U.S. Retail Sales Rise Above Forecast as Consumers Recover
By Shobhana Chandra and Bob Willis
Sales at U.S. retailers rose more than forecast in November as holiday shopping got under way, a sign consumers will play a bigger role in the recovery.
Purchases increased 0.8 percent, following a 1.7 percent gain in October that was larger than previously estimated, Commerce Department figures showed today in Washington. The median forecast of economists surveyed by Bloomberg News called for a 0.6 percent rise. Excluding autos, gasoline and building materials, which are the figures used to calculate gross domestic product, sales climbed 0.9 percent, the most since August.
A report from the Labor Department showed wholesale costs rose in November by the most in eight months, led by higher prices for gasoline, heating oil and fruit. The producer price index increased 0.8 percent from the prior month after a 0.4 percent rise. Excluding more volatile food and energy costs, the so-called core measure posted the smallest year-over-year gain in five months.
“Consumers are on fire relative to expectations in the last three months,” said Brian Jones, an economist at Societe Generale in New York. The “revisions are equally important. Typically, when the revisions start moving in one direction, it’s a clear sign of a pickup or a turning point.”
Only Bloomberg, the masters of financial media goat tripe, could spin up a story about retail sales that is more misleading. Once again it is necessary for me to point out that "retail sales" are a measure of sales "receipts", and NOT a measure of goods sold. Gasoline sales were the largest contributor with a 4.0% gain. Excluding gasoline, total retail sales rose by a modest 0.5%. If prices are rising [I know, the government says they are not...but WE ALL KNOW they are] then sales receipt totals will rise also.
Retail sales are only rising in the world of make believe, as higher prices are ignored by the financial news media. But then, who in the world today uses energy products or eats? And are these retail sales representative of actual "spending", or an increase in consumer debt?
U.S. Oct. consumer credit up $3.4 bln
Dec. 7, 2010
By Greg Robb
WASHINGTON (MarketWatch) -U.S. consumers increased their debt in October by the largest amount since July 2008, the Federal Reserve reported Tuesday. Total seasonally adjusted consumer debt increased $3.4 billion, or a 1.7% annualized rate, in October to $2.4 trillion. Economists had expected a decrease. September consumer credit was revised down to a 0.6% increase compared with the initial estimate of a 1.1% rise. The increase in October was led by non-revolving credit, such as auto loans, personal loans and student loans, which rose $9.0 billion or 6.8%. Revolving debt decreased $5.64 billion or 8.4%. This is the twenty-sixth straight monthly drop in credit card debt.
The Treasury market senses the "inflationary" impact of these retail sales numbers, and are selling off this morning raising yields to the horror of the Fed. The Fed by the way meets today to further discuss their plans to print money [despite what Bumbling Ben claims to the contrary] to buy Treasuries in an effort to keep interest rates low. It is imperative they keep interest rates low, not to help the consumer borrow more money [as Bumbling Ben claims], but to keep JP Morgan's interest rate swaps game from blowing them [and the Fed] off the face of the map. And lower interest rates makes it cheaper for the Treasury to continue borrowing money.
Gold and Silver were up strongly over night, only to be shot down by the "misrepresented" retail sales numbers. These numbers sent the bond market lower, and the trigger happy black box players were once again duped into selling their Precious Metals into fundamentally sound gains recognized overseas. The CRIMEX is as active as ever in stonewalling the rise in Precious Metals. Of course we should again note that there is a Fed Meeting today, and the Fed can't have rising Precious Metals prices ahead of their proclamation on monetary policy.
I wouldn't be surprised if the Fed not only reiterated their intention to buy Treasuries, but somehow find a way to sneak between the lines that they will spend whatever it takes to keep interest rates low. It is imperative that they keep interest rates low not so much for the economy, buy very much so for their, and JP Morgan's survival.
Fed expected to dampen rate rise expectations
By Kirsten Donovan
(Reuters) - Dollar Libor rates were steady on Tuesday as Federal Reserve officials met to assess their controversial bond buying program against a backdrop of fresh tax cuts that could lift U.S. economic growth.
The central bank is not expected to signal any shift away from its intention to buy $600 billion in government debt but markets are already bringing forward expectations of when the Fed may start to raise interest rates.
Eurodollar futures fell to three-month lows this week and two-year Treasury yields are at their highest level in five months.
