatility to scare investors away, Sprott Asset Management CEO Eric Sprott tells King World News tonight, but gold has a growing number of friends around the world and he is confident that the physical market will prevail soon. An excerpt from the interview is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Look at what is going on in Indiana?

Gold and Silver Legal Tender Law Introduced in Indiana

  • Senate Bill No. 99 has been introduced by State Senators Greg Walker and Jim Banks to free US-issued gold and silver coins from sales, use, and capital gains taxes.
  • SB-99 will add a new Chapter to the Indiana Code effectively making all taxes on gold and silver coins and transactions a thing of the past. From the bill’s synopsis:
  • Specifies that gold and silver coins issued by the United States government are legal tender in Indiana. Provides that a person may not compel another person to tender or accept gold or silver coins that are issued by the United States government, except as agreed upon by contract. Provides that the sale or other exchange of gold or silver coins issued by the United States government is exempt from state gross retail tax and use tax. Specifies that capital gains incurred on a sale or exchange of gold or silver coins issued by the United States government are not included in adjusted gross income for purposes of the state adjusted gross income tax.
On Monday, January 7 it will be read and referred to Committee on Tax and Fiscal Policy where co-author Sen. Walker sits. Should it pass on to the rest of the legislature then on to the governor’s desk and signed, the bill would become law by July 1 and the income tax aspects would be in effect January 1, 2014.
The fiscal impact report estimates that 2% of the US Mint’s gold and silver coins are in Indiana, calculating a $9.4 million loss in state revenue from retail and capital gains taxes. If accurate, that is a nice takeaway for Indianans who choose to transact with what the US Constitution lays out as legal tender under Article I, Section 10 – which reads "No State Shall…make any Thing but gold and silver Coin a Tender in Payment of Debts"
Dr. William Greene, in a paper for the Austrian Scholars Conference, explained how state legal tender laws can be an effective method to ending the fed from the bottom up. In essence, pulling the rug out from under their monopoly control of money:
"Over time, as residents of the State use both Federal Reserve Notes and silver and gold coins, the fact that the coins hold their value more than Federal Reserve Notes do will lead to a "reverse Gresham’s Law" effect, where good money (gold and silver coins) will drive out bad money (Federal Reserve Notes). As this happens, a cascade of events can begin to occur, including the flow of real wealth toward the State’s treasury, an influx of banking business from outside of the State – as people in other States carry out their desire to bank with sound money – and an eventual outcry against the use of Federal Reserve Notes for any transactions."
Utah passed a similar bill, HB-317, in 2011 legalizing Constitutional tender, gold and silver coins issued by the federal government.
If you live in Indiana, contact your state legislator. Let him or her know of your support for SB-99 and that you expect him/her to become a co-sponsor. Click here for contact information.
If you live outside of Indiana, still contact your state legislator. Inform him or her that you hope similar legislation will be introduced in your state. Visit this link for model Constitutional Tender legislation that can be introduced today:
Nick Hankoff is a monthly co-host for Tenther Radio, a member of the TACs national outreach team, and the Chair of the Los Angeles County Repubulican Liberty Caucus.


Miners are cutting costs, trying to give back extra dollars to shareholders:

(courtesy Julie Gordon/Reuters)

Experts say the key to restoring investor faith in the gold miners is reining in runaway cost inflation after a year that battered their share prices.Author: Julie Gordon
Posted: Monday , 07 Jan 2013
TORONTO (Reuters) -
Sagging demand for non-precious metals - a trend that's beyond the direct control of Canada’s embattled gold producers - is shaping up as their best hope for recovery in 2013 after a year that battered their share prices.
The key to restoring investor faith in the gold miners is reining in runaway cost inflation, experts say. To that end, a weakening of prices for base metals, coal and iron ore comes at just the right time for big bullion producers, who can no longer use surging gold prices to justify unrestrained spending.
Barrick Gold CorpGoldcorp Inc and their top-tier peers are scrambling to pare spending and return more cash to their shareholders even as they gingerly push ahead with major new gold developments.
"There may be a catalyst here and that is cost stabilization," said Adam Graf, a mining analyst with Dahlman Rose in New York. "Because the rest of the mining industry is going to be weaker in 2013, that should benefit the gold guys."
Spot gold prices closed 2012 with a gain of about 7 percent, extending the metal's bull run to a 12th year. But the S&P/TSX Global Gold index, reflecting the sagging share prices of the world's top gold miners, ended the year with a decline of nearly 16 percent, its biggest annual drop since 1999.
"The market has just completely lost faith in the sector," said Graf. "And what's driving the negative sentiment is the perceptions of runaway cost inflation."
Mining costs have sky-rocketed over the past few years as strong demand from China and India pushed metal prices to historic highs, prompting a global mining boom and putting pressure on an already tight labor and equipment market.
But growth is slowing in China, and that, along with economic uncertainties in the United States and Europe, has weighed on base metal, iron ore and coal prices, leading to mine shutdowns and project deferrals around the world.
In 2012, diversified miners delayed well over $65 billion in planned capital expenditures, according to global accounting firm PwC. BHP Billiton, for example, shelved its multi-billion dollar Olympic Dam copper-uranium mine expansion, citing rising costs and weaker commodity prices.
With fewer projects competing for the same resources, the cost of labor, engineering and equipment is bound to soften -- good news for gold miners, who are pushing ahead with new mines.
Indeed, with the price of gold, widely seen as a safe-haven investment, expected to remain relatively strong over the next few years, companies that can cut costs and boost profit margins will fast become very attractive, analysts say.
"In 2013, we'll be looking at things like dividend increases, growth in earnings per share," said John Ing, a gold analyst at Maison Placements in Toronto. "And I think that will restore the enthusiasm for the gold miners."
From September 2007 to September 2011 gold nearly tripled from around $680 an ounce to an all-time high above $1,920. That drove a period of "growth at any cost," as gold miners looked to boost production to capitalize on rising prices.
But gold fell off its peak in late 2011, and has since traded in the $1,500 to $1,800 per ounce range even as miners' costs kept rising.
That has weighed on the shares of the world's largest gold miner, Barrick, which ended 2012 down 25 percent. Goldcorp and Kinross Gold Corp fell 19 percent and 17 percent respectively.
In fact, of the 10 largest companies on the S&P/TSX Global Gold Index, onlyYamana Gold Inc managed to squeak out a gain in 2012, climbing 14 percent. Barrick, by contrast, is now trading at 2009 levels.
Investors, angered by pricey takeovers, huge cost overruns on new mines and narrowing profit margins, demanded change.Boards responded. Two top chief executives, Aaron Regent of Barrick and Tye Burt of Kinross, were ousted over the summer of 2012, while Richard O'Brien is set to leave Newmont Mining Corp in March. The shake-ups herald a shift in strategy.
"These ambitions of growth have been dashed by the reality that mega-projects bring mega-problems," said Ing. "I think the gold miners now have a new religion and that is emphasizing on profit margins."
Barrick's new CEO, Jamie Sokalsky, has made good on a promise of more disciplined spending, deferring some $3 billion in capital allocation over four years. Working against that restraint is the massive Pascua-Lama gold project on the border of Chile and Argentina, where development is now expected to cost more than $8 billion.
Kinross too has announced a cost-cutting plan, while Goldcorp is currently reviewing all of its capital projects.
Indeed, most major global gold producers have vowed to clamp down on spending and focus on profit margins, even as they push ahead with new mines around the world. Yet the details on how they will keep a rein on costs, beyond benefiting from a broader industry slowdown, remain unclear.
Add in worries over ever-stricter environmental rules, higher royalty and tax demands from governments and growing opposition from local communities, and for some investors the potential rewards are simply not worth the risk.
"It's just getting harder and harder to be a mining company, more environmental restrictions, more government restrictions," said David Baskin, president of Baskin Financial in Toronto.
"It's just tough," said Baskin, who does not hold any gold mining stocks and said he has no plans to buy in 2013.
Despite the nagging concerns, many analysts and industry players believe the top tier of gold miners have hit a bottom and they see an opportunity to buy high-quality gold ounces in the ground for cheap - if miners can get those reserves out without breaking the bank.
"I really think the worse of the news is behind the gold operators. I can't imagine them being hated any more than they are right now," said David Harquail, chief executive of Franco-Nevada Corp, a gold-focused royalty and stream company.
"It's the contrarian play," he added. "But I am absolutely confident that it is going to be the money-maker."

