In time, it's just a matter of time...

We rise this morning to witness a breakout out in Gold And Silver. Silver has exploded through resistance at 13. Gold cleared resistance at 907 and has set it's sights on the launch pad up the hill at 918. Financial calamity is driving this new move higher. The "Big Bank Stress Test" having been deemed a sham by countless economists in league with The Truth, is the source of this weeks banking anxiety. It remains to be seen if the two Precious Metals can maintain this momentum in the face of this mornings blah-blah about "growth in the second half" from Bumbling Ben. You can be sure the Dollar will rise on his appearance, and the stock market will fall. Growth in the second half? Good freakin luck! ...and the fourth quarter '08 was the bottom in the decline of GDP. You can rest assured that should the second quarter GDP come in at say -5.5% vs. the first's -6.1% we will be sold the notion that the economy grew +0.6%. ABSURD!

Suggestions over the weekend that Citi Bank and Bank Of America would need to raise more capital lit a fire under the Precious Metals as the week opened yesterday. This morning comes news that now 10 of the 19 banks "tested" will need to raise more capital. Bank of America dutifully denied that they were seeking more capital. How often have banks told us they were solvent only to disappear within days? Have we forgotten bear Stearns and Leahman Brothers already?

About 10 U.S. stress test banks to need more capital
WASHINGTON (Reuters) - About 10 of the 19 largest U.S. banks being stress tested will be instructed by regulators to raise more capital, according to a source familiar with official talks.

The banks have been negotiating with their regulators about the depth of their capital needs, should the recession prove to be deeper and longer than anticipated. Markets have been anxiously anticipating the results, which will differentiate the strongest banks from those still expected to sustain considerable credit losses.

The exact roster of banks needing to build their capital positions is still unclear. Banks are expected to be briefed on the official results on Tuesday. The Federal Reserve and Treasury Department will also tell them how policymakers plan to publicly unveil the market-sensitive results, the source said, speaking anonymously because the discussions are private.

Some industry insiders worry the stress test results come at a time when the sector is starting to see positive effects from some surprisingly strong first-quarter earnings figures.

"I think the great risk there is that you create some new uncertainty and concerns at the very time the financial condition of the banking industry is turning for the better," Wayne Abernathy, an executive at the American Bankers Association and a former Treasury official said earlier on Monday.
http://finance.yahoo.com/news/About-10-US-stress-test-banks-rb-15128885.html?sec=topStories&pos=main&asset=&ccode=

LOL! Leave it to Reuters to come up with a "former Treasury official" shill to stump on these banks behalf. Financial conditions for the banks are turning for the better? Yeah, right. All 19 of these banks are insolvent. Only through changes in accounting rules and other nefarious accounting gimmickry have these banks miraculously created "profits" from certain continued losses. Anybody that buys into the idea that these banks have turned the corner should have their head examined.

Consider this scenario: Have the banks been "pumped" up by the "market wizards" operating behind the curtains to allow insiders and large funds the opportunity to "sell into this rally" anticipating the worst for these banks, and their next leg down into the abyss? Not only sell profitably into this recent rally, but position themselves to short the top of the rally as the market wizards continue their quest to rape the nations investors yet again?

It's interesting to note that insider selling during this Bear Market Rally has been 8 times higher than insider buying. This stat does not bode well for the equity markets going forward.

Insider selling cause to doubt market bulls
Although market bulls insist the U.S. economy is now on the mend, and the worst of the economic crisis is over, the executives who actually run America's companies seem a tad less certain.

Directors and senior execs have sold $353 million worth of equities this month, or 8.3 times more than they purchased, according to data compiled by Washington Service, a U.S. equity research firm. On the other hand, insider buying sank to the lowest level since July, 1992.
Heavy insider selling is often viewed as a warning sign, since corporate execs typically have access to better information than regular investors.

"They should know more than outsiders would, so you could take it as a signal that there is something wrong," William Stone, of Philadelphia-based PNC Financial Services Group, told Bloomberg.
http://www.edmontonjournal.com/business/fp/Insider+selling+cause+doubt+market+bulls/1533971/story.html#PostComment

Bankrupt Banks
Trace Mayer, J.D.
At a congressional oversight panel on the government's financial rescue program, the tax-evading Treasury Secretary Timothy Geithner testified, "Currently, the vast majority of banks have more capital than they need to be considered well capitalized by their regulators." With the recent fair-value lying accounting changes banks have reported surging quarterly profits. Even the single digit midget Bank of America (BAC) booked a first quarter net income of $4.247 billion - 6% more than it made in all of 2008.