"We think the increase in Fed hike expectations is overdone, the market has priced in a possibility of hikes as early as the second half of 2011," Barclays Capital strategists said.
"The FOMC is likely to reiterate its message of extremely easy policy ... and that could be a catalyst for reversal of some of the recent outsized moves."
The Silver Lining[MUST READ!!]
By: Eric Sprott & David Franklin
Given its seemingly evident market imbalances, you might wonder why silver hasn’t performed better over the last year. The answer, we believe, lies in the way silver is priced. The silver spot price is dictated by paper contracts that trade on the COMEX exchange in New York. Paper contracts can be purchased "long" or sold "short". If more participants sell "short" than purchase "long", the paper market price for silver will decline. Often these contracts have little to no relationship with actual physical silver, and yet they are the most influential contract in determining silver’s physical spot price. Go figure.
In studying the silver market we owe a great debt to the work of silver analyst, Ted Butler. Mr. Butler has been writing about the silver market for fifteen years and has done much to inform investors about the reality of silver’s physical fundamentals. Butler provides some insight into the "short" positions that exist in silver today, highlighting the fact that the eight largest silver traders currently hold a net short position of over 66,000 contracts, representing more than 330 million ounces of silver.11 This means that the eight largest COMEX traders are net short the equivalent of 48.5% of the world’s total annual silver mine production of 680.9 million ounces. None of these traders are in the silver business by the way – they’re all financial institutions. In addition, the COMEX silver short position held by the eight largest traders on May 3, 2010, represented 33% of total world silver bullion inventory, estimated by Butler to be approximately one billion ounces. There is no real comparison with gold, as the 24.5 million ounce concentrated net short position held by the eight largest traders represents a mere 1.2% of the 2 billion+ ounces of world gold bullion inventory as reported by the World Gold Council.12 So in comparison to total world bullion inventories, the concentrated short position in silver is 27 times larger than that for gold. In every comparison possible, the short position in COMEX silver contracts is off the charts, and if you think the short positions sound potentially disruptive, you’re not alone. In September 2008 the CFTC confirmed that its Division of Enforcement has been investigating complaints of misconduct in the silver market. This investigation is ongoing and we look forward to its resolution.13
Because we believe the demand for precious metals will continue to increase in this environment, we’re always interested to know the total supply available in today’s physical bullion market. According to the best estimates from the USGS and current mining statistics, approximately 46 billion ounces of silver have been mined since the dawn of civilization.14 In comparison, approximately 5 billion ounces of gold have been mined throughout history.15 Reading this, a casual observer might conclude that gold is currently justified in being worth more than silver based on its relative scarcity. But the current price discrepancy ($1,250/oz gold vs $19/oz silver) is misleading.
As mentioned above, there are only 1 billion ounces of silver left above ground in bullion form today. That is a surprisingly small number in relation to the 46 billion ounces mined throughout history. The reason is due to silver’s consumption in manufacturing. Just like other industrial minerals, silver has been consumed in various processes over the course of history. Silver’s superiority in heat transfer, conductivity and light reflectivity make it unique, and it boasts anti-microbial properties that make it ideal for surgical instruments, clothing materials and certain medical applications. The key point to remember with all these applications is that once the silver is consumed it is typically never recycled. Many of its industrial applications require such small amounts in each surgical tool, electronic device or clothing item that it isn’t economic to recover from garbage dumps. For comparison, there are currently approximately two billion ounces of gold above ground in bullion form compared with the 5 billion ounces of gold mined throughout history.16 So despite being more heavily mined over time, silver bullion is now the more scarce "precious" metal than gold bullion is from an investment supply perspective.
This is where the silver story gets interesting for us. At today’s prices you have $19 billion dollars of silver ($19 x 1 billion ounces) and $2.5 trillion dollars of gold ($1250 x 2 billion ounces) above ground in bullion form. The size of the investment market for gold is therefore 131 times larger than that for silver. And yet, on a market relative dollar basis, investors are actually buying more silver than they are gold today. At today’s metals prices, in dollar terms, the US mint has sold approximately three times more value in gold than in silver thus far in 2010 coin sales. But there should be 131 times more gold sold than silver for the market to stay in balance. None of the largest gold and silver investment vehicles reflect the 131:1 ratio, suggesting that investors have a disproportionately large interest in owning physical silver.