Cost cuts to give boost to bruised gold seniors

Your early morning overnight sentiment from Europe/Asia:  

Major points:

1.  We have 52 days before the real debt ceiling is reached and thus algos must now concentrate on earnings and not headlines re the cliff.

2. earnings for Q3 were disastrous and expect the same for Q4 as earnings season begins with Alcoa on Tuesday and Wells Fargo on Friday.

3. Basel III saw another agreement to push banking regulation on this front back to 2007.

4. The battleground in the USA is basically set as Mitch McConnell, the Republican minority whip
stated that the tax issue is finished and only they will deal with spending cuts.  Obama states that he wants a "balanced approach" and wants further tax cuts through the ending of loopholes available to corporations that are not available to citizens. Obama wants all spending cuts to be matched by further loophole cuts.  The Republicans say no.

5. Janet Yellen states that it is "her wish" to end QE but not right now and she has no real time frame for when this program will end.  The economy must improve dramatically for QE to end.

5. Chinese markets head south in trading

6. Details from Deutche Bank

your early market sentiment/courtesy zero hedge)

Sentiment Shifts From Macro To The Micro, As Washington Is Forgotten For A Few Brief Days

Tyler Durden's picture

D-day - the real D-Day: the day after which the US government will have to start shutting down - is now 52 days away, but with the Pyrrhic victory on the Fiscal Cliff, which once more, did nothing to resolve the Fiscal Cliff issue but merely hiked payroll taxes for some, general income taxes for others, even as drunken sailor spending has persisted, it is virtually a guarantee that nothing will happen in D.C. for at least 3-4 more weeks until the posturing and jawboning soars in earnest. Only this time the can kicking won't be nearly as easy. In other news, for the first time in maybe 2 months, the algos are neither gripped by headlines about Washington, or macro events, but micro, as the fourth quarter earnings season kicks off, with Alcoa reporting on Tuesday, Wells on Friday and a true launch of Q4 earnings season next week. And since revenues are set to continue deteriorating despite estimates of a Y/Y increase in top lines following a disastrous Q3, and let's not even mention cash flow, operating earnings and capital reinvestment, once again it will all be about EPS rejiggering and accounting games.
There was a bevy of regulatory news over the weekend, which finally buried the farce that was Basel III and, just like everything else, kicked the can on boosting regulatory liquidity and allowing equities - equities! - to be included as part of its adjusted liquidity coverage. We are now back to where we were in the summer of 2007. As for that other provision of Basel III - deleveraging by some €3 trillion in Europe alone - that's pretty much over, as banks either have to sell trillions in assets to other banks, which isn't happening as nobody has the free cash, or trillions in earnings have to be generated, which certainly isn't happening.
More on the most recent events from Deutsche:
The week after payrolls usually brings a lull in the US data calendar but Alcoa’s after-market Q4 results this Tuesday is a gentle reminder of the unofficial start to the upcoming reporting season. Indeed we only have a total of five S&P 500 companies reporting this week before activity picks up next week. Wells Fargo this Friday will kick off the earnings season for banks though. On the other side of the pond, the BoE and ECB policy meetings on Thursday will be the key policy event. We’ll preview these as well as the key data points this week later in a little more detail but we’ll first take a look at some of the key stories over the weekend.
On Sunday, the Basel Committee on Banking Supervision announced changes to the liquidity coverage ratio requirement for banks under Basel III. The changes allow for a greater range of assets to be included in the liquid asset pool including some equities, corporate bonds rated as low as BBB- and some mortgage-backed securities, though at a substantial discount. The revisions also push out the implementation date for compliance by four years to 2019. Speaking at a press conference, BoE governor and chair of the Group of Governors and Heads of Supervision Mervyn King said that the revisions will “prevent central banks from becoming lenders of first resort” and will in “no way hinder the ability of the global banking system to finance a global recovery” (FT).
Back in Washington, the discourse between Democrats and Republicans continued to gradually escalate over the weekend with Senate Minority Leader Mitch McConnell ruling out further changes to taxes on top of the rate increases for top income earners agreed by Congress last week. McConnell added that “the tax issue is finished, over, completed”. In contrast, Obama insisted that any spending cuts “must be balanced with more reforms to our tax code”. The President reiterated that he will be targeting tax deductions and loopholes used by “the wealthiest individuals and the biggest corporations….that aren’t available to most Americans” (Bloomberg).
Also making headlines over the weekend was the Fed’s Vice Chairperson. Janet Yellen said that she hoped that the Fed will be able to “exit” monetary policy, but she gave no indication of when that may happen. The statement comes after last Thursday’s FOMC minutes where several members thought it would be “appropriate to slow or stop asset purchases well before the end of 2013”. Yellen added that “people have raised important questions about the role financial stability considerations should play in our conduct of monetary policy”. US Treasuries had a challenging start to the year not helped by the latest FOMC minutes. .
Turning to overnight markets, Asian equities are trading weaker despite a positive payrolls-fuelled gain on Wall Street last Friday. The Nikkei (-0.65%), KOSPI (-0.2%) are edging lower while Chinese equities (Shanghai Composite (-0.1%) and Hang Seng (-0.05%)) are outperforming on a relative basis. The latter are being supported by a positive day for financial stocks which are benefiting from the relaxed liquidity requirements outlined in Basel over the weekend.
China’s Global Times reported on Sunday that the Chinese government’s top economic policy arm, the NDRC, is expected to unveil a detailed urbanisation plan in March in an attempt to boost domestic consumption which is also supporting Chinese equities.
Recapping Friday’s markets, the S&P500 finished close to the day’s highs of +0.49%, capping a week where the index gained 4.6% after a solid payrolls reading which featured a 155k gain in the headline (vs 161k previously and 152k expected). Upward revisions to the previous two months totalled +14k, and private payrolls over the same period were revised higher by +38k. The unemployment rate was unchanged at  7.8%. DB’s Joe Lavorgna also noted that positive trend in the average workweek (34.5 hrs vs. 34.4 previous) and average hourly earnings (+0.3% vs. +0.3% previously). December marked the second consecutive month with a +0.7% increase in aggregate income which is the strongest two-month performance since May 2010. Outside of equities, the VIX continued to lose ground (-5%) to close below 14 for the first time since September, while 10yr USTs rallied 1.3bp to close at 1.899% despite a 3bp sell-off immediately after the payrolls print.
In other headlines, Mario Monti unveiled on Friday a centrist political alliance, called "With Monti for Italy" for the upcoming elections although a recent poll showed that the alliance would attract only around 12% of the vote while the Democratic Left has 40% (FT). Over the weekend, Monti and Berlusconi sparred on the subject of property taxes and VAT with Monti saying there is a possibility of a tax cut if matched by spending cuts.
Previewing the rest of the week ahead data highlights in the US include consumer credit (Tues), jobless claims (Thurs) and trade balance (Fri). In Europe, no major changes to ECB and BoE policies are expected this Thursday. Indeed as far as the ECB is concerned, DB’s Wall and Moec note that with a rate cut already widely discussed, it might not take much data disappointment to tip the balance but a 25bp cut in March remains their base case. In terms of data we have Eurozone consumer/business sentiment readings, German trade and factory orders on  Tuesday. German and Spanish IP are due Wednesday and Friday respectively.
There will be a Spanish bond auction on Thursday followed by an Italian auction on Friday.


