Thursday, November 12, 2009

Pump It Up!

Let's see now... We have the US Dollar clinging to the edge of a cliff at 75 on the US Dollar Index, Little Timmy Geithner yet again proclaiming the US's "strong dollar policy", Gold hitting 1122.64 in the wee hours of the morning in Asian trading overnight, and The Obama leaving on a big adventure to Asia.

"Would somebody please pump up the Dollar!"

And so it began... At 2AM est., within 10 minutes of Gold achieving yet another new high of 1122, the US Dollar began to levitate, Gold began to retreat, and the engines on Air Force One were lit. After all, how can The Obama face his biggest creditors with the Dollar at a 15 month low and Gold at an all-time high?

Folks, we've seen this retreat in Gold coming for the past week. From a purely technical point of view it was overdue. Toss in the The Obama's Big Adventure and you've got an excellent opportunity to intervene in the currency markets on the US Dollars behalf. What a global embarrassment. What a sick joke. What a farce! The US Dollar is on life support. All the sweet talk in the world, and a five gallon bucket of Viagra couldn't get a rise out of this corpse.

Federal deficit sets October record of $176.4B
WASHINGTON (AP) -- The federal deficit hit a record for October as the new budget year began where the old one ended: with the government awash in red ink.

Economists worry that if such deficits continue it could push up interest rates, further dragging on the fragile economic recovery.

The Treasury Department said Thursday that the deficit for October totaled $176.4 billion, even higher than the $150 billion imbalance that economists expected.

The deficit for the 2009 budget year, which ended on Sept. 30, set an all-time record in dollar terms of $1.42 trillion. That was $958 billion above the 2008 deficit, the previous record holder.

October was the 13th straight month to show a monthly deficit -- another record. It was the fifth-largest monthly deficit ever.

U.S. 30-year bonds get cold shoulder, market falls
NEW YORK, Nov 12 (Reuters) - The record $16 billion sale of U.S. 30-year government bonds got a cool reception from investors on Thursday, sparking a selloff in the Treasury debt market.

Investors' reticence at the last leg of this week's $81 billion federal debt refunding was a surprise after they gave a warm response at the three-year and 10-year note auctions earlier this week.

"Poorly received," Lou Brien, market strategist with DRW Trading in Chicago, said of the latest auction.

The weak auction results triggered selling of 30-year Treasuries in the open market. The 30-year bond briefly lost more than a point, sending the yield to a session high of 4.48 percent, a level not seen since mid-August.

Home-Purchase Index in U.S. Plunges to Lowest Level Since 2000
Nov. 12 (Bloomberg) -- Mortgage applications to purchase homes in the U.S. plunged last week to the lowest level in almost nine years as Americans waited for the outcome of deliberations to extend a government tax credit.

The Mortgage Bankers Association’s index of applications to buy a house dropped 12 percent in the week ended Nov. 6 to 220.9, the lowest level since Dec. 2000. The group’s refinancing gauge rose 11 percent as interest rates decreased, pushing the overall index up 3.2 percent.

The drop in buying plans points to the risk that the recent stabilization in housing will unravel without government help. In a bid to sustain the recovery, Congress passed and the administration signed a bill last week to extend jobless benefits and incentives for first-time homebuyers, adding a provision that also made funds available to current owners.

Foreclosures fall for third straight month, but still up 19% from year ago
The number of homeowners on the brink of losing their homes dipped in October, the third straight monthly decline, as foreclosure prevention programs helped more borrowers.

But foreclosure filings are still up 19 percent from a year ago, RealtyTrac Inc. said Thursday, and rising job losses continue to threaten the stabilizing trend.

O YEAH! We better run out a grab some Dollars quick as we can, dump our Gold. Things are looking up! I just gave you four reasons why the Dollar is going nowhere. Today's move in the Dollar was blatant intervention. If the Dollar rallied on today's pitiful improvement in first-time unemployment claims, I pity the Dollar bulls.

Claims fall; when jobs will come is anyone's guess
WASHINGTON — With the sputtering job market flashing an encouraging sign — unemployment claims at their lowest point since January — the White House announced a summit Thursday to try to speed the day when hiring finally starts again.

While President Barack Obama called the new jobless figures hopeful, economists think claims will probably stay too high to indicate even a slight gain in jobs until early next year.

Job creation is essential for a sustained economic recovery. Obama said the White House is "open to any demonstrably good idea to supplement the steps we've already taken to put America back to work."

First-time claims for unemployment aid fell last week to a seasonally adjusted 502,000, fewer than Wall Street had expected.

Still, most economists say weekly claims would have to fall below 425,000 for several weeks to signal that the economy is actually adding jobs.

The weak job market is ratcheting up the political pressure on Obama administration. The summit was an acknowledgment that unemployment will remain a problem for months to come.

Obama originally had promised the $787 billion stimulus package would create or save 3.5 million jobs. But the administration's efforts to tally the jobs it attributes to the stimulus — about 640,000 so far — have been bedeviled by reports of double-counting and other errors.

An Associated Press-GfK poll released earlier this week found 46 percent of Americans approve of how Obama has handled the economy, down from 50 percent last month.

