Tuesday, February 2, 2010

Connect The Dots

Pending Home Sales Rise in December
The number of people preparing to buy a home rose slightly in December, a sign that home sales could be stabilizing heading into the spring home buying season.

The National Association of Realtors said Tuesday its seasonally adjusted index of sales agreements rose 1 percent from November to December to a reading of 96.6. That was a bit lower than the 97.1 level analysts expected, according to Thomson Reuters.

The index has risen for nine out of the past 10 months as buyers work to take advantage of an $8,000 first-time home buyer tax credit.

The credit had been set to expire Nov. 30 before Congress extended it to April 30. Lawmakers also added a $6,500 credit for current homeowners.

The pending home sales index fell 16 percent from October to November, as activity temporarily died down after the first-time buyer credit was extended. The index is up nearly 11 percent from December 2008.

http://finance.yahoo.com/news/Contracts-to-buy-homes-inch-apf-1172613124.html?x=0&sec=topStories&pos=main&asset=&ccode=

How many times have we been told by the financial media this is "a sign that home sales could be stabilizing", yet the bottom continues to grow deeper? This "measure" of pending home sales is obviously greatly affected by the government's first-time home buyer tax credit. What happens when that tax credit disappears? And how many of these home sales are sales of foreclosures?

Main Street frustration: 'Everything is going to banks'
NEW YORK (CNNMoney.com) -- In his State of the Union speech Wednesday night, President Obama touted a slew of federal initiatives aimed at stimulating small business hiring and growth. Again.

Small companies employ around half of America's workers and drive most of the country's job growth. Obama talks frequently in his speeches about the vital role small companies play, and his administration has launched several efforts to bolster struggling Main Street businesses. But most of the president's small business proposals remain in limbo, caught in bureaucratic logjams and the Great Black Hole of Congress.

A year ago, Obama set the stage during his first major economic speech to Congress. "I will not spend a single penny for the purpose of rewarding a single Wall Street executive, but I will do whatever it takes to help the small business that can't pay its workers or the family that has saved and still can't get a mortgage," Obama said in February. "That's what this is about. It's not about helping banks; it's about helping people."

But small business owners across the nation say they feel left out of the stimulus and recovery action.

http://money.cnn.com/2010/01/27/smallbusiness/obama_small_business_proposals/index.htm?postversion=2010012814

Banks pull another $1 billion from small business lending
NEW YORK (CNNMoney.com) -- The nation's biggest banks cut their collective small business lending balance by another $1 billion in November, according to a Treasury report released late Friday. The drop marked the seventh straight month of declines.

The 22 banks that got the most help from the Treasury's bailout programs have cut their small business loan balances $12.5 billion since April, when the Treasury began requiring them to file monthly reports on the tally. The banks' total lending has fallen 4.6% in that seven-month period, to $256.8 billion.

As Wall Street megabanks return to health -- and celebrate with lavish bonuses -- President Obama and his administration have been pushing financiers to help spur a Main Street recovery. Small business owners are still reporting difficulty finding banks willing to extend the credit they need to launch, run and grow their ventures.

http://money.cnn.com/2010/01/18/smallbusiness/small_business_lending_drop/index.htm?postversion=2010011814

Why Main Street isn't hiring
NEW YORK (CNNMoney.com) -- With unemployment at its highest rate in a generation, Washington's policymakers are zooming in this week on a thorny part of the problem: Starved for credit and sales, small companies aren't hiring.

Businesses with fewer than 50 employees cut another 68,000 workers in November, according to a report released Wednesday by payroll processor ADP (ADP, Fortune 500). Small companies have collectively shed 2 million workers over the last 12 months. That's a sizeable chunk of the 5.3 million jobs lost this year, according to ADP's estimates.

The rate of job cuts has slowed, but economists don't anticipate a pickup in hiring any time soon. Small companies -- which employ about half of America's non-government workers and generate the majority of new jobs -- are still reeling from the recession's effects.

Huntington Bank in Columbus, one of the country's most active small business lenders, recently polled 200 Midwestern business owners about their hiring plans. Almost a quarter -- 23% -- said they expect to begin hiring workers again in the second quarter of next year, while 21% said they won't increase their staffing until 2011. Here's the really scary number: 15% don't think they'll ever return to their previous staff levels.