What to expect this week with respect to currencies and meeting by major bankers:

(courtesy Marc to Market)

Drivers in the Week Ahead

Marc To Market's picture

There are seven items that will be on the radar screen of global investors in the week ahead.  

1.  There is confusion over Fed policy.  Despite the leadership (Bernanke, Yellen and Dudley) demonstrating their unwavering commitment to use heterodox monetary policy in an attempt to promote a stronger economy in the face of household de-leveraging and fiscal consolidation, many have read the FOMC minutes to imply an early end to the $85 bln a month in long-term asset (MBS and Treasuries).  That December meeting was historic not because it marked the beginning of the end of QE, but the exact opposite, the nearly doubling monthly purchases and the adoption of macro-economic guidance (6.5% unemployment and 2.5% inflation) before rates are lifted.

2.  A few elements of the recent price action strikes us as important:  The euro, Swiss franc, and sterling bounced off key trend line supports and this points to further recovery gains are the sharp decline seen in the first few days of the new year.  The yen remains on a weakening trend.  Japanese government encouragement may slow when the dollar nears JPY90.  The dollar-bloc currencies and many of the more liquid and freely accessible emerging market currencies, including the Mexican peso, South African rand and the Turkish lira, also appear poised to trade higher against the US dollar.  The VIX posted an unprecedented large decline last week and the S&P 500 closed at new 5-year highs.  The higher risk appetites have also weighed on core bonds and lifted the European peripheral bonds, especially Italy and Spain.  This in turn  tends to be positive for their financial sectors.  It also reduces the pressure on Spain to seek a formal aid package from the EU and trigger the ECB's Outright Market Transaction program.  

3.  The ECB meets on Thursday.  According to reports,  a majority of the governing council favored a cut in December.  The unchanged outcome was a function of a concession to the Draghi and the German representatives, according to the same reports.  With the PMI readings pointing to a continued contraction, and private sector lending contracting for three months, it is tempting to expect the ECB to cut the refi rate by 25 bp.  However, we suspect the ECB will stand pat again.  The weak economic data was largely within ECB expectations and price pressures appear to have increased into the year-end period.  If the regional economic data does not improve substantially, a rate cut in the coming months possible.   

4.  The Bank of England meets on Thursday.  It is less likely than the ECB to change rates or announce a new gilt purchase program.  The BOE seems content to monitor the progress of the Funding-for-Lending Scheme (FLS), which appears to have boosted some mortgage lending.   More interesting on Thursday will be the National Statisticians recommendation for changes in the the Retail Price Index.  Like the US, the UK is considering changing the inflation calculation used with an eye toward lowing  government obligations (in the US case Social Security benefits and in the UK inflation-link bonds and some pensions). 

5.   The immediate focus in Japan is on monetary policy. The BOJ meets Jan 21-22.  It is to review the 1% inflation target it adopted a little less than a year ago.  The government hopes it will raise it to 2%.  In fact, as ironic as it may seem, the BOJ can preserve its relative independence by capitulating to the government's demands in some form.  This will mean the government is less likely to change the BOJ's charter.    Sometimes losing a battle allows one to win a war.  The BOJ will participate in a meeting the government is hosting this week to begin coordinating its policy response to what is sees as a economic emergency.  The Council of Economics and Fiscal Policy will likely discuss ways finally overcome the 15-year old scourge of deflation.  Late in the week, Japan is expected to report a November trade deficit, but an overall current account surplus.  

6. China's monthly data dump begins in the second half of the week.  On balance, we expect more evidence that the world's second largest economy has stopped slowing, even if the lift is still modest.  Renminbi  loans may have increased slightly in December from November's almost CNY523 bln pace.  An increase in both exports and imports would also lend credence to ideas that there is an underlying improvement taking place. A CPI around November's 2% would maximize the official room to maneuver.  

7.  Highlights from the other emerging markets include a likely 25 bp rate hike by Poland's central bank.  Thailand and South Korea's central bank also meet in the week ahead, but on balance, no change in official rates are expected.  Indonesia's central bank meets and it may narrow the rate corridor by lifting the floor (FASB) 25 bp to 4.25%,  but keeping the key rate steady at 5.75%.  Lastly, while we noted the expectation for improved Chinese imports and exports, India does not look as fortunate.  The fall in India's exports and imports will likely result in a larger trade deficit.


Your early morning sermon from Mark Grant.  Today's most important commentary!!

Pay special attention to the very last two paragraphs:

(courtesy, Mark Grant/out of the box and Onto Wall Street)

Back To The Future

Tyler Durden's picture

Via Mark J. Grant, author of Out of the Box,
“Computers in the future may weigh no more than 1.5 tons.”

               -Popular Mechanics, 1949

Forecasting the future with any accuracy is a difficult affair. It is a deductive process first utilizing the facts at hand and then assessing where they will take us and finally, in our business, concluding how the accumulated rationale will affect the various marketplaces. The process is also dynamic, not stagnant, so that new facts, both economic and political, re-engage the outcomes for the future in a myriad of gyrating motions. Being right about the facts, often obscured by various governments, and then correct in your deductions is never enough as macro impacts such as Draghi’s “Save the World” plan can often change the face of market outcomes in a New York minute. This is why so few people can predict the future of the markets with much accuracy. First they fall down in their assessment of the news and accept what is thrown at them as fact. Then they use a flawed deductive process where they try to fit the fact inside their opinions; instead of the other way around. Finally even if you get both the facts and the deductions correctly the markets’ outcomes may be shifted by outside and often unexpected events; not to mention black swans. In other words you must roll with the procession while both the media and sophisticated investors are judging you and holding you accountable by the machinations of your last fight.

