Monday, April 12, 2010

Mr. Obvious Comments On The Gold Markets

Reporting from the CRIMEX this afternoon, covering the fraud of the day, we turn to Mr. Obvious.

"The fraud in these Precious Metals Markets is as clear as the nose on your face," exclaimed Mr. Obvious today.

When asked why the Precious Metals Markets fell apart at the close of the markets today, Mr. Obvious replied, "Well it's pretty obvious isn't it?"

Asked to elaborate, Mr. Obvious was simply honest in his reply. "How can the DOW clear 11,000 if Gold is rising?"

And there you have it from the straight shooter himself, Mr. Obvious.

So the DOW is struggling to break 11,000 even as the Dollar is shuddering under the weight of a colossal Greek Debt bailout. Gold has been hanging tough all day despite every effort by the CRIMEX goons to sit on it. So they go to the old playbook, and call up the Tank The Gold Market After The Market Closes Play. Brilliant! Nobody will suspect a thing. Nobody except Mr. Obvious.

The Dollar began the week in a free fall following news of the latest Greek Bailout Plan. This plan actually appeared to be real, and substantial. The Euro roared to life on the news and the Dollar took a long walk off a short pier. But miraculously, at exactly 1AM est as the Dollar clung to the cliff's edge just 7 pips above 80, the Dollar bounced and began to claw it's way back from the abyss.

Gold appeared uninterested in the Dollar's 1AM bounce, and admirably held its ground until the CRIMEX open at 8:20AM est came around. The goons took a shot at Gold right off the open. Gold dropped only to pop right back up to where it had been as the Dollar hung on the cliff's edge. The goons were losing control of the Gold price as the markets neared the New York Precious Metals close at 1:30PM est.

At exactly 1:00PM est, the CRIMEX goons pulled their bids and whoosh, there went the price of Gold as the CRIMEX closed it's doors for the day. Gold took a $10 haircut between 1PM and 3:30PM est. Not a single ounce of bullion Gold was sold, yet the price dropped $10 an ounce.

Now of course, $10 an ounce is chump change. And it is certain to entice the dip buyers to look for opportunities to add to their positions, but it is the way the market was blatantly attacked by criminals in full view of the public AND the market regulators that should have participants in these markets seething with rage.

Obviously this was done to make sure the DOW closed above 11,000 today, for whatever that is worth. We sent out a veiled warning last evening to be wary of a corned Rat Bastid, and we were right to do so.

1157 posed early support as we had suggested and offered a nice floor an bounce for Gold after the goons attacked the market as the CRIMEX opened today. What clearly shocked and alarmed the goons was Gold's quick resiliency this morning. This is why the goons had to go the "obvious" route as the CRIMEX markets closed to bring in the price of Gold and foster a rebound in the wheezing DOW for a close 5 points over 11,000. "Epically pathetic," noted Mr. Obvious as he shut down his trade station for the day.

By successfully pushing Gold below 1157, the goons have opened the door for a retest of the breakout at 1134. It is imperative that the Gold Bulls successfully defend this line of support.

Silver has reached the upper level of it's support zone between 18.15 and 17.90. Solid support lies at 17.60, but we would much prefer not to see that support tested here.

On the face of it, this "new" Greek bailout would appear to be Bullish for the Euro. However we must consider what the term "bailout" signifies when $45 BILLION is attached to it. That kind of bailout spending is hardly supportive of any currency. Look for Gold to stay well bid in spite of all the nefarious efforts of the CRIMEX fraudsters and their impudent regulators.

Big Banks Mask Risk Levels
Major banks have masked their risk levels in the past five quarters by temporarily lowering their debt just before reporting it to the public, according to data from the Federal Reserve Bank of New York.

A group of 18 banks—which includes Goldman Sachs Group Inc., Morgan Stanley, J.P. Morgan Chase & Co., Bank of America Corp. and Citigroup Inc.—understated the debt levels used to fund securities trades by lowering them an average of 42% at the end of each of the past five quarterly periods, the data show. The banks, which publicly release debt data each quarter, then boosted the debt levels in the middle of successive quarters.

Excessive borrowing by banks was one of the major causes of the financial crisis, leading to catastrophic bank runs in 2008 at firms including Bear Stearns Cos. and Lehman Brothers. Since then, banks have become more sensitive about showing high levels of debt and risk, worried that their stocks and credit ratings could be punished.

That practice, while legal, can give investors a skewed impression of the level of risk that financial firms are taking the vast majority of the time.

"You want your leverage to look better at quarter-end than it actually was during the quarter, to suggest that you're taking less risk," says William Tanona, a former Goldman analyst who now heads U.S. financials research at Collins Stewart, a U.K. investment bank.

Though some banks privately confirm that they temporarily reduce their borrowings at quarter's end, representatives at Goldman, Morgan Stanley, J.P. Morgan and Citigroup declined to comment specifically on the New York Fed data. Some noted that their firm's financial filings include language saying borrowing levels can fluctuate during the quarter.

"The efforts to manage the size of our balance sheet are appropriate and our policies are consistent with all applicable accounting and legal requirements," a Bank of America spokesman said.

An official at the Federal Reserve Board noted that the Fed continuously monitors asset levels at the large bank-holding companies, but the financing activities captured in the New York Fed's data fall under the purview of the Securities and Exchange Commission, which regulates brokerage firms. The New York Fed declined to comment.

The data highlight the banks' levels of short-term financing in the repurchase, or "repo," market. Financial firms use cash from the loans to buy securities, then use the purchased securities as collateral for other loans, and buy more securities. The loans boost the firms' trading power, or "leverage," allowing them to make big trades without putting up big money. This amplifies gains—and losses, which were disastrous in 2008.

