Tuesday, December 13, 2011

Upon Further Review

The bottom line is that the money needed to bail out Europe and to fund America’s spiraling debt and future unfunded obligations is in the ten of trillions. IT DOES NOT EXIST. It has to be created by printing money in massive quantities, and despite all the rhetoric you will hear against such policies, in the end it’s the path of least resistance. Printing money is an invisible tax on savings, much easier to initiate, than, say, raising taxes or cutting back on services and entitlements  - Frank Guistra, founder of Silver Wheaton
Here's the link for the source of that quote, it's a very good article on gold and negative real interest rates:  LINK 

Remember how "jiggy" everyone got over the reports of incredibly robust Black Friday weekend sales?  Recall that those initial reports were based on subjective measurements such as "foot traffic" recorded at malls.  Well, the retail sales report released for November today came in well below the Wall Street Einstein analyst consensus forecast of .6%.  In fact, it is likely that retail sales for all of November may have gone negative had it not been for the very heavily price-discounted and advertised push for Black Friday weekend sales.  Here's the LINK  Even more foreboding for the economy, a poll out last week of consumers suggests that the majority of people have already made their holiday purchases for the year, suggesting that the bounce we get the week for Christmas will likely be a lot less than expectations and initial hyped-up indications.

And here's another key economic indicator that needs to be further reviewed.  The existing home sales report - a well-spun, highly massaged data series published by the hyper-promotional National Association of Realtors -  will be downwardly revised going all the way back to 2007.  Hmmm.  This particular economic report in the last few months has been giving many "hope" that a rebound in the housing market is developing.  However, I have noticed - because I tend to read the whole news release and not just the headline plus the first few sentences - that the NAR chief economist has actually been uncharacteristically demur in the comments he issues that usually get buried toward the bottom of the press release.  Now we know why.  As you'll see in this news release, which I have not seen anyone mention, especially in the mainstream media, the NAR issues a well-spun "cover" explanation for the fact that their systems have "double-counted"  home sales in many areas:
The NAR said the "up-drift in sales projections developed over time between the fixed model for calculating sales rates and the actual marketplace, including growth in multiple listing service coverage areas, geographic population shifts, a decline in for-sale-by-owner transactions, some new-home sales trickling into MLS data and some individual sales being recorded in more than one MLS." 
Here's the LINK  Obviously, they don't use the term "double counted" in that explanation but that is what that convoluted statement says.

With regard to the opening quote above, I have been wondering now since the summer how the U.S. Government is going to find buyers for the - at minimum - $2 trillion in new debt issuance it will have to do this fiscal year.  Why do I say $2 trillion when the published deficit forecast is something like $1.8 trillion?   Because I saw a report last week - sorry I don't have the link - that said that the Government is already running behind forecast in tax revenues and is already running above estimates in deficit spending.  The former metric - tax revenues - is black and white evidence that the economy is much weaker than is being promoted by Wall Street, politicians and mainstream media.  

But that said, who the hell is going to buy all the new Treasury debt?  I'm not.  I wouldn't touch a Treasury or muni bond even if I had a gun held to my head.  It sounds like China isn't interested in doing that either.  The answer is that one way or another the Fed is going to be the buyer of last resort.  And that means a lot more QE.  More than is already being floated by those who know that the Fed is going to start buying several hundred billion in mortgage paper soon. 

And THIS is why the price of gold is weak right now. The paper money promoters do not want gold moving higher going into the roll-out of big money printing programs in Europe and here.  There was a report last Friday from a European media source that the Bank of England and the ECB were selling gold.  They retracted that report yesterday but it turns out that is it half-true.  It turns out that these two Central Banks were likely "leasing" gold out to member banks in order to enable these banks to raise much-need liquidity without having dump crap assets that have little or no bid.  How do we know that the CB's were leasing gold?  Take a look at the lease rates for gold, which can be found here:  www.kitco.com  You'll see that there are two distance downward spikes into negative territory.  This indicates that Central Banks are making a large supply of gold available for lease to member banks.  Imagine that, borrowing gold AND getting paid a small rate of interest to borrow that gold so you can sell it into the market place and use that money to pay your bills...  
central banks stand ready to lease gold in increasing quantities should the price rise.
That quote is from Alan Greenspan's testimony to the House Banking and Finance Committee on derivatives from 1998.  Here's the LINK  I threw that in there for anyone who doesn't believe that the gold market is manipulated.