“Guitar bands have no future.”

                    -EMI records, 1962

Over the last ten and one-half years I have stuck my neck out in my commentary. Plenty of opportunities for the guillotine have passed. I point out that I am still here and that some 5,000 large financial institutions in forty-eight countries get “Out of the Box” each day. I have no agendas, hidden or otherwise, and I give you my very best every morning in the hope of helping you protect your assets and so that you can make some money when possible. Long ago I learned that we play to win and not to be right and that being right is only one part of the equation.Each and every moment the past shifts to today, today morphs into tomorrow and the future will determine where we are going whether you wish to acknowledge that reality or not. It is not just a game but the “Great Game” and the winners of yesterday are often the losers of tomorrow and nothing, not one thing, replaces experience. For thirty-eight years of my life I have been engaged and I intend to keep going so keep bringing it all on and I will continue to keep endeavoring to figure it all out.

“If you want to make a Wizard laugh; tell him your future plans.”

                              -The Wizard


The central banks of the world have accumulated balance sheets of about 15 trillion dollars. There will be consequences of this including inflation, valuation of currencies and ultimately defaults as motivated by political and economic decisions. In the spring keep your eye on Greece, Portugal, Spain and Italy as nationalism returns to protect the various nations. The Europeans are not out of the woods and all of their assurances will be for naught. The ECB may well promise to save the Continent but events in April through June will put the promise to the test. The “have nots” can outvote the “haves” but the “haves” control the money and push-back and refusal are on the horizon.

“The future is like a toy at Christmas time; some assembly is always required.”

                              -The Sages

In the United States rancor will resurface. Like in Europe, the “have-nots” control the votes but the push-backs will come and the intensity of them may startle many as the House refuses to accede to the demands and cries for the sharing of wealth.Polarization will continue and a shift in the population base will bring intense rivalry from one State to the next. I expect fourth quarter numbers to disappoint and the House may ultimately curtail the Fed so that the largesse of the past may be ended and quite severe consequences occur. In the meantime demand outstrips supply and compression will continue and risk assets will continue to appreciate right up until the time when the music stops in Congress. Be ready to turn on a dime and the reaction must be swift but not yet and enjoy the ride as long as it goes on.

The nightmares of the Past and the chaos of the Present are nothing compared to the wild dreams of the Future. Embrace the Future because if you do not it will surely embrace you!


Your early Monday morning currency crosses;  (at 4:30 am)

This morning we continue with the course set on Friday. The Euro retreats big time against the dollar. 
The Yen, however rises against the dollar even as Abe continues on his quest to massively hyperinflate his economy.  The British pound also loses big time  against the dollar.  The Canadian dollar holds its gains  and then advances against all currencies. We have a risk is off situation and thus all bourses are down: 

Euro/USA    1.3037 down  .0030
USA/yen  87.76  down  .378
GBP/USA     1.6046 down .0021
USA/Can      .987  down   .0003


Japan's new Prime Minister expects to spend 12 trillion yen to boost Japan's economy:

(courtesy Bloomberg)

Abe Seen Spending 12 Trillion Yen to Boost Japan’s Economy

Jan. 7 (Bloomberg) --The Japanese government will announce around 12 trillion yen ($136 billion) in fiscal stimulus measures to boost the nation’s shrinking economy, Japanese media reported today.
The Yomiuri newspaper and Kyodo News both reported the figure for extra spending in the fiscal year through March, with the Yomiuri saying that 5-6 trillion yen will be directed to public works projects, without citing anyone. Prime Minister Shinzo Abe told business leaders today that he hopes to compile the measures this week.
Shinzo Abe, Japan's new prime minister, speaks during a news conference at the prime minister's official residence in Tokyo, Japan. Photographer: Katsumi Kasahara/Pool via Bloomberg
The spending may help to accelerate a recovery from recession as Abe pledges to boost growth and end deflation in the world’s third-largest economy. While Japan’s public debt is more than twice gross domestic product, Finance Minister Taro Aso said last week that the government doesn’t need to adhere to a 44 trillion-yen cap on new bond issuance in this fiscal year.
“The scale of this budget suggests that Abe’s new administration is serious about stimulating the economy,” saidMasamichi Adachi, a senior economist at JPMorgan Securitiesin Tokyo and a former central bank official. “It’ll be very helpful in the near-time, but the problem in the medium-to-long term is that we have to pay this back.”
The yield on benchmark 10-year Japanese government bonds rose half a basis point to 0.84 percent today, the highest since Aug. 21, while the 30-year yield rose to 2.0 percent, a thirteen-month high.

Increasing Debt

A 12 trillion yen extra budget would require about 8-9 trillion in extra bond issuance, Chotaro Morita, chief strategist for fixed income at Barclays Plc in Tokyo, said in an emailed research note today.
Vice Finance Minister Yuko Obuchi told reporters today that the government would need to sell deficit-financing bonds to pay for the extra budget.
The Finance Ministry will offer loans worth 100 billion yen to help companies develop new technologies, with firms contributing an additional 50 billion yen to the program, according to a ministry draft proposal obtained by Bloomberg News.
The ministry will also contribute around 70 billion yen to a fund to help finance firms’ overseas mergers and acquisitions, according to the draft. The money will be disbursed through theJapan Bank for International Cooperation, with the total size of the fund at 200 billion yen.
Japan’s gross domestic product shrank at an annualized 3.5 percent pace in the third quarter after contracting in the three months through June, meeting the textbook definition of a recession. The median estimate of analysts surveyed by Bloomberg News is for a further 0.5 percent fall in the three months through December.
More than 4 trillion yen would be allocated for public works and the extra budget will also allocate around 2.6 trillion yen to fund pension payments, Kyodo News reported today without saying where it obtained the information.
Aso said last month that ministries should submit spending requests for the extra budget by today.
To contact the reporter on this story: Andy Sharp in Tokyo at
To contact the editor responsible for this story: Paul Panckhurst at


Inflation is now hitting coffee brewers"

(courtesy Michael Krieger/Liberty Blitzkrieg)

Guest Post: Inflation Hits Coffee As Brewers Secretly Swap Robusta For Arabica

Tyler Durden's picture

From Michael Krieger of Liberty Blitzkrieg
Inflation Hits Coffee As Brewers Secretly Swap Robusta for Arabica
This article hit close to home for me.  Literally.  It was just over the holiday season that I mentioned to my mom that her coffee doesn’t taste as good as it used to.  She insisted that she was buying the same blend as always and I insisted it didn’t taste as good.  The conversation ended there.
Then I came across the following article and everything started to make sense.  From the Daily Finance:
Reuters is reporting that many of America’s major brands have been quietly tweaking their coffee blends. While most coffee companies consider their blends trade secrets, and are loath to disclose exactly what goes into them, both circumstantial and direct evidence suggests they’re now substituting lower-grade Robusta beans for some of their pricier Arabica, and degrading the quality of our coffee.
Research out of agricultural bank Rabobank confirms that demand for Arabica beans among coffee buyers “has fallen 27% year-to-date, while Robusta [demand] is 25% higher.” This seems to confirm a widespread alteration of the bean mix.
Why the switcheroo? Prepare to not be shocked. The answer is: price.
Now here’s the kicker of the article.

