Thursday, January 28, 2010

Smoke On The Water


First things first. I have it on good authority that if you take a copy of the President's State Of The Union speech last night, shred it, and put it on your lawn this Spring...you will have a wonderfully lush green lawn all summer.

Second, if you missed the grilling of Treasury Secretary Geithner yesterday during the House Oversight Hearing on the AIG Bailout you can watch it here:

http://cspan.org/Watch/Media/2010/01/27/HP/A/28886/House+Oversight+Hearing+on+AIG+Bailout.aspx
This is PRICELESS. These Congressmen, one by one, took Tiny Tim to the woodshed, and beat him to a pulp. The hearing lasted nearly 2 and a half hours, but every minute is worth a view just to see this scoundrel squirm. If he's still in office by April 1st, then we've all been fooled.

Third, I will refrain from commenting on the prices of Gold and Silver this evening as they at present do not in any way, shape, or form represent fundamental reality. As the folks at the MIDAS Report said yesterday in what may be the understatement of the century, "Rigging Of US Financial Markets Going Off The Charts."

Fourth, I will comment of the Fed's claim yesterday that "the economy continues to show signs of recovery". What a load of complete crap...the economy is dead in the water. No jobs, no recovery. I can't explain it any simpler than that. To believe otherwise is simply wishful thinking.

Fifth, the Treasury successfully completed the auction of $118 BILLION of debt this week, today. With, of course, the Fed buying all of it, indirectly, with Dollars they swapped to the European banks last year. More on those swaps below. It would appear these banks have grown weary of this scam and wish to close the door on this deceit...

And finally, after promising Harry Reid that he will flood the world with US Dollars, Bumbling Ben Bernanke was reconfirmed to another four year term as Federal Reserve Chairman. May God have mercy on us all...

Durable Goods Orders Rise Below Expectations
WASHINGTON -(Dow Jones)- Orders for long-lasting goods rose in December much less than expected following a pair of declines, according to a report signaling manufacturing's recovery will be slow.

Manufacturers' orders for the durables increased 0.3% to a seasonally adjusted $167.91 billion, the Commerce Department said Thursday. Economists surveyed by Dow Jones Newswires had projected a 2.0% increase.

Durables in all of 2009 fell on an unadjusted basis by 20.2%.

November durables dropped 0.4%, revised from a previously reported 0.7% drop. October orders dipped 0.1%.

A sign within Thursday's data of future demand for durables, unfilled manufacturers' orders, tumbled 1.2%, the 15th decline in a row.

http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=ff72923d-ba70-424a-9b33-955b6247775a

I left out all the excuses for the poor data, as we are only interested in the facts. I am sick of excuses. For a real load of excuses, check out the new jobless claims report below:

Jump in jobless claims blamed on special factors
Weekly initial jobless claims jumped 36,000 in the latest week to 482,000, easily exceeding the forecast offered by Bloomberg of 440,000. The 4-week moving average
rose 7,000 to 448,250, while continuing claims dropped a scant 18,000 to 4.6 million.

Continuing claims are over 2 million below the peak set last year, though the steep drop is unlikely the result of increases in employment but mostly do to unemployed workers losing standard benefits, which normally run six months.

Before we go setting of any alarms bells over the unexpectedly-large rise in weekly claims, let’s look at an explanation offered up by Bloomberg News:

The Labor Department said claims piled up due to short holiday staffing at state processing centers. Market News International is quoting a Labor Department analyst as saying the week's gain is "not economic, but administrative."

Starting with the next report, the government analyst expects the effect to reverse making for a steady decline in coming weeks. An implication here is that short-staffing this year was greater than prior years and is not offset by seasonal adjustments. Note also that data from an unusually large number of seven states had to be estimated for the current report.
http://economytodaytomorrow.blogspot.com/2010/01/jump-in-jobless-claims-blamed-on.html

"Roll up your window and hold yer nose, dead skunk in the middle of the road." WTF? Can you believe this crap? Desperation is too soft a word to describe this "report". What will the excuse be next week when new jobless claims are once again "worse than expected"? And damn it, expected by whom?

How Paulson's People Colluded With Goldman to Destroy AIG And Get A Backdoor Bailout
To understand what happened, you need to remember that the top guys at Goldman are really, really smart. They are like champion chess players who anticipate the possible moves of their opponent. The guys at Goldman can quickly grasp how pieces of a financial transaction work together, like the pieces on a chessboard, to game out different scenarios. This attribute is not unique to the guys at Goldman; it's an essential quality of every good banker. But it does mean that the guys at Goldman cannot credibly profess to being oblivious.

The other thing that you must remember is that the dagger hanging over AIG and Goldman -- the eventual payout to the CDO counterparties -- was a zero-sum game between the two financial giants. On June 30, 2008, AIG's net worth was $79 billion and its CDO obligations totaled $62 billion. On August 27, 2008 Goldman's net worth was $42 billion and its share of the infamous CDO portfolio was $22 billion. The stakes were huge.

