Wednesday, February 24, 2010

The Joke's On Us

The US Dollar is a joke.

Ben Bernake is a joke.

Barney Frank is a joke.

The US Bond Market is a joke.

Tim Geithner is a joke.

The President of the United States is a joke.

Maxine Waters is an embarrassment to the ENTIRE US House of Representatives...Her questioning of Bumbling Ben today was an ABSOLUTE JOKE.

CNBC is a joke.

Goldman Sachs is a joke.

JP Morgan is a bigger joke.

Fannie Mae and Freddie Mac are a joke.

The CFTC is a joke.


...and the joke's on us.

What should we do? Hang on to our Gold and Silver, and laugh all the way past the bank.

CFTC to examine trading in metals markets
WASHINGTON -- The U.S. Commodity Futures Trading Commission said on Tuesday it will hold a public meeting on March 25 to examine whether position limits are needed for gold, silver, and copper futures markets.

The CFTC, the top regulator for futures markets, has long enforced position limits for grains trading, and is now mulling similar restrictions on the number of contracts speculators can hold for other markets.

The March 25 meeting will look at "the application of speculative position limits to address the burdens of excessive speculation in the precious and base metals markets; how such limits should be structured; how such limits should be set; the aggregation of positions across different markets; and the types of exemptions, if any, that should be permitted," the CFTC said in its official notice.

The meeting will hear from experts from all segments of the markets, the CFTC said. The names will be announced later. The CFTC will also accept public comments until April 30.

CFTC Admits to Suppressing Information that Would Expose Market Manipulators
By Adrian Douglas
Recently while reviewing the Bank Participation Reports (BPR) released each month by the CFTC I noticed that, since November 2009, in silver and in some other commodities the CFTC has stopped listing the number of banks that hold positions.

GATA sent an inquiry to the CFTC as to why this data was now omitted. The following response was received dated February 19, 2010.

"Beginning with the December 2009 BPR, the CFTC began suppressing the trader count in some markets. The change became effective with the Dec 2009 BPR because it was the next available report to be published following the Commission’s November 2009 decision to implement the change. The decision to suppress the trader counts was made as part of an ongoing review of the methodology of the BPR. As part of that review, the Commission determined that where the number of banks in each reporting category is particularly small, fewer than four banks, there exists the potential to extrapolate both the identity of individual banks and the bank’s positions. Under section 8(a) of the Commodity Exchange Act, the Commission, among other things, is generally prohibited from publishing data and information that would separately disclose the business transactions or market positions of any person/entity. Accordingly, in order to protect the confidentiality of market participants’ positions, the Commission determined to suppress the individual category breakdown when that number is less than four."

In March 2009 I wrote an article entitled “Pirates of the COMEX”. In this article I showed how the two largest short positions on the COMEX, which reached an outrageously manipulative extreme of 100% of the Commercial net short position must be held by JPMorgan Chase and HSBC by comparing data from the CFTC with the Bank Derivatives report of the Office of the Comptroller of the Currency (OCC). This article was sent to the CFTC.

The CFTC has been posting the monthly BPR for over 10 years. Under a strict interpretation of the law that prohibits the CFTC from “publishing data and information that would separately disclose the business transactions or market positions of any person/entity” giving the number of contracts held long and short and the number of banks holding the positions does not “separately disclose the business transactions or market positions of any person/entity”. The CFTC claims that the identity of traders and their holding could be “extrapolated”. If “extrapolation” is required then the CFTC has not “disclosed” the information. Extrapolation is, at best, an inference not a disclosure.

The new reporting protocol of the CFTC concerning the BPR is stated on their website as “The BPR includes data for every market where five or more banks hold reportable positions”.

If one looks at the latest
COT report there are plenty of examples of categories where there are only 4 traders holding positions. For example in Random Length Lumber 4 traders hold all the long positions in the swap trader category, and in Platinum 4 traders hold all the spread positions in the managed money category.

So not only has the CFTC gone out of its way to interpret “extrapolation” of data to infer traders’ positions and identities as equivalent to actual “disclosure” but they have not afforded this same level of anonymity to any other trader by eliminating the trader count if it is less than five.

What has made it possible to “extrapolate” and infer that the two biggest shorts of gold and silver on the COMEX are JPMorgan Chase and HSBC is their outrageously manipulative positions in the largely unregulated OTC derivatives market where they are not afforded anonymity because they must report their positions to the OCC who publishes their holdings and names. In the latest report HSBC and JPMorgan hold over 95% of the gold and precious metals derivatives of all US banks with a combined notional value of 109B$.

The latest report of the
OCC's Quarterly Report on Bank Derivatives Activities shows that the total notional value of all types of derivatives held by all US banks is 204 Trillion dollars. They show that just five US banks own 97% of them. They are JPMorgan Chase, Goldman Sachs, Bank of America, Citi, and Wells Fargo with HSBC in 6th place.