When you get right down to it, if there’s more Robusta in our coffee but people still find it drinkable, and the coffee’s getting a bit cheaper in consequence, where’s the harm?
What’s the harm?  I didn’t think whether coffee was “drinkable” or not was the point of drinking coffee.  The harm is this is just another example of standards of living being eroded by inflation.  Inflation that we are told doesn’t exist.  Just another day in Oceania…
Full article here.


More central bank gimmicks exposed as European collateral issued to the ECB fell short of requirement payments.  It shows that the proper collateral deteriorates:

(courtesy zero hedge)

More Central Bank Gimmicks Exposed As European Collateral Shortage Deteriorates

Tyler Durden's picture

The epic farce that is the opaque balance sheets of European banks, sovereigns, NCBs, and the ECB, continues to occur under our very eyes. Only when one sniffs below the headlines is the truth exposed with no apology or recognition of 'cheating' anywhere. To wit, following November's farcical over-payment on collateral by the ECB to Spanish banks (that was quietly brushed under the carpet by Draghi et al.), Germany's Die Welt am Sonntag has found that the Bank of France overpaid up to EUR550mm ($720mm) on its short-term paper financing to six French and Italian banks. The reason - incorrect evaluation of the crappy collateral (i.e. the NCB not taking a big enough haircut for risk purposes) on 113 separate occasions. The problem lies in the  increasingly poor quality of collateral the CBs are willing to accept (and the illiquidity of the underlying markets) - as higher quality collateral disappears; which leaves the central bankers clearly out of depth when it comes to 'risk management', no matter how many times Draghi tells us this week.

The European Central Bank continues to have problems with its collateral management, according to a German newspaper report Sunday.

The Bank of France, a member of the European System of Central Banks, has granted too much credit compared with collateral to six banks due toinsufficient risk valuation discounts, or haircuts, made on the collateral, reports German newspaper Welt am Sonntag. The Bank provided credit in exchange for bonds known as Short-Term European Paper, or STEP, which it accepted as collateral from the banks, the newspaper says.

According to the report, notes worth less than 6.5 billion euros ($8.5 billion) with maturities of up to one year that were issued by the six banks benefited from risk valuation discounts that were too small. As a result, the banks were able to get up to EUR550 million in additional central bank money without having to provide the corresponding collateral, the newspaper calculates. According to the report, the six banks included French Societe Generale SA (GLE.FR) and Italy's UniCredit SpA (UCG.MI).

The banks had, however, provided sufficient other collateral overall so there was no impact on monetary policy operations, the newspaper quotes the ECB as saying.

An ECB spokeswoman, asked to remark on the report by Dow Jones Newswires Sunday, referred to the fact that there was no impact on the monetary policy operations and said she had no further comments.

Spokespeople at the Bank of France and Euroclear France weren't immediately available to comment to Dow Jones Newswires Sunday.

Within the Eurosystem, the Bank of France provides the relevant data--such as volume, coupon or default risk--on short-term European paper to the ECB. The ECB says it has little information about that market segment and refers to the BOF, according to the newspaper.

According to the ECB, in 113 cases the risk valuation discounts for STEP collateral calculated by the BOF were wrong, the newspaper says.

Bank of France said it gets the data exclusively from Euroclear France, the newspaper reports. Euroclear France belongs to Euroclear Group which also owns Euroclear Bank, itself a big player in the European short-term paper market, that could cause substantial conflict of interest, the newspaper writes.

In recent years, the ECB has substantially expanded the list of securities it accepts as collateral in monetary policy refinancing operations

your closing 10 year bond yield from Spain:  




5.112000.05500 1.09%
As of 11:59:57 ET on 01/07/2013.


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

Italy Govt Bonds 10 Year Gross Yield



4.348000.08300 1.95%
As of 11:59:57 ET on 01/07/2013.


Your 5:00 pm Thursday currency crosses: 

the Euro regained some of it's losses suffered in the early morning. The Yen strengthened a tiny bit against the dollar late in the session.  The pound also caught some bids and strengthened against the dollar as did the Canadian dollar:

Euro/USA    1.3113 up  .0047
USA/Yen  87.70 down  .44
GBP/USA     1.6115 up .0048
USA/Can      .9857  down .0016


Your closing figures from Europe and the USA:
 everybody in the green as everything is reversed from the morning:

i) England/FTSE down 25.26  or 0 .41%

ii) Paris/CAC  down 25.38 or  0.68% 

iii) German DAX: down 43.71 or .56% 

iv) Spanish ibex: down 16.8  or .20%

and the Dow: down 50.92  points or .38% 



And now for major USA stories:
In this following commentary, zero hedge shows the impact of a one % change in rates on the total debt in 2022.  His assumptions are simple;

i. starting point 2012 GDP 16.4 trillion.
ii) growth rate of 1.5% per year  (even that is generous)
iii) assume a primary deficit of 6% per year  (exactly where we are heading)
iv) then sensitive for 2%,3% and then 5% interest rate scenarios and see where it takes DEBT to GDP.

you will be amazed:

(courtesy zero hedge)

"The Magic Of Compounding" - The Impact Of 1% Change In Rates On Total 2022 US Debt