That's a problem drawing attention from top government officials.


http://money.cnn.com/2009/12/02/smallbusiness/small_business_white_house_jobs_forum/index.htm?postversion=2009120317

Connect the dots Mr. President. The banks are getting all the bailouts, the banks are not lending to small businesses, small business are not creating any jobs. It's so simple a caveman could figure it out. The government doesn't create jobs, private businesses do. That's a fact you should have learned in Economics 101. Oh, I'm sorry, you never ran a business before, you were a "community organizer, in a previous occupational capacity. My bad.

Raising taxes on individuals earning over $250,000 is akin to raising taxes on the small business owner. You talk out one side of your mouth about creating tax credits for small businesses that create jobs, but if you then turn around and tax their incomes you take away their incentive to create jobs or even operate a business.

You can't have your cake and eat it too Mr. President. Higher taxes on "the rich" has never lead to economic growth. There is plenty of statistical data to back that up. Data that goes back a couple centuries. This you could have learned in Economics 102, but you were to busy organising your community. Sigh...

Bottom line Mr. President, raising taxes on the rich is NOT going to help you cut the budget deficits. In fact, it will probably result in further loss of tax revenue and exacerbate the deficit problem. You want to cut the deficit? CUT GOVERNMENT SPENDING!

Should Germany bail out Club Med or leave the euro altogether?
By Ambrose Evans-Pritchard
Germany faces a terrible dilemma. Either Europe's paymaster agrees to underwrite a Greek bail-out and drops its vehement opposition to a de facto EU economic government, treasury, and debt union, or the euro will start to unravel, and with it Germany's strategic investment in the post-war order.
http://www.telegraph.co.uk/finance/comment/7119986/Should-Germany-bail-out-Club-Med-or-leave-the-euro-altogether.html

Adrian Douglas comments on this dilemma:

We tend to be very focused on gold and its relation to the US dollar on this side of the pond. The current "strength" in the US dollar as measured by the USDX is really only weakness in the euro as the euro is weighted as 50% of the basket of 6 currencies that define the USDX. The latest article by Ambrose Evans-Pritchard distributed by Chris today highlights what economic chaos is descending on Europe. It is almost impossible to imagine that the high net worth individuals in Europe (and there are a lot of them!) are sitting by and hoping for the best. They are no doubt looking for a life-boat…the ultimate safe-haven. The wealth of Europeans goes back many generations and they are no strangers to gold. Many still have living memory or have first hand stories from grandparents of how owning gold was the only thing that saved them financially through the turmoil of two world wars in a single century.

I suspect as this crisis in euroland starts to accelerate and the breakup of the EU looks a possibility the gold rush on London and in particular the OTC of the LBMA will get into high gear and expose the fractional reserve accounting fraud they have been conducting. I am hearing more and more rumors from some of my sources that there are major problems with gold deliveries. Anyone protecting themselves from a major meltdown of the EU monetary system would be very foolish to accept unallocated gold. This could be the Cartel Waterloo. It could be the run on the bank of the gold cartel. The smartest and smuggest crooks in the world that make up the gold cartel probably never envisaged in all their worst case scenario computer risk models that there could be a crash in the second most widely held currency in the world. To quote Eddie George they may soon be staring into the abyss. This time "Golden Brown" doesn’t have any gold to give away and neither do the other Central Banks.

Perhaps with a good PR campaign they can convince the sheeple to stampede into CDO derivatives, MB securities, or US Treasuries or other such "safe-havens" instead of that highly risky, barbarous relic!

Gold and Silver rose again today as more rumours of physical suppy squeezes on both the CRIMEX and LBMA swirl about the internet. Open interest in the COT appears to signal short covering in both metals today and yesterday.

Gold at its high today of 1118 had retraced 50% of it's plunge from it's false breakout two weeks ago. Silver, ever determined, is still trying to clear the bar at 16.73.

Gold must stay above 1105 for one more day to bring pressure to bear on the shorts in this market. Of course nothing is sacred when you have the CRIMEX goons always on the lookout to paste the markets, but it would appear that even they might be reeling from the delivery demand out of the February contract.