Olivier Garret, CEO of Casey Research, asks a couple penetrating questions and gives a couple answers.

"For starters, just where did all this income come from? And has credit quality really improved.

"The answers to both can be found buried in a company press release bearing the encouraging title "Bank of America Earns $4.2 Billion in First Quarter."

I'd like to draw your attention to the four most telling excerpts from this release.

1. Equity investment income includes a $1.9 billion pretax gain on the sale of China Construction Bank (CCB) shares."

2. Noninterest income included $2.2 billion in gains related to mark-to-market adjustments on certain Merrill Lynch structured notes as a result of credit spreads widening."

3. Credit quality deteriorated further across all lines of business as housing prices continued to fall and the economic environment weakened.

4. Nonperforming assets were $25.7 billion compared with $18.2 billion at December 31, 2008 and $7.8 billion at March 31, 2008, reflecting the continued deterioration in portfolios tied to housing.

Bank of America makes $4.2B almost completely from a one time sale of a Chinese bank and some accounting sorcery on Merrill's failing mortgages. Looking at the cash position of Bank of America if those two extraordinary events were backed out and preferred dividends were included then Bank of America actually bled about $1.3B.

The head of the sorcery order, Goldman Sachs (GS), was very creative by changing its reporting calendar which effectively erased the impact of a $1.5B loss in December from showing up in its earning statements although it still flowed through to the balance sheet. Bank of America is not the only bank with these shenanigans.

The FDIC poltergeist possessed another four banks on Friday bringing the total for the year to 29. The evaporated banks that went poof were dotted across the nation holding about $1.6B in deposits including American Southern Bank of Kennesaw, GA with $104M in deposits, Heritage Bank of Farmington Hills, MI with $152M in deposits, First Bank of Beverly Hills in Calabasas, CA with $1B in deposits and the First Bank of Idaho in Ketchum, ID with $374M in deposits.

It is clear that credit quality continues to deteriorate at the banks and almost all banks are engaged in fraudulent accounting sorcery. On the bright side for these vampires, the steep yield curve helps generate tremendous real income for the banks as they are able to suck the life out of the remaining wealth generating companies in the economy.

JP Morgan (JPM) reported a stunning profit because the value of their bonds declined in the market and Citigroup (C) had a similar $2.5B gain.
http://www.321gold.com/editorials/mayer_t/mayer_t_050409.html

Once again Tiny Turbo Tax Tim Geithner is caught in a lie about the banks "capitalization". "The vast majority"? How do you define that Tim? One out of two? It would appear that 50% of the banks tested need more capital. I would not consider one half to equal a "vast majority". 80% may constitute a vast majority, but Tim, 50%. Yeah, right. Tim goes for the CONfidence headline with his "declaration" in front of Congress instead of the honest truth. But then we all know that the first duty of a central banker is to obscure the truth. Yes, Tiny Tim is the Treasury secretary now, but he was a part of the banking cartel prior. Lying is a hard habit to break.

Hey Tim, how are those treasury Bill auctions going?

China has 'canceled U.S. credit card,' congressman says
WASHINGTON -- China, wary of the troubled US economy, has already "canceled America's credit card" by cutting down purchases of debt, a US congressman said Thursday.

China has the world's largest foreign reserves, believed to be mostly in dollars, along with around $800 billion in U.S. Treasury bonds, more than any other country.

But Treasury Department data shows that investors in China have sharply curtailed their purchases of bonds in January and February.

U.S. Rep. Mark Kirk, a member of the House Appropriations Committee and co-chair of a group of lawmakers promoting relations with Beijing, said China had "very legitimate" concerns about its investments.

"It would appear, quietly and with deference and politeness, that China has canceled America's credit card," Kirk told the Committee of 100, a Chinese-American group.
"I'm not sure too many people on Capitol Hill realize that this is now happening," he said.

