Monday, January 25, 2010

Water Under The Bridge

“Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power.”
- Benito Mussolini

Last week is now just "water under the bridge". Gold and Silver traders got screwed, but the fundamental reasons for owning physical bullion could not be stronger. It is my firm belief that Gold and Silver are on the cusp of a mind blowing move higher in price as the gulf between paper Precious Metals and the REAL THING grows ever wider by the day.

Once again overnight in the Asian markets the bid for Precious Metals was strong. At 5:30AM est Gold was up $12. The Asian markets had closed and the first of the soon to be in default markets, the LBMA was just gearing up for the day. On a $5 vertical spike higher, to a new overnight high at this time, the Gold Market gets whacked by an obvious not for profit seller, and the "drift" lower begins once again into today's CRIMEX open.

It's so obvious that the western banks cannot tolerate a rise in the price of Gold. The Asians obviously cannot get enough of the Precious Metal. For how much longer can the Gold Cartel believe they can hold back this raging Gold Bull? For how much longer can the Gold Cartel hide behind the misrepresentation of the forces driving Gold prices higher by the western financial media? I seriously doubt too much longer. Huge blanks are beginning to appear on their paper Gold promises.

This from Harvey Organ's - The Daily Gold :

The volume of gold trading at the comex on Thursday turned out to be 328000. In a rather strange development, the open interest declined by only 2400 contracts on that huge volume.

This no doubt infuriated our banking cartel as they could not shake the leaves off the tree. The bankers had their own problems to contend with, with the announcement of Obama that the USA was going to restrict trading by bankers.

As for silver, the volume on the comex was an astounding 51000 contracts (250 million oz). To give you an idea of the amount of silver offered: the world produces 500 million oz of silver in a given year and have no above ground strategic supplies like their richer cousin, gold.

Thus in one day, the comex traded 1/2 its yearly production. What is also strange, the comex is not the world's largest trader in silver and gold. That belongs to the LBMA which trades on a daily basis of around 100,000 contracts or 500 million oz of silver and for gold around 2100 metric tonnes. (75000 contracts) In gold that equates to a full years production of gold sold at the LBMA in one day.

In another strange development, the OI in silver (basis Thursday) rose by 721 contracts to 126941. Please recall that silver has lost almost 2.00$ per oz and yet the OI has gone up????

As for gold, we are nearing the completion of the Feb contract. It goes off the board on Jan 26.10 as does the options. The OI for February stands tonight at 197000 which is extremely high for 4 days to go.

In another development we are seeing strange announcements at the comex at the various warehouses.

For gold: 16 tonnes of gold (physical) was adjusted out of the dealer inventory into the investor's inventory. This caused the dealer inventory to fall to a dangerously low 1.8 million oz or 18,000 contracts.
This is the amount of gold that is available to be delivered upon!

For silver: 2.4 million oz were removed from the dealer inventory to investor inventory. This caused the level of dealer inventory to fall to a dangerously low 47 million oz of silver or 9400 contracts of silver.

To boot, for January options (January is a non delivery month for both silver and gold) in gold, a huge 2808 contracts are already standing for delivery (280 thousand oz of gold or 10 tonnes of gold)
This is extremely high for just options in a non delivery month. Not only that, but a further 45 contracts are standing which have not been hit.

I would like to point out, that this does not include February options which expire Jan 26.10. There is no doubt that our wicked bankers will be trying to keep the option holders from exercising contracts.

In silver: the January options hit for metal total 286 contracts or 1.43 million oz of silver. Only 1 contract remains to be hit.

There is no doubt that this coming week will be extremely volatile as the bankers wish to get those long holders from taking delivery.

Very interesting indead, but the shinanigans in the Silver warehouses is where we need to focus more attention:

Silver: The Race Is On
By Ed Zimmer
On Wednesday, January 20th, prices in New York for silver plummeted 4.7%, down 89 cents on the day. Yet the World Spot price not only stops the crash, but turns slightly positive in the first few minutes of trade. It would appear that traders outside the US have a different view of the value of the silver metal.

Tuesday, January 19th. the COMEX totals of silver on deposit shows 113 Moz of silver combined on deposit. While that is up slightly from the 112.6Moz in December, the numbers are seriously misleading. On the 8th of January, total stocks were at 111.5 Moz of which 54 Moz were registered to cover contract positions, 57 Moz was eligible to cover contracts, but were actually owned by someone who had them on deposit at a COMEX depository.

Just 11 days later, the stocks of registered silver have fallen to 47.4 Moz while the eligible stocks rose to 65 Moz. As of the 15th, over 128,000 silver contracts were open, amounting to a trade of more than 640 Moz with just 47 Moz available to cover demands for delivery. That's right, there is only physical silver to cover slightly more than 7% of the open silver contracts on the COMEX. Do the math -- 93% of the COMEX contracts can only be covered if the short side can find someone to sell them silver or the long is willing to settle in paper money for a paper silver contract.