For example, the largest gold ETF today, the SPDR Gold Trust ("GLD"), is currently ten times the dollar value of the largest silver ETF, the iShares Silver Trust (SLV). Since the SLV began trading in April 2006, the GLD has increased by $8 for every $1 increase in SLV’s NAV. Again, given the choice, investors are voting with their dollars and putting disproportionately more dollars into silver than gold from a relative market size perspective. It appears that no investors are anywhere close to buying 131 times more gold than silver, which market metrics would suggest if the demand for gold and silver were relatively equal – all of which brings us to silver’s ‘supply conundrum’: If on the supply side, as Ted Butler calculates, there are only one billion ounces of silver left in bullion form available for investment; and if, on the demand side, we were able to identify the holders of 500 million ounces spread across a mere seven investors - it implies that there is only 500 million ounces of silver left for everyone else to invest in! As large holders of silver bullion ourselves, we can tell you that 500 million ounces is not that much from a global perspective, and certainly won’t be enough to satiate the world’s investment demand for silver going forward. Also let us not forget the large silver short position on the COMEX that will almost undoubtedly require the purchase of 330 million ounces of silver to eventually cover. Assuming that happens, most of the silver available for investment will essentially already have been spoken for.
It also serves to mention that there will be no government silver stocks capable of covering this impending supply shortfall. According to the latest audit, the US treasury currently has 7,075,171 oz of silver in storage, which is about enough to handle two months of silver eagle coin production. If the COMEX silver short sellers are ever forced to cover, they won’t be able to lean on the government for a physical bailout.
JPMorgan cuts back on US silver futures
By Jack Farchy in London and Gregory Meyer
JPMorgan has quietly reduced a large position in the US silver futures market which had been at the centre of a controversy about its impact on global prices for the precious metal.
The decision by JPMorgan was an attempt to deflect public criticism of the bank’s dealings in silver, a person familiar with the matter said. The person added that the bank’s position in silver would from now on be “materially smaller” than in the past.
A group of small precious metals investors has alleged that large short positions – or bets on lower prices – in silver futures held by several banks, including JPMorgan, are keeping prices artificially low.
The US regulator, the Commodity Futures Trading Commission, announced in September 2008 that it was investigating complaints of misconduct in the silver market, although it did not name specific entities.
However, JPMorgan said in a statement: “It is absolutely incorrect to say or imply that the Nymex, CFTC or any other exchange or regulator has instructed or asked us to reduce our position.” The bank declined to comment on whether it had reduced its position in the silver market.
Market riggers are feeling the heat, so help GATA turn it up
Submitted by cpowell on 06:51PM ET Monday, December 13, 2010. Section: Daily Dispatches
10p ET Monday, December 13, 2010
Dear Friend of GATA and Gold (and Silver):
As you read with delight tonight's Financial Times story about the difficulty in which J.P. Morgan Chase & Co. apparently has found itself with silver (http://www.gata.org/node/9419), it may be worth remembering the remark variously attributed to those most cynical statesmen Metternich and Talleyrand during the Congress of Vienna, which reorganized Europe in 1815. Told by an aide that the Russian ambassador had just died, Metternich -- or Talleyrand -- supposedly responded: "I wonder what his motive was."
Tonight's FT story, reporting that Morgan Chase has substantially reduced its silver futures position, is attributed to an anonymous source, "a person familiar with the matter." Of course it is unlikely that anyone outside Morgan Chase itself would be so familiar with the matter, just as it is unlikely that anyone except Morgan Chase itself would want such information, or misinformation, to be broadcast as widely as the FT could broadcast it.
The FT story acknowledges that Morgan Chase means to "deflect public criticism" of its silver dealings, and at least that much is plausible. But as the himself pseudonymous Tyler Durden remarks tonight at Zero Hedge (http://www.zerohedge.com/article/jp-morgan-admits-defeat-cuts-silver-sho...), any suggestion that Morgan Chase now has covered its silver shorts is "pure and total" effluent. If Morgan Chase really had covered its silver shorts, the investment bank could say so itself, on the record, and not have to operate through the usual compliant plants at the FT. But then, of course, Morgan Chase would have some liability in lying.
Manipulative as it is, the FT story does signify something important: that clamor from the rabble about market rigging -- starting so many years ago with silver market analyst Ted Butler and continuing with GATA and hundreds of ordinary investors and a few courageous investment houses like Sprott Asset Management and Hinde Capital and now including that clever provocateur Max Keiser and that modern American patriot, U.S. Commodity Futures Trading Commission member Bart Chilton -- is making things hot for the market riggers, and they would like to get the hounds off their tail.