According to the data, the banks' outstanding net repo borrowings at the end of each of the past five quarters were on average 42% below their peak in net borrowings in the same quarters. Though the repo market represents just a slice of banks' overall activities, it provides a window into the risks that financial institutions take to trade.

The SEC now is seeking detailed information from nearly two dozen large financial firms about repos, signaling that the agency is looking for accounting techniques that could hide a firm's risk-taking. The SEC's inquiry follows recent disclosures that Lehman used repos to mask some $50 billion in debt before it collapsed in 2008.

The banks will all claim that this is "legal" accounting, but it is far from honest. It's bad enough that the FASB allows banks to makr their assets to make-believe instead of to market, but to routinely cook your books to present an illusion of solvency? When the eye of this financial storm passes, the banking catastrophe that will move onshore will be swift and merciless.

Budget Deficit in U.S. Narrowed to $65.4 Billion
April 12 (Bloomberg) -- The U.S. posted a budget deficit for a record 18th straight month in March, reflecting gains in government spending to bolster the economy.

The excess of spending over revenue declined to $65.4 billion last month, compared with a shortfall of $191.6 billion in March 2009, according to Treasury Department figures released today in Washington. The year-over-year narrowing reflected a decline in outlays for the Troubled Asset Relief Program to shore up financial firms.

A deficit that’s forecast to reach a record $1.6 trillion this fiscal year illustrates the challenges facing President Barack Obama and Congress as they struggle to spur the recovery while keeping the budget gap manageable. Deterioration in the government’s balance sheet in coming years raises the risk of higher interest rates.

“We can’t keep this up,” said David Wyss, chief economist at Standard & Poor’s in New York. “We’re getting more revenue, but we’re still spending. That’s the problem. You’ve got to start paying your way.”

The non-partisan Congressional Budget Office, in a report issued April 8, projected a March deficit of $62 billion, reflecting differences in costs associated with TARP compared with the same time last year during the worst of the financial crisis.

The U.S. can’t ignore the effect of the growing federal deficit on Treasury yields and the outlook of investors, Federal Reserve Bank of Dallas President Richard Fisher said in a speech March 30.

“Even under the most optimistic of scenarios, large deficits will be run for as far as the eye can see,” Fisher said in Tucson, Arizona. “The markets, fearing the consequences of runaway deficit financing, have bid up longer-term nominal rates, resulting in a yield curve that is now historically steep.”

A very misleading headline. The budget deficit in March came in worse than expected. Yet it was sold as an improvement in the headline. The savings that was responsible for the "narrowing" was a result of accounting gimmickry by the government itself. Subtract money that was spent, but paid back, and add as income. And we wonder why the banks books are so filled with fantasy. Bottom line? The US Government posted its 18th straight monthly budget deficit in March

Sovereign debt crisis at 'boiling point', warns Bank for International Settlements
By Ambrose Evans-Pritchard, International Business Editor
"The aftermath of the financial crisis is poised to bring a simmering fiscal problem in industrial economies to the boiling point", said the Swiss-based bank for central bankers -- the oldest and most venerable of the world's financial watchdogs. Drastic austerity measures will be needed to head off a compound interest spiral, if it is not already too late for some.

The risk is an "abrupt rise in government bond yields" as investors choke on a surfeit of public debt. "Bond traders are notoriously short-sighted, assuming they can get out before the storm hits: their time horizons are days or weeks, not years or decade. We take a longer and less benign view of current developments," said the study, entitled "The Future of Public Debt", by the bank's chief economist Stephen Cecchetti.

"The question is when markets will start putting pressure on governments, not if. When will investors start demanding a much higher compensation for holding increasingly large amounts of public debt? In some countries, unstable debt dynamics -- in which higher debt levels lead to higher interest rates, which then lead to even higher debt levels -- are already clearly on the horizon."

Official debt figures in the West are "very misleading" since they fail to take in account the contingent liabilities and pension debts that have mushroomed over recent years. "Rapidly ageing populations present a number of countries with the prospect of enormous future costs that are not wholly recognised in current budget projections. The size of these future obligations is anybody's guess," said the report. The BIS lamented the lack of any systematic data on the scale of unfunded IOUs that care-free politicians have handed out like confetti.

Official debt figures in the West are "very misleading"... Yes they are! It would appear that honest accounting for banks and countries no longer exists. Both banks and countries seem content to continue whistling past the graveyard as the eye of the financial storm gives a false sense of conquest to the crime sydicates that have lead the World towards financial ruin. The Day Of Reckoning is still out there, and it's trigger will be pulled by rising interest rates. Not "if" interest rates begin to rise, but "when".

Treasury Burns Through $82 Billion Cash In April, Down To Just $9 Billion; Adds $53 Billion In Debt In Same Period
Submitted by Tyler Durden on 04/12/2010
In some parallel universe, the Congressional Budget Office is boasting about how its revenues were only x billion less than outlays. We have not seen these numbers, nor do we care: we always and only look at the cash. And so far in April, things are getting scary (almost as scary as March's $333 billion in net debt issuance): The Treasury just reported that its Federal Reserve Account is down to just $9 billion, after starting the month at $91.5 billion, and the year at $108.3 billion: Tim Geithner has burned over $80 billion in cash in just one week, financing aside. This has occurred even as the Treasury has so far recognized about $53 billion in net settled debt, all of its Bills, for net funding deficit of about $145 billion. As we know that almost a hundred billion in Coupons have been issued and pending settlement, as well as another $100 billion + in Bills will settle after this week, we adjust our estimate of net cash burn and believe that total outlays as funded by cash (not much left) on hand and new issuance will hit $300 billion. This delta is also a function of various Trust programs which are now in net need of funding, courtesy of yet another Ponzi scheme created by the great John Maynard Keynes.

The big banks and the US Government are insolvent. The only question left to answer is: When will they admit it?

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