Wednesday, December 30, 2009

Is It Really Just A Coincidence?

I'm doing my best to ignore the markets this week. The noise that seems to persist is but a cacophony of impudent thieves boasting of triumph. Hardly...

In the never ending effort to obfuscate the Precious Metals Markets, the CRIMEX goons this week have toed the company line and engaged in some of their most nefarious and blatantly obvious criminal activity to date. Pause for a moment and peruse the graphic above...and consider this:

On Monday, Tuesday, and Wednesday of this week the United States Treasury Department has been engaged in yet another desperate series of auctions of US Treasury Bonds to further fund the irresponsible excesses of our floundering government. The total raised for the week a staggering $118 BILLION. This weeks auctions will be the final installment of 2009 Treasury issuance, which will bring this years gross coupon issuance to $2.183 trillion -- a daunting figure surely to be matched in 2010.

In an effort to make these "tokens of debt" attractive to investors, it was deemed imperative by the Grand Masters of National Debt to make the US Dollar look strong, and it's arch enemy Gold look weak. Marching orders were sent to the cartel's bullion banks to "press Gold" to throw investors off the scent of safety in the hope of luring them into the Treasury's little Den of Debt instead.

Is it really just a coincidence that the price of Gold rolled over each of these three past days precisely at the open of trading on the CRIMEX as shown clearly on the graphic above? Not bloody likely! Let the graphic above sear into your mind. It is the clearest picture of a "crime in broad daylight" you may ever witness. There is absolutely no sound fundamental reason for Gold to have sold off at PRECISELY 8:20AM est every morning the past three days. NONE! If Gold is such a poor investment, why then does it not get clobbered in trading around the rest of the planet each night?

Gold holds the TRUTH about the destruction of your country by a small group of thieves determined to put each and every one of you in the poor house and destroy your inalienable right to life, liberty, and the pursuit of happiness guaranteed by the Constitution Of The United States Of America. The US Government will stop at nothing to keep this TRUTH from you.

The US Treasury can not sell US Dollar denominated debt on it's own merit. Therefore, the Treasury must use it's minions at the bullion banks to make Treasury Bonds "look better" than any alternative, in particular Gold.

US Treasury Bonds are a bad bet, and the World grows wiser by the day to this TRUTH. We are told again and again by the financial media that these weekly debt auctions are "successful". Why? Does one more successful bond auction buy the government another week or two of kicking the can down the road before the TRUTH overwhelms the Bond Market? Why are "successful" bond auctions always reported as if it were a "relief" that the Treasury succeeded in selling some more of the nations future?

Are investors really buying all this debt? Or are we being led to believe investors are buying ALL this debt when in fact the Fed is buying it "indirectly"? Who is buying all the bad debt instead of buying Gold? Eric Sprott & David Franklin may know the answer to this question, and I doubt the Treasury Department will be happy to know that their little Ponzi Scheme has been exposed.

In their essay: Is it all just a Ponzi scheme? Eric Sprott & David Franklin go to extraordinary lengths to reveal just who is buying all this US Teasury debt, and it ain't you and me folks.

In the latest Treasury Bulletin published in December 2009, ownership data reveals that the United States increased the public debt by $1.885 trillion dollars in fi scal 2009.1 So who bought all the new Treasury securities to fi nance the massive increase in expenditures? According to the same report, there were three distinct groups that bought more than they did in 2008. The first was “Foreign and International Buyers”, who purchased $697.5 billion worth of Treasury securities in fi scal 2009 – representing about 23% more than their respective purchases in fi scal 2008. The second group was the Federal Reserve itself. According to its published balance sheet, it increased its treasury holdings by $286 billion in 2009, representing a 60% increase year-over-year.2 This increase appears to be a direct result of the Federal Reserve’s Quantitative Easing program announced this past March. Most of the other identifi ed buyers in the Treasury Bulletin were either net sellers or small buyers in 2009. While the Q4 data is not yet available, the Q1, Q2 and Q3 data suggests that the State and Local governments and US Savings Bonds groups will be net sellers of US Treasury securities in 2009, while pension funds, insurance companies and depository institutions only increased their purchases by a negligible amount.

So who was the third large buyer? Drum roll please,... it was “Other Investors”. After purchasing $90 billion in 2008, this group has purchased $510.1 billion of freshly minted treasury securities so far in the fi rst three quarters of fi scal 2009. If you annualize this rate of purchase, they are on pace to buy $680 billion of US treasuries this year - or more than seven times what they purchased in 2008. This is undoubtedly the group that made the US defi cit possible this year. But who are they? The Treasury Bulletin identifi es “Other Investors” as consisting of Individuals, Government-Sponsored Enterprises (GSE), Brokers and Dealers, Bank Personal Trusts and Estates, Corporate and Non- Corporate Businesses, Individuals and Other Investors. Hmmm. Do you think anyone in that group had almost $700 billion to invest in the US Treasury market in fi scal 2009? We didn’t either. To dig further, we turned to the Federal Reserve Board of Governors Flow of Funds Data which provides a detailed breakdown of the owners of Treasury Securities to Q3 2009.3 Within this grouping, the GSE’s were small buyers of a mere $5 billion this year;4 Broker and Dealers were sellers of almost $80 billion;5 Commercial Banking were buyers of approximately $80 billion;6 Corporate and Non-corporate
Businesses, grouped together, were buyers of $11.6 billion, for a grand net purchase of $16.6 billion. So who really picked up the tab? To our surprise, the only group to actually substantially increase their purchases in 2009 is defi ned in the Federal Reserve Flow of Funds Report as the “Household Sector”. This category of buyers bought $15 billion worth of treasuries in 2008, but by Q3 2009 had purchased a whopping $528.7 billion worth. At the end of Q3 this Household Sector category now owns more treasuries than the Federal Reserve itself.8

So to summarize, the majority buyers of Treasury securities in 2009 were:

1. Foreign and International buyers who purchased $697.5 billion.
2. The Federal Reserve who bought $286 billion.
3. The Household Sector who bought $528 billion to Q3 – which puts them on track
purchase $704 billion for fi scal 2009.