Tyler Durden's picture

They say "be careful what you wish for", and they are right. Because, in the neverending story of the American "recovery" which, sadly, never comes (although in its place we keep getting now semiannual iterations of Quantitative Easing), the one recurring theme we hear over and over and over is to wait for the great rotation out of bonds and into stocks. Well, fine. Let it come. The question is what then and what happens to the US economy when rates do, finally and so overdue (for all those sellside analysts and media who have been a broken record on the topic for the past 3 years), go up. To answer just that question, which in a country that is currently at 103% debt/GDP and which will be at 109% by the end of 2013, we have decided to ignore the CBO's farcical models and come up with our own. Our model is painfully simple, and just to give our readers a hands on feel, we have opened up the excel file for everyone to tinker with (however,unlike the CBO, we do realize that when calculating average interest, one needs to have circular references enabled so please do that before you open the model).
Our assumptions are also painfully simple:
i) grow 2012 year end GDP of ~$16 trillion at what is now widely accepted as the 'New Normal' 1.5% growth rate (this can be easily adjusted in the model);
ii) assume the primary deficit is a conservative and generous 6% of GDP because America will never, repeat never, address the true cause of soaring deficits: i.e.,spending, which will only grow in direct proportion with demographics but as we said, we are being generous (also adjustable), and
iii) sensitize for 3 interest rate scenarios: 2% blended cash interest; 3% blended cash interest and 5% blended cash interest.
And it is here that we get a reminder of a very key lesson, one that even the CBO admitted on Friday they had forgotten about, in what compounding truly looks like in a country that is far beyond the Reinhart-Rogoff critical threshold of 80% sovereign debt/GDP.
The bottom line: going from just 2% to 3% interest, will result in total 2022 debt rising from $31.4 trillion to $34.1 trillion; while "jumping" from 2% to just the long term historical average of 5%, would push total 2022 debt to increase by a whopping $9 trillion over the 2% interest rate base case to over $40 trillion in total debt!
Sadly, this is no "magic" - this is the reality that awaits the US.
And for those more curious about that other critical economic indicator, debt/GDP, the three scenarios result in the following 2022 debt/GDP ratios:
  • 2% interest - 169%;
  • 3% interest - 183.5%; and 
  • 5% interest - 217%, or just shy of where Japan is now.
Which reminds us: in the next few days we will recreate the same exercise for Japan's ¥1 quadrillion in total sovereign debt, which will show why any more "exuberance" arising from Abe's latest economic lunacy, will promptly send the country spiraling into that twilight zone where every dollar in tax revenue is used only to fund interest expense.
Once again, it is not our intention to predict what US GDP or debt/GDP will be in 2022: only the IMF can do that with decimal level precision, apparently, and not just with anyone, but Greece. The whole point is to show that when dealing with a debt trap lasting a decade, even the tiniest change in input conditions has profound implications on the final outcome. We invite readers to come up with their own wacky and wonderful projections of what the futures of the US may look like.
And that one should, indeed, be careful what one wishes for.
The results summarized for the three scenarios:
Total debt: 2013-2022.
Debt/GDP: 2013-2022:
The Zero Hedge open source model, for everyone to play around with, can be found here. Remember: don't be a CBO, enable circs!
P.S. don't even think of modelling a recession: everything Refs up then.


Don't expect any dividends from Bank of America as they had to settle with Fannie for 10 billion dollars.  They have 16 billion in reserves but many more players to pay for their folly with Countrywide's robosigning fiasco.

(courtesy zero hedge)

BofA Settles With Fannie Mae Over Reps And Warranties For $10 Billion, To Incur $2.7 Billion Pretax Hit

Tyler Durden's picture

As had been widely expected, days before a National Mortgage/Foreclosure settlement is formally announced, the most exposed banks have started tying up the loose ends with the other nationalized entities. Sure enough, moments ago Bank of America just announced a $10 billion settlement with one of the GSEs - Fannie, whose CEO Tim Mayopoulous was BofA's former General Counsel and one of the people scapegoated by Ken Lewis. As just reported, as part of the agreement to settle representations and warranties claims, Bank of America will make a cash payment to Fannie Mae of $3.6 billion and also repurchase for $6.75 billion certain residential mortgage loans sold to Fannie Mae, which Bank of America has valued at less than the purchase price. These actions are expected to be covered by existing reserves and an additional $2.5 billion (pretax) in representations and warranties provisionrecorded in the fourth quarter of 2012. Bank of America also agreed to make a cash payment to Fannie Mae to settle substantially all of Fannie Mae’s outstanding and future claims for compensatory fees arising out of past foreclosure delays. This payment is expected to be covered by existing reserves and an additional provision of $260 million (pretax) recorded in the fourth quarter of 2012. Bottom line: hit to Q4 pretax earnings will be $2.7 billion. Yet, as BAC notes, despite the settlement, "Bank of America expects earnings per share to be modestly positive for the fourth quarter of 2012." Which means prepare for one whopper of a loan-loss reserve release for the quarter as more "earnings" are nothing but bookkeeping gimmicks.
As for the implications of this settlement, we learn two things:
i) as we have said since 2010, BAC has been very much underreserved on its total putback exposure and the additional $2.5 billion in provisions to settle with Fannie means that ongoing provisions over the last 5 quarters have been far too low as seen in this chart from the firm's latest earnings presentation:
ii) the $10 billion settlement with one GSE is put in the context of total reserves as of Q3, 2012, at $16.3 billion.
So with one of the GSEs out of the way, and with an additional $2.5 billion in reserves having to be established just to prefund this particular $10 billion settlement, one can see why the firm is so skittish in coming to a settlement over its private label exposure, which according to some is where the true fulcrum loss lies, and as per Piper Jaffray is estimated at tens of billions in total. Of this, MBI is the leading case study, which seeks $4-5 billion. So while the Fannie settlement was perfectly expected, as the government would hardly impair one of its darling banks by too much (and one wonders whether Mayopoulos did recuse himself of any negotiations), when it comes to private labels, there will be blood.
And while the additional provision may be $2.5 billion for just one Fannie, like for the final number to be far greater when all other exposures are settled, which include private labers, Freddie, second-lien monolines as well as whole loans.
As a result, don't expect the bank to be paying much if any dividends in 2013 either, as the bulk of the free cash flow will once again be rerouted for loss provisions which will come, just a question of when.


And now all the crooked banks get bailed with with a measly 10 billion dollar settlement and now if the banks do not have the original lien document it does not matter they can proceed with foreclosure!

such crooks

(courtesy zero  hedge)

Banks Put Linda Green Behind Them With $10 Billion Robosigning Settlement

Tyler Durden's picture

The chapter on robosigning, i.e., Fraudclosure, is now closed with a $10 billion wristslap on US banks, of which a whopping $3.3 billion in the form of direct cash and $5.2 billion in "other assistance." The banks who are now absolved from any and all Linda Green transgressions in the past include: Aurora, Bank of America, Citibank, JPMorgan Chase, MetLife Bank, PNC, Sovereign, SunTrust, U.S. Bank, and Wells Fargo. And so, banks can resume to resell properties with mortgages on which the original lien may or may not have been lost in the sands of time.
From the Fed:
Independent Foreclosure Review to Provide $3.3 Billion in Payments, $5.2 Billion in Mortgage Assistance
Ten mortgage servicing companies subject to enforcement actions for deficient practices in mortgage loan servicing and foreclosure processing have reached an agreement in principle with the Office of the Comptroller of the Currency (OCC) and the Federal Reserve Board to pay more than $8.5 billion in cash payments and other assistance to help borrowers.
The sum includes $3.3 billion in direct payments to eligible borrowers and $5.2 billion in other assistance, such as loan modifications and forgiveness of deficiency judgments.  The payments involve mortgage servicers operating under enforcement actions issued in April 2011 by the OCC, the Federal Reserve, and the Office of Thrift Supervision.  The agreement ensures that more than 3.8 million borrowers whose homes were in foreclosure in 2009 and 2010 with the participating servicers will receive cash compensation in a timely manner.
Eligible borrowers are expected to receive compensation ranging from hundreds of dollars up to $125,000, depending on the type of possible servicer error.
This agreement includes Aurora, Bank of America, Citibank, JPMorgan Chase, MetLife Bank, PNC, Sovereign, SunTrust, U.S. Bank, and Wells Fargo.  For these participating servicers, fulfillment of the agreement would meet the requirements of the enforcement actions that mandated that the servicers retain independent consultants to conduct an Independent Foreclosure Review. 
As a result of this agreement, the participating servicers would cease the Independent Foreclosure Review, which involved case-by-case reviews, and replace it with a broader framework allowing eligible borrowers to receive compensation significantly more quickly.  The OCC and the Federal Reserve accepted this agreement because it provides the greatest benefit to consumers subject to unsafe and unsound mortgage servicing and foreclosure practices during the relevant period in a more timely manner than would have occurred under the review process.  Eligible borrowers will receive compensation whether or not they filed a request for review form, and borrowers do not need to take further action to be eligible for compensation.    
A payment agent will be appointed to administer payments to borrowers on behalf of the servicers.  Eligible borrowers are expected to be contacted by the payment agent by the end of March with payment details.  Borrowers will not be required to execute a waiver of any legal claims they may have against their servicer as a condition for receiving payment.  In addition, the servicers' internal complaint process will remain available to borrowers. 
The agencies continue to work to reach similar agreements in principle with other servicers that are not parties to the agreement announced today, but that are also subject to enforcement actions for deficient practices in mortgage loan servicing and foreclosure processing. 
OCC and Federal Reserve examiners are continuing to closely monitor the servicers' implementation of plans required by the enforcement actions issued in April 2011 to correct the unsafe and unsound mortgage servicing and foreclosure practices.
* * *
The signatures below have now been "indemnified":


