Wednesday, October 27, 2010

Nice breakout! ...NOT! Apparently the CRIMEX goons were none to amused by CFTC Commissioner Bart Chilton calling them on the carpet yesterday. Thousands of ounces of Gold and Silver that do not exist were sold today in New York to halt the resumption of the Mother Of All Short Squeezes in the Precious Metals Markets. Nothing shocking...

Patience grasshopper, the bear trap is being set. The best part about it is the bears are setting their own trap.

The question of will the Fed begin buying treasury debt after the election, or won't they, has been the catalyst for last weeks and this weeks market volatility. Again, nothing shocking...

The Fed has no choice but to begin a process of Quantitative Easing in one last ditch effort to "save the economy". Unfortunately, they only sow the seeds of it's destruction. Efforts to date, mostly covert, to pump money into the system have done little to "rescue the economy". And despite government claims to the contrary, inflation is raging behind the phony statistics the government uses to track it.

Chart of the Week: Inflation in the Real World
As is often the case, there is a big difference between what the government statistics are reporting and what’s going on in the real world. According to the most recent inflation reading published by the Bureau of Labor Statistics (BLS), consumer prices grew at an annual rate of just 1.1% in August.

The government has an incentive to distort CPI numbers, for reasons such as keeping the cost-of-living adjustment for Social Security payments low. While there’s no question that you may be able to get a good deal on a new car or a flat-screen TV today, how often are you really buying these things? When you look at the real costs of everyday life, prices have risen sharply over the last year. For simplicity’s sake, consider the cash market prices on some basic commodities.

On average, our basic food costs have increased by an incredible 48% over the last year (measured by wheat, corn, oats, and canola prices). From the price at the pump to heating your stove, energy costs are up 23% on average (heating oil, gasoline, natural gas). A little protein at dinner is now 39% higher (beef and pork), and your morning cup of coffee with a little sugar has risen by 36% since last October.

You probably aren’t buying new linens or shopping for copper piping at the hardware store every day, but I included these items to show the inflationary pressures on some other basic materials that will likely affect consumer prices down the road.

The jump in gold and silver prices illustrates that it’s not just supply and demand issues driving the precious metals higher – the decline in purchasing power of the dollar is also showing up in the price of physical goods. It is because stashing wheat and cotton in the garage is an impractical way to protect purchasing power that investors are increasingly looking to protect themselves with the monetary metals – a trend that is now very much in motion.

It is highly unlikely that by debasing the Dollar, the US Federal Reserve is going to save the economy. A loss of confidence in the Dollar will most likely lead to a hyperinflationary Depression, and the complete destruction of the economy as we have known it.

Jim Sinclair summarizes this whirlwind of Precious Metals volatility this way:

This is the entire story. All else is meaningless chatter.

The world of traders is locked onto November 3rd as if it was the Super Bowl of markets. It is simply more madness of the crowd as they count the minutes before “he does,” “he does a little,” or “he does nothing” on that date.

The following is the entire story, and may well be the only story until November 3rd.

Dear CIGAs,

Right now an exhausted group of manic speculators in all markets are tied to the question of "Will he or will he not QE on November 3rd."

The recent small upticks in international economic statistics is not a sign of economies turning strong for GB or the US. They are the normal play of government statistics.

Britain is not on the threshold of a turn towards the better. In fact it is the absolute opposite that GB will experience in the next 12 months.

Regardless of what comes on November 3rd, the only choice the Fed has is QE to infinity. This won’t be because it is good, but because all else is not.

November 3rd is only relevant date to the mad short term gambleholics. QE to infinity is what is coming and November 3rd is meaningless to that. Whether it comes November 3rd, December 3rd, January 3rd or any other date, QE to infinity is coming.

All the new converts to austerity in the Western World are going to do a 180 degree turn as their economies crater and their populations swear to vote every politician out of office no matter what party they are.