These three buying groups represent the lion’s share of the $1.885 trillion of debt that was issued by the US in fi scal 2009.

We must admit that we were surprised to discover that “Households” had bought so many Treasuries in 2009. They bought 35 times more government debt than they did in 2008. Given the financial condition of the average household in 2009, this makes little sense to us.

This is a MUST READ essay. Please take the time to read it in its entirety, and share it with a fellow investor. The TRUTH must be heard.

Trader Dan Comments On The Talking Up Of The Dollar
By Dan Norcini,
In technical analysis there is what we term the “reverse polarity” principle. What this means in English is that former levels of support, such as what we see back in December 2008 and June 2009, become resistance levels when once broken to the downside. In other words, just as they formed regions where buyers were quite active previously, they then “reverse polarity”, or attract sellers when price moves back up to test them from the downside. In this case, this level has currently stopped the Dollar’s rally in its tracks.

Before I would become too excited about the Dollar’s prospects, I would need to see a weekly close above this level but even more importantly, I would want to see all of the major moving averages turning up and moving higher with the 10 week and the 20 week moving above the 40 and 50 week. Another way of saying this is that Dollar bulls have not yet proved that they are capable of beating back the selling that is originating at last week’s high. Until they do, the longer term trend is still bearish even though I am the first to admit that the bears were unable to break the double bottom support near the 74 level.

Price then rebounded away from that level with analysts looking for a reason to explain the move higher. The concerted opinion has now emerged that the US economy is on the mend and the next move by the Fed will be to raise interest rates, thus supporting the Dollar. Again, market action makes commentary.

Personally I believe that any such expectation of an increase in interest rates is unjustifiable nonsense. Much of the improvement in the numbers coming out for the US economy is the result of government expenditures. That is unsustainable. Everyone knows that except perhaps the current Administration and the political leadership of the Congress which believes that the more debt that is created the more prosperity follows.

I have posted a number of quotes and stories this month that clearly address the "debt bomb" that the US Treasury has on their doorstep in the coming year. The illusion being sold to the American Public by government "officials" and economists, the financial news media, and Wall Street is that "the recession is over" and America is "on the road to recovery". Folks, it's a load of crap! ...the greatest lie ever told. I just have to post one more:

Brace For Impact: In 2010, Demand For US Fixed Income Has To Increase Elevenfold... Or Else
by Tyler Durden
And while you are lamenting the death of private debt markets, here is precisely what the Fed, the Treasury, and all bank CEOs are doing all their best to keep hidden until they are safely on their private jets heading toward warmer climes: in 2010, the total estimated net issuance across all US$ denominated fixed income classes is expected to increase by 27%, from $1.75 trillion to $2.22 trillion. The culprit: Treasury issuance to keep funding an impossible budget. And, yes, we use the term impossible in its most technical sense. As everyone who has taken First Grade math knows, there is no way that the ludicrous deficit spending the US has embarked on makes any sense at all... none. But the administration can sure pretend it does, until everything falls apart and blaming everyone else for its fiscal imprudence is no longer an option.

Out of the $2.22 trillion in expected 2010 issuance, $200 billion will be absorbed by the Fed while QE continues through March. Then the US is on its own: $2.06 trillion will have to find non-Fed originating demand. To sum up: $200 billion in 2009; $2.1 trillion in 2010. Good luck.

As we pointed, the number one reason why 2010 is set to be a truly "interesting" year is a result of the upcoming explosion in US Treasury issuance. Fiscal 2010 gross coupon issuance is expected to hit $2.55 trillion, a $700 billion increase from 2009, which in turn was $1.1 trillion increase from 2008. For those of you needing a primer on the exponential function, click here. But wait, there is a light in the tunnel: in 2011, gross issuance is expected to decline... to $1.9 trillion.

A brazen essay by one of the Internets best. Please take the time to read Tyler Durden's essay in its entirety.

The Great Year-end Gold Sale is sure to end without notice. Make your purchases soon, and hold on tight. These goons will stop at nothing to steal your Gold from you. Let's face the facts folks, the goons at the CRIMEX are on the hook for potential Gold deliveries that are far in excess of what the CRIMEX has in its coffers. This is going to get ugly, and they NEED YOUR GOLD.

And then there is Silver. The CRIMEX are about to be sunk by their Silver commitments:

The Silver market is waiting to explode The BIS just reported derivative totals and the category "other metals" which is mostly Silver, more than doubled in size to $203 Billion over the last six months alone. To put this number in perspective, the annual global production of Silver is about $10 Billion and a rough estimate of global above ground inventory is $17 Billion. So the "paper Silver" market is about 20 times the size of annual global production and 12 times the above ground inventory. Can you say default?!!! -Bill Holder, LeMetropoleCafe


With the markets in OBVIOUS rigged mode, I will again refrain from commenting further on the Precious Metals charts as they are clearly being painted by the CRIMEX goons. As the New Year passes, the opening few trading days of 2010 should prove most intriguing...

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