This makes me sick!.  Now a settlement with all the crooks:

(zero hedge)

In Case There Was Any Confusion Just Who The Fed Works For...

Tyler Durden's picture

Today, to little fanfare, the Fed announced a major binding settlement with the banks over robosigning and fraudclosure, which benefited the large banks, impaired the small ones (which is great: room for even more consolidation, and even more TBest-erTF, which benefits America's handful of remaining megabanks), and was nothing but one minor slap on the banking sector's consolidated wrist involving a laughable $3 billion cash payment. As part of the settlement, the US public is expected to ignore how much money the banks actually made in the primary and secondary market over the years courtesy of countless Linda Greens and robosigning abuses. A guess: the "settlement" represents an IRR of some 10,000% to 100,000% for the settling banks. We are confident once the details are ironed out, this will be an accurate range.
Yet what is most disturbing, or not at all, depending on one's level of naivete, is the response of Elijah Cummings, ranking member of the house Committee on Oversight and Government Reform. As a reminder, Congress had demanded that the settlement not be announced before there was a hearing on it. This did not even dent the Fed's plans to proceed with today's 11 am public announcement which can now not be revoked. It is Cummings' response which shows, yet again, just who is the true master of the Federal Reserve.
Today, Rep. Elijah E. Cummings, Ranking Member of the House Committee on Oversight and Government Reform, issued the following statement regarding the public announcement of a new settlement between the Office of the Comptroller of the Currency (OCC), the Federal Reserve Board, and 10 mortgage servicers without first briefing the Oversight Committee as requested on a bipartisan basis last week:
“I am deeply disappointed that the OCC and the Federal Reserve finalized this settlement and effectively terminated the Independent Foreclosure Review process before providing Congress answers to serious questions about how this settlement amount was determined, who these funds will go to, and what will happen to other families who were abused by these mortgage servicing companies, but have not yet had their cases reviewed.  I do not know what the rush was to make this settlement without answering these key questions, and although I look forward to obtaining information about how this deal may assist homeowners, I have serious concerns that this settlement may allow banks to skirt what they owe and sweep past abuses under the rug without determining the full harm borrowers have suffered.
On Friday, Cummings and Oversight Committee Chairman Darrell Issa sent a bipartisan letter to Federal Reserve Chairman Ben Bernanke and Comptroller of the Currency Thomas Curry requesting a briefing before any new settlement was agreed to or announced publicly. 
The statement concludes as follows:
In calls to the agencies this morning, agency officials stated that they
would not provide the briefing or answer additional questions before
going public with the announcement of the deal
And that, folks, says it all, although it should not come as a surprise to anyone who has by now realized that the only goal the Fed has is to boost the Russell 2000 to new record highs, instead of giving any part of a rat's anatomy about the US public or the broader economy.

Study the following inflation graph since 1776 and you will see the inflation is really held in check until the 1913 when the Fed is created and really takes off in 1971 when the USA exits the gold standard for good:

(courtesy zero hedge)

Guest Post: Inflation Since The American Revolution

Tyler Durden's picture

Via Michael Krieger of Liberty Blitzkrieg blog,
As is clear by this chart, inflation was virtually unheard of until the Creature from Jekyll Island (the Federal Reserve) took over.  However, more importantly, things didn’t really start to get bad until the 1970?s right after Nixon took the nation off the gold standard in 1971.  Since that time, America has seen a period of non-existent real wage growth and a huge gap grow between the rich and the poor ever since.  Nothing like livin’ the debt slave dream!

The following was written by a 21 year old:

(courtesy Monty Pelerin/World Blog)

Guest Post: Fixing The Problem Isn't Difficult

Tyler Durden's picture

The following was received via email. Supposedly it appeared in the Waco Tribune. We don’t know the author, but we assume those interested could look her up. Since the Constitution no longer matters, we assume we can make her President, even though she doesn’t meet the (formerly valid) age restriction.
This was written by a 21 yr old female who gets it. It’s her future she’s worried about and this is how she feels about the social welfare big government state that she’s being forced to live in! These solutions are just common sense in her opinion. This was in the Waco Tribune Herald, Waco , TX , Nov 18, 2011
Put Me In Charge...
Put me in charge of food stamps. I’d get rid of Lone Star cards; no cash for Ding Dongs or Ho Ho’s, just money for 50-pound bags of rice and beans, blocks of cheese and all the powdered milk you can haul away. If you want steak and frozen pizza, then get a job.

Put me in charge of Medicaid. The first thing I’d do is to get women Norplant birth control implants or tubal ligations. Then, we’ll test recipients for drugs, alcohol, and nicotine. If you want to reproduce or use drugs, alcohol, or smoke, then get a job.

Put me in charge of government housing. Ever live in a military barracks? You will maintain our property in a clean and good state of repair. Your home” will be subject to inspections anytime and possessions will be inventoried. If you want a plasma TV or Xbox 360, then get a job and your own place.

In addition, you will either present a check stub from a job each week or you will report to a “government” job. It may be cleaning the roadways of trash, painting and repairing public housing, whatever we find for you. We will sell your 22 inch rims and low profile tires and your blasting stereo and speakers and put that money toward the “common good..”

Before you write that I’ve violated someone’s rights, realize that all of the above is voluntary. If you want our money, accept our rules. Before you say that this would be “demeaning” and ruin their “self esteem,” consider that it wasn’t that long ago that taking someone else’s money for doing absolutely nothing was demeaning and lowered self esteem.

If we are expected to pay for other people’s mistakes we should at least attempt to make them learn from their bad choices. The current system rewards them for continuing to make bad choices.