Also, none of the critical elements that led to AIG's demise were obscure. In retrospect they seem quite obvious. Unfortunately, few in the financial media have attempted to understand those critical elements.

http://www.huffingtonpost.com/david-fiderer/how-paulsons-people-collu_b_435549.html

Fascinating reading if you have the time.

Is Bernanke Hiding A Smoking Gun?
A Republican senator said Tuesday that documents showing Federal Reserve Board Chairman Ben Bernake covered up the fact that his staff recommended he not bailout AIG are being kept from the public. And a House Republican charged that a whistleblower had alerted Congress to specific documents provide "troubling details" of Bernanke's role in the AIG bailout.

Sen. Jim Bunning (R-Ky.), a Bernanke critic, said on CNBC that he has seen documents showing that Bernanke overruled such a recommendation. If that's the case, it raises questions about whether bailing out AIG was actually necessary, and what Bernanke's motives were.
http://www.huffingtonpost.com/2010/01/26/is-bernanke-hiding-a-smok_n_437509.html

Two at Fed Had Doubts Over Payout by A.I.G.
Weeks after rescuing the American International Group with an $85 billion taxpayer loan in late 2008, Federal Reserve Board officials rejected a proposal that would have forced the insurer’s trading partners to return $30 billion in cash that they had received from A.I.G. in the preceding months.

The Fed chose instead to let the banks keep the cash and to receive additional billions from taxpayers. This decision was made, internal documents show, after two Fed governors expressed concern that such a plan might be “a gift” to the company’s trading partners, including Goldman Sachs and Société Générale, a major French bank. The documents were provided to Congressional investigators by the Federal Reserve and were obtained by The New York Times.

Donald L. Kohn, the vice chairman of the Federal Reserve Board, has also come under fire for his role in the A.I.G. bailout. Testifying before Congress last March, Mr. Kohn refused to identify those banks that received taxpayer funds as A.I.G. counterparties, saying that the stability of the financial markets would be undermined if the insurer’s trading partners were disclosed.

According to the documents, Mr. Kohn is one of the two Fed governors — the other was Kevin M. Warsh — who expressed worry that paying the counterparties receipt of 100 cents on the dollar to unwind their insurance contracts could be a gift to the banks.
http://www.nytimes.com/2010/01/27/business/27aig.html?ref=business

S&P cuts Japan outlook to ‘negative’
Standard & Poor’s has warned that it might cut its sovereign debt rating on Japan for the first time since 2002, a move that highlights doubts about the fiscal health of the world’s second-largest economy and the policies of its new Democratic party government.

The decision by S&P to change to negative the outlook on Japan’s AA long-term rating comes amid heightened international wariness towards sovereign risk as government deficits surge in the aftermath of the global financial crisis.
http://www.ft.com/cms/s/0/f24b0b52-0a33-11df-8b23-00144feabdc0.html

ECB, Other Central Banks To Stop Dollar Swaps With Fed
FRANKFURT -(Dow Jones)- The European Central Bank said Wednesday it has decided, along with other central banks, to stop providing liquidity to banks in dollars through swap agreements with the U.S. Federal Reserve.

The ECB said that it, the Bank of England, the Bank of Japan and the Swiss National Bank would stop conducting any such operations after Jan. 31.

The step had been widely expected after the discontinuation of longer-term foreign currency swaps with the Fed in September and the end of a swap agreement between the ECB and the SNB earlier this month.

"These lines, which were established to counter pressures in global funding markets, are no longer needed given the improvements seen in the functioning of financial markets over the past year," the ECB said in a statement.

The foreign currency liquidity provision was one of five non-conventional measures adopted by the ECB to stem the financial market panic that erupted after the collapse of Lehman Brothers in September 2008. It is the first of the five to be completely ended.

Of the remaining four, two have clearly defined ends while the other two are being phased out gradually as the level of stress in financial markets retreats to levels seen before the crisis.

http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=201001271456dowjonesdjonline000634&title=ecbother-central-banks-to-stop-dollar-swaps-with-fed

We wonder what this may imply, but we have to assume that whatever it does, it will be messy.

India Jan 1-27 gold imports at 35-40 tonnes-trade
NEW DELHI, Jan 27 (Reuters) - India has imported 35-40 tonnes of gold during January 1-27, up from 9.8 tonnes in the whole of the same month last year, the head of a trade body and bank dealers said on Wednesday.
http://in.reuters.com/article/domesticNews/idINSGE60Q0HS20100127?rpc=401&feedType=RSS&feedName=domesticNews&rpc=401&sp=true

I'm sorry I just can't find any good reasons to sell Gold or Silver. Of course we know nobody is really selling any REAL Gold and Silver right now, just paper claims to Gold that DOES NOT EXIST. I guess if the banking regulators can miss the sub prime crisis in the housing market, they are allowed to miss the shenanigans in the phony Precious Metals market in New York. Isn't it amazing that laws put on the books by our own government are broken by the cops put in place by our own government to enforce them? Yeah, it's a great country, ain't it? Whoever said crime doesn't pay must have never had a job with the US Government.

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