Basically, nearly 15% of what was the available COMEX silver is now owned by someone. It only took 11 days for that much silver to disappear into personal hands. Only 47 Moz remains, at which point the shorts develope a new term for "naked short selling", because the only way they can then satisfiy the counterparties is to settle 1) Buy Silver on the open market to settle the demand for delivery or 2) force a settlement in cash, which is the same thing as a default.

Combine this observation with suggestions that the Silver ETF [SLV, JP Morgan custodian] is leasing out it's Silver and one begins to wonder if the end game in the Great Silver scam is fast approaching. Once Silver supply can not meet demand, the paper Silver deception will go down in flames.

What I find fascinating about this whole flow of events is that by drilling the price of Silver lower, the shorts only raise demand for the metal itself. This demand begins to quickly drain "available supply" and only makes a bad situation worse for those on the short side of this market.

Consider the COT open interest numbers in both Silver AND Gold. Open interest should be falling with the price, but it is not. Either the CRIMEX goons have run up against a determined bunch of buyers, or the CRIMEX goons are buying the metals themselves to cover their tracks on the short side of the market. This raises the question: Is the CRIMEX just a circle jerk? Is all the volume indicated there just a swirl of contracts being bought and sold "in house" by the likes of JP Morgan. In other words, is JP Morgan's left hand short, and it's right hand long?

Think about it. All futures contracts have a buyer and seller. ALL of them. If JP Mrogan sells a contract short, there has to be a buyer out there to take that short from them and go long against it. If there are no "non-affiliated" buyers present in the markets, you get a downdraft in price as the bids plummet for lack of buyers.

All too often we are told that "prices plunged because the funds dumped their positions". Have they, or are they simply on a buyers strike? JP Morgan is selling, but nobody is buying so the "price" must fall. If the open interest is not falling with price, then the funds must not be selling.
This must piss of the CRIMEX goons to no end for they cannot cover their mountainous short position if nobody will sell to them.

This then begs the question, are the funds looking to rout the CRIMEX by holding their cards close to their vests? Could they be planning a raid of their own by standing for delivery when they know the CRIMEX goons have NO CHANCE of making delivery on their obligations. Never forget, the party that goes long against the short in a futures transaction holds all the cards becasue he is now owed all the metal that that contract represents and the short side is on the hook for it.

With options expiration on the February Precious Metals tomorrow, this week could not only be very interesting, but historic in hindsight down the road. Particularly in light of the vote to renominate Bumbling Ben Bernanke as Fed Chairman, the Congress' grilling Geithner on his AIG shinanigans, a Fed Interest Rate decision, $166 BILLION in NEW Treasury Debt Auctions, and Fourth Quarter GDP announcement this week. Tighten your seatbelts, the ride just up ahead looks turbulent.

The Bernanke Nomination
There's no doubt that some of this reconfirmation panic is nothing but political opportunism. When we opposed Mr. Bernanke's reconfirmation on December 3, the facile consensus was that the Fed chief was a master of the universe who had saved the world from depression. But after Scott Brown's victory in Massachusetts last week, Senate Democrats are suddenly looking for a financial political sacrifice. President Obama doesn't look ready to throw over Treasury Secretary Tim Geithner, so Mr. Bernanke is the designated spear catcher.

The Democrats' loudest complaint, moreover, is that Mr. Bernanke and the Fed haven't been easy enough in printing money. Majority Leader Harry Reid declared his support for Mr. Bernanke on Friday, but not before extracting what he said were concessions about future Fed policy.

The Fed chief promised, said Mr. Reid, that he would "redouble his efforts" to make credit available and that Mr. Bernanke "has assured me that he will soon outline plans for making that happen, and I eagerly await them."

Redouble? The Fed has already kept interest rates at near zero for more than a year, and it is buying $1.25 trillion in mortgage-backed securities to refloat the housing bubble, among other interventions into fiscal policy and credit allocation. Is the Fed going to buy another $1.25 trillion, or promise to keep rates at zero for another 14 months?

Mr. Reid's declaration of a confirmation quid pro quo will not reassure global investors who already fear that the Fed lacks the political will to withdraw its historic post-crisis liquidity binge soon enough to avoid new asset bubbles.

Hey now, I thought Bumbling Ben Bernanke was adamant that the Fed must maintain it's independence so as not to give the impression of "political influence" on monetary policy? I guess that was only true when his reconfirmation as Fed Chairman was never in doubt. It appears Ben is now willing to sell his soul to save his job. Shocking to learn that Harry Reid, top Senate shiester in the Health Care vote buying, has made a "deal" with the seated Fed Chaiman to assure him the votes for reconfimation and keep his job. Woe is America. Where is the outrage? Harry Reid has signed the Dollars death warrant.