If the US government has a budget of 3.8T$ and supposedly governs a 10T$ economy yet five commercial banks control 198 T$ of derivatives who do you think really runs the country?

Good question...

On Monday February 21, 2010:

Demand soft at US 30-yr inflation-linked bond sale
NEW YORK, Feb 22 (Reuters) - The U.S. government's $8 billion auction of 30-year inflation-protected bonds produced mixed results on Monday, which may cast a cloud over the rest of this week's record $126 billion worth of debt offerings.

On Tuesday February 22, 2010:

Strong demand snaps up $44 bln in 2-yr US Treasuries
NEW YORK, Feb 23 (Reuters) - The U.S. government sold $44 billion worth of two-year debt on Tuesday in a well-bid auction that might signal strong demand for the rest of this week's record slate of bond offerings.

On Wednesday February 23, 2010

Soft demand greets $42 bln in 5-yr US Treasuries
NEW YORK, Feb 24 (Reuters) - The U.S. government sold $42 billion worth of five-year debt on Wednesday in a poorly bid auction that showed market fatigue with this week's record slate of bond sales.

Obviously, the further you go out on the US Treasury limb, the faster investors begin to run the other way. The US financial media may try to "spin" the fact, but demand for US Treasury debt IS waning.

Not enough can be said about the TRUE threat the growing US Government debt mountain is to the future of the country.

Falling Debt Dynamite Dominoes, The Coming Financial Catastrophe
By: Andrew_G_Marshall
Understanding the Nature of the Global Economic Crisis - The people have been lulled into a false sense of safety under the rouse of a perceived “economic recovery.” Unfortunately, what the majority of people think does not make it so, especially when the people making the key decisions think and act to the contrary. The sovereign debt crises that have been unfolding in the past couple years and more recently in Greece, are canaries in the coal mine for the rest of Western “civilization.” The crisis threatens to spread to Spain, Portugal and Ireland; like dominoes, one country after another will collapse into a debt and currency crisis, all the way to America.

In October 2008, the mainstream media and politicians of the Western world were warning of an impending depression if actions were not taken to quickly prevent this. The problem was that this crisis had been a long-time coming, and what’s worse, is that the actions governments took did not address any of the core, systemic issues and problems with the global economy; they merely set out to save the banking industry from collapse. To do this, governments around the world implemented massive “stimulus” and “bailout” packages, plunging their countries deeper into debt to save the banks from themselves, while charging it to people of the world.

Then an uproar of stock market speculation followed, as money was pumped into the stocks, but not the real economy. This recovery has been nothing but a complete and utter illusion, and within the next two years, the illusion will likely come to a complete collapse.

You can deal with debt three ways. Either you pay it back, you default or, if you're a government, you can inflate it away.

Over-Arching Sovereign Debt Crisis
By: Jim Willie CB,
Neither the US financial press nor the US bank leaders take the sovereign debt crisis seriously. Even the USCongress seems totally unaware of the growing global intolerance for government debt out of control. The issue is rollover of short-term debt, size of the overall debt burden, borrowing costs to sustain the debt, annual deficits that accumulate further debt, and size of debt versus economic size. The United States projects a certain degree of arrogance that foreigner must continue to finance the USGovt debt at a time when the evidence gathers on loud suspicious activity in the USTreasury auctions. The US travels down a road to debt default also, as the mask of corrupt USTBond management is removed. The plight of Europe will strike the United States and United Kingdom, as contagion is ripe. The claim of containment incites laughter. The Euro currency has finally begun to stabilize, which will make all the more apparent a global bull market in the Gold price. The Gold price in almost every major currency is rising. In the US$ it will be last.

Analysts have noticed the drop-off in Indirect Bids, which means central banks participate less. Analysts have noticed the lack of identification of Direct Bids, which means the USGovt is lying through their teeth as they monetize the debt. Analysts have noticed the new ledger item called Household as bidder, which reeks of accounting fraud in creation of a catch-all category. The USFed and USDept Treasury can no longer hide their enormous monetization of USGovt debt. Some reports mention that bond professionals are extremely anxious about the results of recent USTreasury auction. A huge jump in the Direct bidders took 24% of the auction supply. The apparent lack of transparency behind this group has increased speculation that the USFed could be directly buying its own auctions, so as to prevent both an auction failure and a sudden rise in yields. Safe haven, my foot!