QE is coming, of that have no doubt. The markets fully expect it now, in fact they demand it. A failure to deliver as "promised" and the Fed only digs the hole they must fill with funny money that much deeper. Consider the recently unveiled "Forclosuregate Crisis". There is not a bank on the planet, including the Fed, that can make this fraud disappear. Is the Fed going to print SIX TRILLION DOLLARS to paper over this fraud along with the two to four trillion it needs to print to "jump start the economy" by buying the US Treasury's debt?


“The Wall Street Journal reported on Wednesday the Fed was likely next week to unveil a programme of Treasury bond purchases worth a few hundred billion dollars over several months, a "measured approach" which would contrast with purchases of nearly $2 trillion during the global financial crisis.

Expectations vary as to how much the Fed could announce in asset buying when it meets on Nov. 2-3, although investors' base-case scenario has been for an initial commitment to buy at least $500 billion over five months.

"There is a lot of speculation ranging from 100 billion per month for several months to at the most $2 trillion, so a few hundred billion is in the range," said Akihiro Nishida, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.”

The Six Trillion Dollar Problem
By Greg Hunter’s
When I was an investigative reporter at the networks, the first question we would ask when trying to decide if we wanted to do a story was: How many? How many people have been hurt by a defective product? How many defective products of a certain kind were in use? How many dollars will it take to fix the problem? In the case of the recent mortgage crisis – “Foreclosuregate,” the question of how many has been answered.It has been widely reported that there are a little more than 60 million home mortgages in the Mortgage Electronic Registry System (MERS). If every one of the 60 million mortgages are worth $100,000, that would mean a total of at least $6 trillion in home mortgages that are electronically filed. In MERS, there is no physical written record of a “Promissory Note.” In almost all states, you need that original “Note” to prove ownership of a home. That means in almost every single state, the banks cannot legally foreclose on your home without this document. Some say the loan documents were lost on purpose because the bankers did not want their massive fraud to see the light of day. Whether or not the “Notes” were lost on purpose or accident, the fact is the original “Notes” are nowhere to be found. That is what the “Robo Signing” part of the story is all about. It has been widely reported that “foreclosure mills” were creating massive amounts of counterfeit Promissory Notes so banks could legally foreclose on homeowners.

In the post I did earlier this week called “The Perfect No-Prosecution Crime,” I laid out several layers of fraud and white collar crime of mortgage and foreclosure fraud. The lack of the Promissory Note is the biggest of all the problems in this chain of chicanery. Here’s why. A Promissory Note is a financial instrument. It is in the same family as a Federal Reserve Note. For example, if you copied a $100 bill and then tried to spend that copy in a store, because you lost the original, is it still money?–Of course not. You need the original financial instrument (in this case, $100 Federal Reserve Note) to make a legal transaction in a store. The same is true for a Promissory Note. You need the original Promissory Note to legally complete a foreclosure. A counterfeit, or copy, of a Promissory Note is not a financial instrument, just like a counterfeit or copy of a $100 bill is not a financial instrument!

Can you see how big this problem really is for the banks? This is $6 trillion in real estate that fat cat bankers cannot legally prove they own. Likewise, that means trillions of mortgage-backed securities HAVE NO BACKING. I think this is the biggest financial fraud in history. This was not an accident made by someone pressing the wrong button or a few documents that weren’t handled properly, but fraud on a massive scale that took years and tens of thousands of people to pull off.

Be right and sit tight! If you are "in" the Gold and Silver market, rest easy. If you are a trader, why are you short this market? Do you have a death wish? Gold and Silver are on sale, stock up while the crooks are giving the REAL money away.

CFTC’s Chilton Probably Not Why Silver Strong[MUST READ]
By: Gene Arensberg
The idea that silver is now rising merely because of increased scrutiny by regulators on the short sellers is neither comforting, nor appealing, but we sincerely doubt that is solely the reason that silver has found a bid of late.