  1. "This indicates that Central Banks are making a large supply of gold available for lease to member banks."

    A large supply of just what kind of gold Dave? Physical? Or fractional?



  2. Sorry, maybe I missed something. But if a bank borrows gold from a central bank, to sell to it's customer, who really owns it? What happens to the customer if the bank defaults on other loans? Is the central bank, as a privledged creditor, entitled to take the gold?

  3. Here's what I think: I think that gold is taken from GLD unallocated bins and given to banks to sell into the market and the gold is attributed to Central Bank leasing. Until that view is proven wrong, that is the truth.

    The real problem with this is that now that a lot of gold was leased and sold at $300/oz., banks stand to lose a shitload - billions - if the CB's recalled the gold. The banks would not only have to pay several multiples more than they leased it for, but they would drive up the price with their bid to buy. This is why the Fed won't allow an audit of its gold stock - it's not there - it's been leased.

    If the lessor bank defaults, they could NEVER figure out who owns the bar. But that's why you don't leave gold in depositories of the bullion banks like HSBC and JP Morgan. Because you'll get MF'd. If you don't want to safekeep it yourself, keep it at a place like Diamond State Depository - a private depository.

  4. CME is talking to Martin Armstrong

    CME knows they are between a rock and a hard place.

    Click here for a written intro on the interview by KWN of Martin Armstrong. Audio to be released later.

    When asked about a communication he received regarding the MF Global situation, Armstrong stated, “Largely because of my comments on this subject, I received an email (from the CME) saying that the CME is now considering ponying up $550 million to help the investors to bring them back up to at least an 88% level instead of the 72% level from the court.

    Legally the CME should bring it up to 100% and then they become the creditor against the banks. They probably don’t have the money. But the banks should be giving back all of the money they took from MF Global. They know what the deal is, they know it was client’s assets….

    They (investors) have been moving money dramatically from New York. You don’t want your money at a place that’s trading right now…It’s just crazy. What’s going on around the world, everybody is really concerned at practically every level and now we have MF Global, which is bringing into question the validity of the US financial system.

    Just because the CME is thinking about actually doing their job, doesn’t mean they will do it. It is gg’s humble opinion that the CME knows Martin’s influence and they are trying to quell the mass exit of funds from the US trading houses by starting their own rumor mill. Get that piece of paper from your broker if you decide to continue to trade, regardless of the outcome of MF Global’s customer funds.

    If CME reps were at the World Economic Conference, they know they are doomed.


  5. Endless American Consumption Is A Crowded Trade

    How many times have the talking heads told us not to bet against the American consumer? Too many times to count. It's gotten to the point that many investors believe that the US consumption machine will never stumble. Sounds like a crowded to trade to me.

    Economic activity is either rising or falling at an increasing rate. Real and gold adjusted retail sales have been contracting since early 2011. The trends are becoming difficult to ignore now as the public feels the grip of the Great Recession tightening once again.

    Consumption is a key driver of economic growth in the US. If the negative consumption trend extends into 2012, it will become both a political and social hot potato.


  6. Howard Davidowitz: Consumers In TERRIBLE Shape and “It’s Going to Get Worse”

    In his own inimitable style, Davidowitz explains why the consumer is in "terrible shape" and why "it's going to get worse," citing the following:

    Crushing Debt Load: Consumer debt is 117% of disposable income.
    Help Not Wanted: Even November's "strong" report included more people dropping out of the labor pool (315,000) vs. those who found work (278,000), according to the Labor Department's household survey.
    Reverse Wealth Effect: Household net worth fell 4% in the third quarter, a drop of $2.4 trillion, according to the Fed. That's the biggest drop since 2008 and would be hard to overcome even if wages were rising sharply, which they're most certainly not.
    Housing Bust Rolls On: Residential housing remains depressed, which is putting tremendous pressure on Americans' net worth and sense of financial confidence. Davidowitz, among others, sees more downside for housing prices and another increase in foreclosures in 2012.