Keiser and some others think that exploding the silver rig will explode the great parasite of an investment bank that is behind it. More likely we will find that the investment bank is the U.S. government and the U.S. government is the investment bank and that any silver shorts supposedly covered on Morgan Chase's books will materialize someplace else and be well-hidden there for as long as possible.
But no matter -- the riggers are having big trouble if they aren't quite yet on the run, and in a few weeks U.S. Rep. Ron Paul, R-Texas, will become chairman of the House Financial Services Committee's Subcommittee on Domestic Monetary Policy and Technology, with jurisdiction over the Federal Reserve. Paul wrote today (http://www.gata.org/node/9418)that "Fed transparency will be the cornerstone of my efforts as subcommittee chairman." As subcommittee chairman with much more time to speak, Paul at last may ask the right questions of the right people on the record -- something the Financial Times has yet to do -- thereby bringing forth what Morgan Chase and the bankers who control the U.S. government may already dimly perceive as the End Times.
In the meantime, please remember that it was GATA -- particularly GATA Chairman Bill Murphy, GATA board member Adrian Douglas, and GATA whistleblower Andrew Maguire -- who thrust the silver market manipulation issue in the face of the CFTC and the financial news media at the CFTC's public hearing in Washington last March 25. That's exactly when the silver rig started coming apart. Please remember also that it is GATA and not some mining industry group that is suing the Federal Reserve in U.S. District Court for the District of Columbia for access to the Fed's gold records and particularly for access to the records the Fed admits having of gold swap arrangements with foreign banks, arrangements that are the primary mechanisms of gold market rigging. Exposing the market riggers and sustaining the agitation for free markets in the monetary metals requires the financial support of those who believe in GATA's work. We're making good progress against nearly all the money and pow er in the world. If you'd like to help us, please visit:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Audit the Fed in 2011
By Ron Paul
Since the announcement last week that I will chair the congressional subcommittee that oversees the Federal Reserve, the media response has been overwhelming. The groundswell of opposition to Fed actions among ordinary citizens is reflected not only in the rhetoric coming out of Capitol Hill, but also in the tremendous interest shown by the financial press. The demand for transparency is growing, whether the political and financial establishment likes it or not. The Fed is losing its vaunted status as an institution that somehow is above politics and public scrutiny. Fed transparency will be the cornerstone of my efforts as subcommittee chairman.
Thanks to public pressure earlier this year, Congress did pass legislation that requires the Fed to disclose some information about its bailout of select industries and companies following the 2008 financial crisis. So two weeks ago the Fed released data concerning more than $3 trillion of assistance it offered to banks through its bailout facilities. After reviewing this data, however, we are left with many more questions about the Fed's “lending”.
In the “Term Securities Lending Facility”, the Fed was supposed to have loaned against AAA-rated securities-- yet over half of the collateral put up by banks to obtain loans had no listed credit rating. Should we assume that the Fed accepted absolute junk rated securities as collateral for loans? Presumably these securities were so bad that they wouldn’t even publicize their credit rating. So why should our central bank, backed up by your taxes, accept such collateral?
On another note, of the $1.25 trillion purchased under the Fed’s “Mortgage-Backed Securities Purchase Program,” only $877 billion in purchases have been publicized. What happened to the remaining $400 billion?
These kinds of limited disclosures by the Fed only underscore the need for a full and complete audit of the Fed’s financial books. This audit should be done by an independent third party, in the same manner that public companies are audited. The Fed should make public its balance sheet, income statement, and perhaps most importantly its cash flow statement. It also should publicize the notes explaining those financial statements.
We seem to forget sometimes that Congress created the Fed-- it is a government-created banking monopoly, and its top decision-makers are appointed by the President and confirmed by the Senate. If the Fed does not perform satisfactorily in the eyes of these politicians and their constituents, the Chairman and Governors may not be re-nominated.
In theory, Congress could even repeal the Federal Reserve Act altogether since it has the authority to do so. Obviously Congress is within its authority to audit an organization it created by statute, and it is time to assume that responsibility.
With 320 Members of Congress cosponsoring my legislation to fully audit the Fed in the 111th Congress, my hope is that we can build on our broad bipartisan coalition in 2011 and continue the push for greater Fed transparency going forward.