Kirk said he was the first member of Congress to tour the Bureau of Public Debt, which trades bonds, and was alarmed at how much debt was being bought by the U.S. Federal Reserve due to absence of foreign investors.

"There will come a time where the lack of Chinese participation may have a significant impact," Kirk said.

"We should track that, because up until last month they were the No. 1 provider of currency to the United States and now they're gone."
http://gata.org/node/7403

Tim, Ben, Larry...The Three Stooges. Guys, the jig is almost up. The banks are broke and China has cut your credit limit. Printing money to buy your own debt is futile and self destructive. Gold is all we have left to save the nation, and you keep it in chains. In time The Truth shall rise from it's bondage, and crush your feeble cartel. In time, it's just a matter of time...

Gold isn't going to $2,000 an ounce
Jeff Clark, Editor, BIG GOLD
May 4, 2009
Gold isn't going to $2,000 an ounce.

Before you gag on your coffee or suffer chest pains, allow me to explain.

We're about eight years into the bull market, and gold has breached the $1,000 level twice and has spent weeks trading above the old high of $850. Some observers are now saying that gold's pretty much had its day and that once the recession is over, it will retreat for good.

However, the four-digit gold price we've seen so far is with no price inflation to speak of, no effects of the atrocious increase in the money supply, and despite a rising dollar. What happens to gold when each of those pictures gets turned upside down - high inflation, excess cash jolting the economy, and a falling dollar? After all, gold's performance to date has been powered only by general anxiety, not by any visible erosion in the dollar's value.

I decided to take a fresh look at calculations that could be used to appraise gold's upside potential. No one of them, by itself, comes with compelling logic. But they all point in the same direction.

Gold's Percentage Rise in the Last Bull Market. What if gold in this bull market repeats the percentage rise in the last bull market? In the 1970s gold rose from $35 to $850, a factor of 24.28. Our low in 2001 was $255.95. Multiply that by 24.28 and you get a gold price of $6,214 per ounce.

U.S. Gold Holdings to Money Supply: The M1 money supply consists of currency and checkable deposits. The U.S. government currently holds 286.9 million ounces of gold. If the government were to make each dollar redeemable by the amount of gold it possesses, we'd arrive at the following price for gold: $1.569 trillion ÷ 286.9 million oz. = $5,468.80 per ounce.

Gold/Dow Ratio: The ratio was about "1" when gold peaked in 1980, meaning the Dow and gold were the same price. To restore that relationship at today's stock prices would mean when the Dow is at 6,626, gold should be at $6,626/oz. Of course, we think it likely that the Dow will get a lot lower before gold peaks. But even if it drops all the way to 4,000, that would imply a gold price of $4,000/oz.

All the Money in the World vs. Gold Reserves: If the public eventually sees the paper game being run by the central banks for what it is, governments will be forced to back their currencies with gold (and perhaps other tangibles like silver). Assuming they had to go into the market and buy the gold needed to restore faith in their currencies, the numbers might look like this: Total central banks reserves (including gold holdings) = $4.8 trillion, divided by 929.6 million ounces total gold reserves held by all official institutions that issue currency = $5,246 gold price.

U.S. Gold Holdings to U.S. Foreign Trade Deficit: The size of a country's deficit or surplus would be of no consequence if all currencies were convertible into a fixed amount of gold. However, the dollar is increasingly considered a hot potato, and when the trade balance reverses, as it must, dollars will flow back to the U.S. and fuel domestic price inflation. Based on the cumulative trade deficit of $9.13 trillion (up from $6 trillion since June '07!) and U.S. gold holdings of 286.9 million ounces, the corresponding price of gold would be $31,822 per ounce.

U.S. Gold to U.S. Government Liabilities: Finally, the GAO (Government Accountability Office) calculates an income statement and balance sheet for the U.S. government. As you'd suspect, it is dominated by future liabilities for Medicare and Social Security. What if they had to be backed by the supply of gold? Official U.S. government liabilities now ring in at an incredible $55.2 trillion. To make good on that would require a $192,401 gold price.

No, we don't think gold will hit $192,000 or even $32,000. And there really isn't any surefire way to forecast the eventual high. But it's clear that every weathervane is pointing in the same direction. So, yes, gold isn't going to $2,000; it's going higher.
http://www.321gold.com/editorials/casey/casey050409.html