  7. "...The former metric - tax revenues - is black and white evidence that the economy is much weaker than is being promoted by Wall Street, politicians and mainstream media..."

    Tough times here in the Statist of California; retail sales and use tax collections in November were down 36% compared to one year ago. Fiscal year to date (Jul.-Nov.), they are down 27%.


  8. Wealth confiscation....

    MF Global Cash at JP Morgan 'Presumed Its Own' So It Can Pay the Bankruptcy Trustees

    So what is MF Global going to do with that cash held at JPM?

    Presumably it will be used to pay the Bankruptcy Trustees and lawyers who decided that it belongs to them.

    Anyone who holds a significant sum in a brokerage is fair game apparently.

    Oh you have account statements? Sorry, that money is gone. Can you prove where we put it?

    MF Global Cash at JPMorgan Presumed Its Own, Freeh Says
    By Tiffany Kary
    Dec 12, 2011 8:39 PM ET

  9. “You can’t trust any counterparty anymore. Not your broker, not your bank, not the regulators, not the exchange and not even the clearinghouse. In one short stroke, MF Global has knocked out all the props holding up the one essential ingredient needed for any market to function – namely, confidence.

    Frankly, Eric, what is happening right now is something few people alive today have ever experienced. But it is something we can learn about from history books. The loss of confidence in the market structure means a drop in economic activity.

    There will also be a decline in living standards caused by the destruction of financial assets. In other words, your paper assets one day appear valuable and then the next day are worthless or nearly so because the counterparty failed. That is the message from the MF Global collapse that the market is now assessing.

    Everyone should be carefully paying attention to what is happening on the CME, the biggest futures market in the world. The drop in volumes and open interest are a reflection of the decline in confidence in the various counterparties. The same thinking applies to the world’s stock exchanges, so watch those too.


  10. Armstrong understands markets and money flows and when he talks about systematic risk and that we're on the precipice, people should really pay attention. Nothing is safe.

    And really CME? An email to Armstrong? And NOW you're willing to take action (maybe, nudge, nudge, wink, wink)? Just surreal.

  11. $ rally function of this?

    Prepare for a European default: Kyle Bass

    "As the dominoes fall, it's clear that the peripheral countries that are in the news so much -- the PIIGS as we like to call them [Portugal, Ireland, Italy, Greece and Spain) -- will have to restructure their obligations," he tells BNN. "I think that's coming much sooner than others would think and that is something you must prepare for in 2012."

    "You see the deposits leaving the periphery at an annualized rate of more than 20 percent. This is the final precursor for a sovereign default and it's happening while we speak."


  12. I have read several comments in the MSM this week that a crime "may" have been committed at MF Global.

    JFC, what kind of goddamn horseshit is that? Two fucking billion missing, and the cocksucker Corzine and his minions claim to have no idea where the money is.

    A fucking crime "MAY" have been committed? Are you fucking shitting me? Where do all of these world-class media sleuths come from?

    Corzine and his thieving pals should be lined up and shot.

  13. I totally agree with Proximo but I have stated many times- there is no rule of law in this country. And while you may make an argument that the swine (us) are subjected to one- you can damn sure bet the elite cocksuckers are not.

    I am ready to stretch some fucking necks. But I am early. I am always early- esp when shorting equities on max margin.

    Dave I absolutely love this post. Like you, I read that 2 trillion figure somewhere and I could not find it. I damn sure know I saw a 1.8 handle but it's all part of "economic cleansing."

    In fact... I think I just coined a new term.