Indirect bidders is widely viewed as the most important category. It defines the success or failure of the auction, since foreign central banks are entered from this category. A 30-year bond auction came in with a pathetic 28% bid as Indirect, far below the 36 to 40% levels seen across year 2009. This is worth watching for establishment of trend before billboard alarms (AMBER ALERT) are made. The Direct bid ratio (in yellow) looks fishy. The USFed & USDept Treasury would use this category to attempt to hide the elephant in the living room, calling it an extra oversized sofa. Failure to identify these mythical bidders will fuel speculation of devious concealment of monetization, far greater than the official Quantitative Easing programs that are heralded as coming to an end in mid-March. The ugliest deception is the usage of the Household category to pretend that Fannie Mae and its fat gang of sewage treatment managers are actually buying USTreasurys. Press networks are oblivious to the con game. See past Hat Trick Letter member reports for details, fully cited and analyzed.

A napkin argument is relevant here. The foreign accumulation of new USTreasury debt is tiny compared to what USTBond debt is issued and auctioned. Nobody seems to be capable of primary school mathematics, once graduation to Wall Street and USGovt service is achieved. If new debt is five times what foreigners are buying, then after factoring the domestic bond fund absence like PIMCO (they hate bonds nowadays), one can quickly conclude that the USFed/Treasury tarnished tagteam are monetizing 60% to 80% of all new debt issuance. Isolation is here, but must be more fully recognized.

Panic at the Fed or Back to Normalcy?
by F. William Engdahl
The decision of the US Federal Reserve to raise its key interest rate was definitely not a sign of confidence in the US economic recovery or a signal that Fed policy is slowly returning to normal as claimed. It was rather a signal of panic over the weakness in US Government bond markets, the heart of the dollar financial system.

Financial markets have reacted with jubilation, by buying dollars and selling Euros, at the decision by the Fed to raise rates for the first time since 2006 for its so-called Discount Rate, going from 0.5% to 0.75%. The Discount Rate is the interest rate charged for banks to borrow from the central bank. At the same time the Fed left its more important short-term Fed Funds rate unchanged and historically low -- between 0.0% and 0.25%. In its official statement the Board of Governors said the rate move was intended to push private banks back into the private inter-bank borrowing market and away from reliance on Federal Reserve subsidized money which had been provided since the financial crisis began in August 2007.

The decision, in plain words, was framed so as to give the impression of a ‘return to business as usual.’ At the same time, financial players like George Soros continue to speak openly about the fundamental weakness of the Euro. This has the effect of taking speculative pressure away from fundamentally worse economic and financial fundamentals within the dollar zone at the expense of the Euro. The reality is that the dollar world is anything but returning to ‘normal.’

The Sovereign Debt Disaster
By Egon von Greyerz
It took almost 200 years for US Federal debt to reach $1 trillion, which it did in 1981. In 2009 the debt increased by $1.9 trillion in just that year to $12.4 trillion. In the next ten years the US debt is forecast to reach $25 trillion. And this doubling of the debt does not include any funds to continue propping up a bankrupt financial system. The forecast also assumes optimistic growth in GDP, which is extremely unlikely. Currently, US Federal debt is six times what it collects in tax revenue every year. With debt exploding and tax revenues collapsing, there is no chance that the debt can ever be repaid with normal money. Also, with debt out of control, interest rates will rise substantially to 10-20% per annum. Applying a 15% interest rate to a $25 trillion debt would give an annual interest bill of $3.75 trillion, which is the same size as this year’s ENTIRE budget.

New home sales hit record low in January
WASHINGTON (AP) -- Sales of new homes plunged to a record low in January, underscoring the formidable challenges facing the housing industry as it tries to recover from the worst slump in decades.

The Commerce Department reported Wednesday that new home sales dropped 11.2 percent last month to a seasonally adjusted annual sales pace of 309,000 units, the lowest level on records going back nearly a half century. The big drop was a surprise to economists who had expected sales would rise about 5 percent over December's pace.

What continues to amuse me to no that every day the economic news is reported as bad, the media reports it as an "unexpected drop" or a "surprise drop". "Economists expected..." LOOOOOL, economists are as lame as weathermen... Did any of these "economists" see this catastrophe coming in the first place? A small few did, and they were all laughed at. As long as "hope remains"...there will be no bottom. The bottom comes when ALL hope is lost.

What also continues to amuse me is Bumbling Ben's continued insistance that "the Fed will keep interest rates low for an extended period". Why do I get the feeling that the bond "market" is going to soon make a liar out of the hopeful Fed Chairman, and raise interest rates for him...

A final note this evening:

The CRIMEX Silver goons may soon be facing a serious conundrum. The dealer inventory at the CRIMEX is now at at record low 46.38 million oz. This is the amount of Silver at the CRIMEX available to meet the delivery demands of futures contract holders. Approximately 9000 contracts of Silver standing for delivery on first notice day tomorrow would eliminate this entire inventory. Can you say default?

Going into the first notice day of the March contract tomorrow there are 22,545 contracts outstanding in MAR silver. If that level persists and asks for delivery the cartel is in serious trouble. VERY serious trouble...

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