Harvey Organ's - The Daily Gold tells it like this:

GOLD CLOSE TO BACKWARDATION!
COMEX Warehouse Stocks Feb 2, 2010


SILVER

10,093 ozs withdrawn from the dealer's (registered) inventory
2,762 ozs withdrawn from the customer (eligible) inventory
Total dealer inventory 47.38 Mozs
Total customer inventory 64.53 Mozs
Combined Total 111.91 Mozs

GOLD

4,400 ozs deposited in the dealers (registered) category
30,535 ozs withdrawn from the customer (eligible) category
Total dealer inventory 1.61 Mozs
Total customer inventory 8.27 Mozs
Combined Total 9.88 Mozs

There were paltry movements of silver in the COMEX warehouse. The gold movements were small except that there was an "adjustment" of 198,371 ozs of gold that moved from the dealers to the customers. This was most likely due to deliveries. This has brought the dealers down to a fairly low inventory level of just 1.6 Mozs.

There were 607 delivery notices issued in the FEB gold contract. The FEB gold contract total for the month is 2,509 notices or 250,900 ozs. Goldman Sachs issued 7 notices and stopped 0. Deutche Bank issued none and stopped 188. BNS issued 419 and stopped 206 while JPM issued none and stopped 172.

There were 121 delivery notices issued in the FEB silver contract. The total delivery notices for the month in silver stand at 242 or 1.2 Mozs.

There is 0.7 cent of contango in silver FEB/MAR contracts and 3.0 cents contango FEB/MAY contracts. The stunner is that the contango in gold fell again which for FEB/MAR is only $0.1 and $0.6 for FEB/APR. Gold is very close to going into backwardation which is signaling severe stress in the physical market. Razor thin contango is to be expected between the two front month contracts at the end of the month not the beginning. This is very significant.

The number of contracts in gold stopped so far is 251000 oz for the Feb contract.

We have 290,000 oz of Jan options that are still standing for delivery.

We have an additional 4276 contracts left to be served upon or 427600 oz.

Total oz of gold standing 968,600. If you were to add the missing 422,000 you get 1.39 million oz of gold standing on first day notice.However as I pointed out to you 422,000 disappeared and
probably these contracts were paid a premium to settle in cash.

Please note the opening paragraph were there is an "adjustment" of 198,371 oz of gold moving from the dealers inventory to customers. The dealer inventory is now down to an alltime low of 1.6 million oz.

You will recall that I told you that starting this month's delivery process, the total gold inventory for the dealers was at a low 1.8 million oz or 18,000 contracts. It has now moved down to 1.6 million oz with this "adjustment"!

What is even for fascinating is the contango in gold fell again for the Feb to March roll. It is only 10 cents for that trade. For the complete Feb to April roll which is the next delivery month, the contract is only

60 cents. It has never ever been this low. We are heading closer and closer to backwardation as the owners of metal refuse to take a premium and relinquish their spot contract for a futures contract.

Why? because of the risk that they might not get real physical gold. This is very very very significant.

I have been following the physical market for quite some time and I have never seen this develop at all in gold.

My good friend Reg Howe often tells me that if gold were to ever go into backwardation, the whole comex will blow up, and thus fiat currency.

On the silver front, take a look at the deliveries in silver for February. Please remember that silver is a non delivery month. That belongs to March.

Look at the quantity of silver metal standing due to options exercised: 1.2 million oz.

Not only that but there is still 127 contracts or 635000 contracts left to be served upon. Thus the total silver standing for this non delivery month is almost 2 million oz.

The contango in silver is .7 cents (yes, 7/10 of a cent) from Feb to March and 3 cents from Feb to the next big delivery month of May.

Both metals are showing massive shortages due to the low contango.
http://harveyorgan.blogspot.com/2010/02/feb-210-commentary.html

Ed Steer over at Casey Research adds:

It's going to be interesting to see if this rally in both gold and silver has any legs. Both metals were oversold... but not to the extremes I would like to have seen. I'm somewhat concerned that this rally may roll over in the days and weeks ahead. But what I'm really watching is to see if JPMorgan et al are going to short this rally. You must understand, dear reader, that if the bullion banks... specifically the '8 or less' traders... were not there to go short against all longs, there is nobody... not a single trader left in the Commercial category of the Commitment of Traders... that is prepared to go short silver [and gold] at current prices... and the prices would explode instantly. That's why the bullion banks are there... as the shorts of last resort. The moment they withdraw from the market... or begin to cover their short positions... will be an event talked [and written] about for centuries to come.
http://www.caseyresearch.com/displayGsd.php

It may be time to drop a line in the Precious Metals markets again, but keep some powder dry...just in case.


2 comments:

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  2. Good information, always handy if someone reads for one :-) This home buyer index is just like the people who buy into falling stock markets - they get burnt again, and it will be to no avail when the ARM disaster strikes!

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