  14. Was The "Collapse" Of MF Global Premeditated? A Conspiracy Theory

    Which bring us to a rather disturbing theory proposed by Walter Burien of CAFR1.com who has floated the rather the chilling idea, and what some may call an outright conspiracy theory, that by scuttling MF, Corzine effectively helped some shell company (or companies) which were controlled by a "cabal" of his closest confidants (we will let readers come up with their own theories who the former CEO of Goldman Sachs may have been close with) to make the offsetting profit that resulted from the accelerated and massive losses borne by MF's stakeholders in the vicious liquidation. As Burien says: "A government and media cover up would just focus on MFG's loss. A true and open investigation would be focused on "who" took the other side of the coin; the profit."


  15. OWS game changer?..like game over....

    Ron Paul furious over indefinite detention act

    With the approval from the Oval Office the only thing keeping a terrifying law that will allow for the indefinite detention and torture of Americans from passing, presidential hopeful Ron Paul has finally unleashed on the legislation.

    Although President Barack Obama had originally insisted that he would veto the National Defense Authorization Act for Fiscal Year 2013, Senate Armed Services Committee Chairman Carl Levin revealed recently that the bill in its current wording was drafted after the current administration asked for changes.

    Already making its way through the House and Senate, the Act in its current wording will allow for Americans suspected of any “belligerent” act to be detained in Guantanamo Bay-style military prisons indefinitely for any alleged crimes without trial. With it now being revealed that the president put forth suggestions to draft the latest version of the legislation, Levin told the press Monday night, "I just can't imagine that the president would veto this bill.”

    "I very strongly believe this should satisfy the administration and hope it will,” added Levin.


  16. Banks are lawless dictators? Whose side are the police on?

    The deficit that worries me most in terms of the future of our civilisation is the legal accountability deficit - or anomie as I use it here. This deficit is huge and still growing rapidly as decisions are taken behind closed doors to shield lawless bankers from taxes or criminal sanctions and dedicate more and more public funds and/or monetary expansion to the same lawless bankers with too little public accounting, scrutiny or recourse.

    The banks as dictators makes sense to me. In thinking about my dissatisfaction with financial regulation for much of the past decade, I see that a great deal of it is attributable to who the regulators see as their polity. Their idea of consultation on regulations is to ask the bankers, traders and rating agencies whether they approve. The idea of making public policy in the public interest if the bankers disapprove is unimaginable to them. And so the banks get the regulations they prefer - or at least did so until the crisis.

    And my queasiness about David Cameron's behaviour in Brussels on Friday stems from the same concern. He threw his toys out of the pram and turned his back on the EU because they wouldn't guarantee to preserve the City from further taxation, regulation and scrutiny. It's very clear that the polity he was serving was not the United Kingdom's 62,300,000 people - but the one per cent that make their living in the City of London.
    Fisk and Meighan remind us that the people are sovereign. The protests are because our sovereignty is undermined when it is disrespected by bankers buying lawlessness or by the police or financial regulators using state powers against the public interest. We have a right as a free people to self-governance under the rule of law. We as a free people have a right to regulate financial services to ensure that it serves a socially constructive function in the economy. Applying the rule of law to bankers reinforces the principles of justice essential to capitalism and the preservation of private property. The banks are not sovereign, and do not have a right to laws, regulators and police that protect them and them alone. There's some work to do here, of course, but having the issue crystallised helps a lot.

  17. This is what you call kiss ass spin...the article sucks but the comments are worth sending to CONgress

    December 13, 2011, 9:20 pmLegal/Regulatory
    Confusion Follows Claim That Corzine Knew of Funds Transfer


  18. Sharp Decline in Withholding Tax Receipts Signals Imminent Recession

    The forward indicators that produce the most reliable signals with respect to recession forecasting continue to indicate that a return to economic contraction is highly likely in early 2012. Our computer models have been predicting the likely start of a new recession in the US for the past several months and the data trends continue to weaken as we approach the end of the year, suggesting that the recession scenario is becoming even more likely. One indicator that has weakened significantly during the last two months is the trend in Federal withholding tax deposits. Economist John Williams of Shadow Government Statistics discussed the deterioration in this data set in a recent commentary.