The Nation: Geithner Must Go
by William Greider
Tim Geithner is standing in the middle of the muck because he was still president of the New York Fed in the fall of 2008 when it rescued AIG with tons of public money (now totaling $180 billion). The facts of the deal are catching up with him now and none are good, since they raise doubts about his competence and his public integrity. This scandal has smoldered for several weeks in newspaper business sections, but is about to grab front-page attention.

The House Oversight Committee, chaired by Edolphus Towns, has turned up damning evidence and called Geithner to testify the week of January 27. Committee investigators are poring through some 250,000 e-mails and subpoenaed documents and finding smoking revelations. House Republicans smell blood. House Democrats, given the present climate of popular discontent, are unlikely to rally around tainted goods.

Perhaps the most explosive revelation is that Geithner's subordinates at the New York Fed instructed AIG executives to evade securities law and conceal from the public the $62 billion the insurance company paid out on contracts with the largest investment houses and banks. AIG was already bankrupt and 80 percent owned by the government, kept afloat solely with the billions being injected by the central bank. Yet the Fed told the company to pay off the bankers at full value—100 percent on the dollar—without negotiating a better deal for the public. The bankers would not have collected a dime if the government hadn't come to the rescue.

The Fed, other words, gave the largest, most prestigious banks a very sweet deal—much sweeter than anything the banks or the federal government will offer to homeowners facing mortgage foreclosure. The central bank, in effect, was operating a backdoor bank bailout that nobody could see. The public billions devoted to AIG went in one door at the insurance company and came out another door to the private banks. Goldman Sachs alone collected $13 billion.

Failure to disclose is a big no-no in corporate finance. People can go to jail if they willfully withhold material information from shareholders and the Securities and Exchange Commission (SEC), or they may be sued for investor fraud. Yet that is what the New York Fed told AIG to do. The company officers wanted to report fully to the SEC. Their Fed overseers told them to take out the disclosure out of their report to the SEC (the facts were ultimately not disclosed until five months later). The Fed, remember, is the government's principal banking regulator. It is supposed to enforce the laws, not tell regulated firms to break them.

Little Timmy, that is a Bozo No-No. Of course he will feign either ignorance or the droll excuse that "this had to be done to save the system". BULLSHIT! This guy is a proven crook, a tax cheat. Any and all that voted to confirm him as Treasury Secretary should be held accountable in the November mid-term elections. If Obama fails to send him packing he deserves to be run out of town on a rail himself. ALL ties to Goldman Sachs and the Treasury Department need to be severed immediately.

The fed's interest rate decison this week is sure to get lost in the headlines as they are certain to maintain there zero interest rate policy. Look for hints that the Fed will continue or increase purchases of mortgage backed securities from Fannie and Freddie. Also be on the lookout for lies pertaining to the Fed's "draining liquidity"...the whole world knows that is impossible if the governemnt wants to keep the illusion of economic recovery in the headlines.

MORE Treasury Debt to swamp bond markets this week? This is always one to keep tabs on particularly this week in light of the Chinese backing away from that table recently, stuffed and on the verge of puking up their overwhelming holdings.

Forth Quarter GDP numbers will most likely come in "strong", at or near +4%. This number is absolute rubish, and is representative of one thing ONLY...government spending. How can a nation with now chronic 10% unemployment [by government estimates] have any growth at all when the consumer represents 70% of that growth and it is CLEAR the consumer is NOT spending money it has, let alone money it doesn't via credit cards. The lie of economic recovery can be substatiated only as long as the people believe it. The people have suspended belief in anything and everything coming out of the mouths of governemnt officials. That should have been made clear by the results of last weeks election in Massachusetts.

"The last time one out of six Americans was out of work was the Great Depression when one out of four was unemployed."
- Charles Biderman

Charles Biderman Bloomberg TV January 19, 2010 [video, must watch]
Charles Biderman, founder and CEO of Trim Tabs Investment Research, discusses the possible role of U.S. government cash in the current stock market rally with Bloomberg's Lori Rothman. He basically says that the markets are rigged, the Fed [through its primary dealers] is pumping the overnight futures market and is the stock buyer of last resort. He says that when it ends, the markets will crash.

This interview paints a pretty clear picture. Who has been buying stocks the past 9 months if all the tradional sources of funds for the equity markets are sitting on the sidelines or selling? You decide.

Marc Faber: White House should let markets work [video, short and SWEET]
The US administration’s interventions in the market will not solve problems and will bring about unintended consequences, Marc Faber, author and publisher of the Gloom, Boom & Doom Report, told CNBC on Friday.

President Barack Obama on Thursday proposed new limits on the size and trading practices of big banks, to prevent excessive risk-taking.

“I don’t have a very high opinion of Mr. Obama,” Faber told CNBC’s Squawk Box Europe. “I was negative of Mr. Bush but I think Mr. Obama makes him look like a genius.”

“Basically I think everybody will agree that in an economic system the market solves problems best.”

1 comment:

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