AND While you are on Gov’t subsistence, you no longer can VOTE! Yes, that is correct. For you to vote would be a conflict of interest. You will voluntarily remove yourself from voting while you are receiving a Gov’t welfare check. If you want to vote, then get a job.


Well that about does it for tonight.

I will see you tomorrow night



Anonymous said...

Harvey,just love your work. thanks for what you do. Q. in your second paragraph tonight about the cascade of effects of "non delivery"....are you saying gold and silver will go down and the bankers win or are you saying they fly north? if so how high wouldyou expect? And does your scenario take down all stock markets? Looking forward to your thoughts.

Harvey Organ said...

What I am saying is this:

gold will be say 3,000 bid and no offer

silver will be bid 50.00 bid and no offer and then I will leave your imagination on full throttle after that.


Jack said...

US Mint reports sales of 3.9 MILLION silver eagles today. This was the first day for ordering 2013 ASE's. Still it is an all time record.

I guess "Fred" can keep pretending there's plenty of silver to go around, but the demand speaks volumes. Since people can't get squat from the thieves at COMEX, it's better just to buy actual, real silver online than deal with the paper monkeys who never deliver.

Sneed said...

The "regulators" are not brain dead as they are doing exactly what they're actually there for and doing it well. The mistake is seeing them as regulators, which they most certainly are not. They are fully complicit in what is going on and know full well what it is.

Anonymous said...

Harvey Organ said...
What I am saying is this:

gold will be say 3,000 bid and no offer

silver will be bid 50.00 bid and no offer and then I will leave your imagination on full throttle after that

Harvey, what in the world does that mean in simple terms please????

Anonymous said...

3,000 bid and no offer
50 bid and no offer

no offer = no one is willing to part with the metal for the price, or any price in paper fiat USD.

Fred said...

To Jack--

Why can't "people get squat from COMEX"???

Have you tried to take delivery and been denied metal?

I don't understand your statement.
The position limit for spot month is 1500 contracts. That means you could take 7,500,000 ounces.

I dunno, I consider 7.5 million ounces more than "squat".

Anonymous said...

Thanks Harvey!

to anonymous re: bid and no offer

When you buy financial assets, (including gold and silver) you have a bid price and an asking price.

Right before 4PM let's say I went to buy shares of the silver miner First Majestic (trade symbol AG) and the price per share at that moment was what it closed at today $20.23. That is NOT the price I will pay for those shares. Instead I will see a bid price (say it is $20 even) and an ask price (we will say that is $20.40).. The ask price is the amount I will actually pay per share if I mash down that buy button (plus broker fee). The bid price is the amount I will get if I were to sell shares of AG at that given time.

The same works for gold and silver. My local coin shop will offer me silver ingots for a price above the spot price at that time (ask), or I could sell an ingot to them for a price a bit below spot (bid). This is how brokers and dealers make their money.

Now if there is a bid price but no ask price, that means that you can sell, but you cannot buy. This would imply a market with absolutely NO supply whatsoever, hence the price would skyrocket, until someone would finally be willing to name an asking price.

hope this helps!

Jack said...

Someone wants to buy Gold for 3,000 an ounce. That is the bid. But there is no offer, an any price, so no one is willing to sell.

You must recall that a mere 90 years ago, in the German Weimar Republic the most infamous hyperinflation in history that one ounce of GOLD would purchase an entire city block of commercial business in Berlin. That is where the USA, and possibly the world are heading now.

Jack said...

Who wants a piece of paper that claims I own 7.5 million ounces? It's bullshit. But that's what you are "Fred". A bullshitter.

I'll just buy online and get the real thing delivered to me. No more dealing with crooks!

Jack said...

And BTW "Fred".

Fuck you.

Old Timer said...

Anon 5:02 AM on the 7th,

I too have worked hard all my life, given nothing by anyone.

All I am saying is that there are always disagreements on the blog, and I side with nobody in particular, only try to be true to myself and what I believe in.

That being said, I have re-read my earlier posts, your responses, and am here to tell you I get where you are coming from, and extend my apologies.

I am long metals, and follow them more for hobby nowadays. Personally I would like the price to be steady, which would be an indication the economy is stable, not for my sake, but that of my families, and have no plans on selling any in my lifetime.

But I think we all believe there will be a different outcome than that, which is exactly why we purchase physical. Retaining our purchasing power.

Even a grumpy old man knows this much, and when to admit he was wrong,--never meant to belittle anyone.

Anonymous said...

Old Timer, you are a good man, a bigger man than most here. You have accumulated a boatload of wisdom and anybody on this blog would be wise to listen to you.

Fred said...

To Jack--

Well, you call up Brinks or one of half a dozen other armored car services and you go to the COMEX approved vault and you take your metal OUT. Then it's not a paper promise, it's sitting wherever the heck you want it to sit. That what I've done.

Where do you think the online guys you buy from get the metal to fabricate their product??

You're really something, Jack.

Ignorance and a lack of class. Always a great combination.

FunkyMonkeyBoy said...

People should be thinking critically.

Why does an old man, Harvey Organ, sell big pharma drugs to the masses during the day, and pumps the metals (using proven fabricated nonsense) during the night...

... all with your best interests at heart right?

Time and time Harvey gets proven wrong by more knowledgable, experience posters on here... but Harvey just ignores the hard reality... and continues on and on that the "next big delivery month with bust the COMEX"... and those delivery months come and go... months go by, years go by... and nothing happens... not a single report of a problem at the COMEX. Not a single one!

A critical thinker would be thinking what the real agenda is here...

Don't forget to buy more silver from using your Harvey Organ discount code... all the physical silver you want (even though Harvey says it's be rarer than rocking horse-sh*t), at just a small premium to the COMEX set price (even though Harvey says that it is paper price only).

Stinks to high heaven.

Anonymous said...

You're right, monkey. People should be thinking critically.

Why does someone, who probably bought high and got his ass handed to him, continues to do little more than hurl insults and uses the same reality distorting tactics that the establishment uses?

A REAL critical thinker would be thinking.. "gee.. even though gold and silver are off their all time highs, they still buy MORE gasoline, MORE heating oil, MORE food, MORE electricity, and more well.. things you need to live, than they did 10 years ago.. I wonder what this guy's agenda is.."

Surely one that is NOT in my best interest!

Jack said...

Online supplies of Silver Eagles are low and the 2013 supply is about 10 days away.

We could see a temporary supply crunch that could result in strong price premiums. This bears watching, like a small fire, but out of control and next to a large forest full of very dry wood.

Anonymous said...

Well I for one think FMB has a valid point.


FunkyMonkeyBoy said...

Anon @ 1.16PM,

You're making up more bull than Harvey.

Of course, i was making the same warnings when silver was $40+.

Those one listened to me and not the gold/silver celebrities (who are paid for by the PM miners/retailers) would have saved themselves a lot of pain.

All these gold/silver celebrities blog sites are simply PR and marketing campaigns by the gold/silver miners and retailers... and they've done very well getting people to sink a lot of wealth into their product.

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