The government also said Thursday that the number of people continuing to claim jobless benefits dropped by 139,000 to 5.6 million, also below analysts' estimates. The figures on continuing claims lag behind the data on initial claims by a week.

Millions of unemployed Americans have used up the regular six months of benefits typically provided by states and are receiving extended benefits for up to almost another year and a half, paid for by the federal government.

Congress extended the program last week for the fourth time since the recession began. About 4 million people were receiving extended jobless benefits in the week that ended Oct. 24. That total was little changed from the previous week.

Pathetic... The hand writing is on the wall people. More government spending, bigger deficits...lower Dollar = higher Gold prices. Believe it!

Is Gold in a Bubble?
by Chris Puplava
Short answer... Not even close!

As the number of USD’s has expanded exponentionally over the last few decades, the purchasing power of the dollars has eroded and while gold may have reached a new all-time high, a clearer picture is to use the consumer price index (CPI) index to measure gold currently to what it’s inflation adjusted price was back in 1980. Using the government’s CPI shows that the 1980 inflation adjusted high in gold was about $1,807 an ounce while using John Williams Shadow Government Statistics (that measures CPI BEFORE all the government manipulations) showing the inflation-adjusted gold peak at $5,513 an ounce. Just to get back to the real inflation-adjusted high in gold, gold would have to rally 64% to reach the government's CPI adjusted peak and 401% to reach the true inflation-adjusted high in gold. Thus, gold’s recent high is in no way close to the bubble peaks seen during the last secular bull market in gold.

Another Reason to Buy (More) Gold
By Chris Mayer
11/12/09 Gaithersburg, Maryland – The age of de-leveraging is upon us. Bad news for the US economy; good news for gold.

For the past 60 years, corporate debt has grown faster than the economy – 4.1% annually for debt, compared with only 2.7% for the economy as a whole. In short, more and more debt went toward producing each dollar of GDP growth.

What if this 60-year trend reverses?

In fact, I think that is the likely scenario. The deleveraging will take some time…and it won’t be fun.

“Today’s overleveraged assets will become tomorrow’s underleveraged assets, and vice versa,” QB Partners, a hedge fund, explained in a recent letter to shareholders.

What will this new world look like? More people will save more money. And they will focus more on preserving that wealth than on making a big score. We’ve been here before. Michael Farrell, the chairman of Annaly, says the psychology of people will change as it did for those of 1930s, as he discussed on his company’s first-quarter conference call:

Exhausted by the uncertainties of the 1930s and 1940s, the older generation just felt lucky to be alive and they settled into a time of saving, preservation of capital and lowered expectations as consumers.

If that kind of financial orthodoxy takes root, then leveraged assets like real estate and bank balance sheets face a long period of stagnant returns as they continue to deliver – that is, as borrowers and lenders ratchet down the debt on these things. (I find it ridiculous that government officials want us to believe that the US banking system is OK at 25-to-1 leverage. The banking system’s insolvency will become more apparent as it continues to take losses from bad debts made during the bubble.)

Deleveraging puts pricing pressure on leveraged assets. Banks must raise capital, diluting their shareholders and hurting their stock prices. Real estate owners must sell property to raise capital to defend other properties, thus putting pricing pressures on real estate assets. And so on…

So as an investor, it will pay better to stick with the unlevered assets, which face no such head winds. After all, there is no pressure to sell an asset with no debt, no ticking clock. “What are the most underleveraged assets?” you ask. QB Partners gives the answer: hard assets and natural resources.

The ultimate unlevered hard asset may be humble old gold.

On Doing God’s Work
By: Rob Kirby
When the news of tungsten “salted” gold bars in Hong Kong first surfaced, many people who I am acquainted with automatically assumed that these bars were manufactured in China – because China is generally viewed as “the knock-off capital of the world”.

Here’s what I now understand really happened:

The amount of “salted tungsten” gold bars in question was allegedly between 5,600 and 5,700 – 400 oz – good delivery bars [roughly 60 metric tonnes].

This was apparently all highly orchestrated by an extremely well financed criminal operation.

Within mere hours of this scam being identified – Chinese officials had many of the perpetrators in custody.

And here’s what the Chinese allegedly uncovered:

Roughly 15 years ago – during the Clinton Administration [think Robert Rubin, Sir Alan Greenspan and Lawrence Summers] – between 1.3 and 1.5 million 400 oz tungsten blanks were allegedly manufactured by a very high-end, sophisticated refiner in the USA [more than 16 Thousand metric tonnes]. Subsequently, 640,000 of these tungsten blanks received their gold plating and WERE shipped to Ft. Knox and remain there to this day. I know folks who have copies of the original shipping docs with dates and exact weights of “tungsten” bars shipped to Ft. Knox.

The balance of this 1.3 million – 1.5 million 400 oz tungsten cache was also plated and then allegedly “sold” into the international market.

Apparently, the global market is literally “stuffed full of 400 oz salted bars”.

Makes one wonder if the Indians were smart enough to assay their 200 tonne haul from the IMF?

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