We are of the firm opinion that silver is not rising merely because of regulator’s newly found desire to promote “fair” futures markets. Indeed we believe that if there is any influence from the CFTC investigation into the silver futures markets, or increased scrutiny, or whatever, that influence is at best minimal, and more likely coincident to what is happening in the much larger and much less regulated physical markets.

To be sure we lament the unfair advantage in the futures markets that the traders the CFTC grants “bona fide hedger” status to (thus allowing a few elite traders access to larger positioning than their long-side opponents). And, it doesn’t take ownership of a tin-foil hat to have noticed multiple bone-crunching sell raids by those “usual suspects” in the past. All long-time traders are certainly aware of them. All long-timers have learned to survive them using one or another money management method (stops, options, nimble trading, etc.).

However, as we have said so many times in the past, one can manipulate the price of something temporarily for short periods of time given enough firepower and given the “right” execution of the trading, but nothing and no one can manipulate the global market price of something – no one, not bullion banks, nor even central banks can argue with the supply/demand/liquidity equilibrium of a global market for any length of time and certainly not indefinitely.

Our view: We believe there is a tectonic shift underway for silver. A shift of historic and generational proportions that is only just now starting to surface in a material way. We believe that global public demand for precious silver is once again returning the metal to its historic role as money – alongside its rarer cousin gold. We believe that the recent absence of concerted short selling is more likely a logical market reaction by hedgers and short sellers to the reality of much higher demand and the realization that existing and available supplies may not be sufficient to satisfy that burgeoning demand at current pricing.

If our view is correct, then it really doesn’t matter if the CFTC or any other regulator is looking harder at the positioning of futures traders. If our view is correct, then the market price of silver will find its own supply/demand/liquidity equilibrium whether or not hedgers and short sellers sell a few hundred million more ounces of the stuff in paper contracts in New York.

So much for that G-20 pledge for free currency markets
TOKYO -- Japan's government renewed its efforts to talk down the yen Tuesday, with both the finance minister and the economy minister weighing in to express discomfort with the soaring currency a day after it climbed to a new 15-year high against the dollar.

"I think the moves yesterday were a bit one-sided," said Finance Minister Yoshihiko Noda at regular press conference. "I will continue to closely monitor these moves with great interest."

The comments were Noda's strongest since finance ministers and central bankers of the Group of 20 advanced and developing nations met over the weekend in South Korea. Many market participants interpreted the G-20 agreement to avoid competitive devaluation of their currencies as a green light to sell the safe-haven dollar for riskier currencies. The dollar fell to Y80.41 Monday, a 15-year low.

Noda's stepped-up rhetoric was the latest reminder of how concerned the government is about the doggedly strong yen, which undermines the export-led economy by making Japanese products less competitive overseas and diminishing revenues sent back to Japan.

Echoing comments he made over the weekend, Noda again tried to steer market attention toward a separate part of the G-20 communique, in which officials agreed that advanced economies "will be vigilant" against excessive and disorderly currency market moves.

"'Vigilant' means not just recognition of the negative impact excessive foreign exchange moves have on economic and financial stability, but also that the countries with major currencies -- in particular the dollar, euro, and yen -- monitor market moves and cooperate appropriately," Noda said.

While acknowledging that any "announcement effect" from this part of the agreement was limited, Noda said he hoped there would eventually be an impact.

But the yen's continued strength early Monday pointed to the difficulty of verbally taming the currency's rise. The dollar fell to Y80.66 after Noda's comments, near the 15-year low.

When all else fails, talk, talk talk. Where I come from we call that bullsh!t.

CFTC Is Urged to Act in Silver Probe - WSJ [MUST READ]

Today's afternoon headlines:

Bond investors are now fighting the Fed- CNNMoney
Gross, Grantham blast Fed's asset buying- Reuters
Gold prices extend losses on QE caution- TheStreet
Dollar climbs amid questions about Fed program- AP
Treasury: Foreclosure woes not systemic threat- Reuters

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