    A sharp downturn in the annual change in withholding tax receipts by the U.S. Treasury is signaling a deterioration in personal income. The shift in tax revenues began to surface in Treasury reporting of October 2011 and has continued through the latest available numbers, as of December 7th.


  19. is he on the board of MF?..from a guy that publicly has hated it since $1000..at least

    Roubini Asks of ‘Goldbugs’ on Twitter “Where is 2,000?” - Ignores Academic Research


  20. Occupy Endgame: law enforcement arrests 1%’s War & economic criminals

    The brilliant 2-minute video from Waiting for the Storm below is a message for police, sheriff, and military law enforcement to arrest US political, economic, and corporate “leadership” who have committed obvious crimes.

    Occupy’s endgame, in retrospect, will be obvious: after a period of “emperor has no clothes” expository communication from independent Internet media to the 99% and citizen engagement with those facts, those with arrest authority exercised it to remove criminal leadership from power.

    The first criminal arrests will be for War Crimes and financial fraud. The most notable will be “leadership” of both US political parties and from the largest financial institutions involved in mortgage and “investment” frauds.

    Importantly, the “criminal 1%” include corporate media who are criminal accomplices to enable and cover-up the murder of millions, deprivation of billions, and looting of trillions of our dollars. Their manipulative voices will be removed from power, quickly facilitating public communication of the objective facts of the depth of state crimes, and the inspirational future humanity enters.

    Occupy’s victory means peace from criminal wars based on obvious lies, economic security and sufficiency for 100% of humanity, and unleashing suppressed technologies that transforms what it means to be human into unimaginable status.


  21. "...And THIS is why the price of gold is weak right now. The paper money promoters do not want gold moving higher going into the roll-out of big money printing programs in Europe and here. There was a report last Friday from a European media source that the Bank of England and the ECB were selling gold. They retracted that report yesterday but it turns out that is it half-true. It turns out that these two Central Banks were likely "leasing" gold out to member banks in order to enable these banks to raise much-need liquidity without having dump crap assets that have little or no bid...?"

    Nice Dave, bang on. This isn't bearish at all, contrary to yahoo finance lol. Oh, the inevitable LBMA/comex collapse when the many 'holders' of gold/silver finally decide the counterparty risk is too high and seek possession of the metals. 99% of these 'holders' better like waiting in line.

  22. Kyle Bass On Rehypothecation And Other Keynesian Endgame Scenarios

    If readers have the sense there has been a deluge of Kyle Bass reading (and viewing) materials on Zero Hedge in the past two weeks, it is because there has been: and why not - after all, unlike all other cheap talking heads, and know-nothing pundits who merely need a suit to make an appearance on one of the TV's financial comedy channels, Kyle has been consistent in the most important thing - telling the truth. Today, he took his resurgent popularity to CNBC which always knows which way the winds blow, and told David Faber more or less everything that Zero Hedge readers know already about Europe's collapse, on why the ECB will print but only after a default, and about the inevitable global debt restructuring. There was a twist: as most regulars here know, the key topic of the past week, of December, and potentially of 2011, is the limitless "fractional Prime Broker lending" of assets-cum-liabilities (and when it comes to the realization that one's gold itself may be rehypothecated, via GLD, it is no surprise why paper gold is plunging, with the expected delayed effect of slow comprehension) in an infinite loop of daisy chained counterparty exposure, also known as rehypothecation. Which is precisely what what Bass touches on 9 minutes 30 seconds into the interview when the discussion shifts to "shortening collateral chains." Must watch for everyone who enjoys not being lied to.


  23. In a court filing, MF Global said it can use the collateral for operating expenses, fees owed to its trustee and "reasonable restructuring expenses" including fees to professionals."

    Translation: The Court says the lawyers and accountants will be able to run up fees and be paid first. The greatest oxymoron in America- a system run by lawyers is called "The Justice System."

    MF Global account holders and other creditors are screwed. Now if only the Occupy Wall Street's hero, Obama can figure out a way to move the unions ahead of the account holders and legit creditors all will be well in America.