Sunday, January 31, 2010

Upon Further Review: the AIG Bailout Hearings

I spent some time this weekend re-watching the AIG bailout hearings conducted by the House Committee on Oversight and Reform.  I wanted to re-watch the Congressmen who put forth the most intelligent and challenging questions - i.e. the questions which attempted to expose the truth.  Some of the most engaging questions surprisingly came from Democrats.  In this regard, it would be well worth anyone's time taking another look specifically at the Q&A segments which involved Darrel Issa, Dan Burton, Jim Jordan, Jason Chaffetz, Dennis Kucinich, Stephen Lynch and Marcy Kaptor. Some of the Congressmen, like Chairman Edolphus Towns, asked questions which reflected stunning ignorance regarding the subject matter and events under investigation. One wonders how someone like Towns even gets elected in the first place.

With regard to "the truth," many of both Geithner's and Paulson's answers go beyond stretching my ability to suspend disbelief.  In several instances, both of them never answered some questions directly and were allowed to get away with answers that evasively danced around answering the question.  In one instance, Geithner is nailed with an email that was addressed to him regarding negotiations on what value would be paid to the banks and Geithner claims he does not remember that email.  Paulson at one point says, "I don't want answer that question."  The entire circus was appalling.  Even more appalling was the willingness of Committee members to allow Geithner and Paulson off the hook.  Part of the problem results from the five minute time limit imposed, and Geithner's and Paulson's ability to assert long-winded, overly verbose and rhetorically empty answers in order to use up the alloted time.

There is no question in my mind that both men lied under oath.  The problem will be getting someone higher up than Edolphus Towns to issue a request for a special investigation with full subpoena powers.  Upon further review, I can spot the exact comments and statements and answers which were highly scripted and rehearsed by Geithner. I would bet that he spent the whole week leading up to the hearings spending many hours with his legal counsel memorizing and rehearsing how to say key phrases. With Paulson, you can tell what's rehearsed and what questions his counsel didn't anticipate by whether or not he starts stuttering (I'm dead serious about this).  Even the New York Post refers to Paulson as "stammering Hank Paulson."  Here's my tribute to Geithner, followed by a link to a video of the full hearing:

Here is the link to the video:  AIG BAILOUT HEARINGS

Friday, January 29, 2010

The USD/Euro Currency Swap Unwind

A reader has asked me to comment on the announced unwinding of the $500 billion in currency swaps that were implemented by the Fed between the U.S. and the British, Japanese, EU and Swiss National Banks.  It's a really good question and given that Bernanke issued a statement, under oath in front of Congress, that he doesn't know how that money has been used or the specifics of where it went, then we have to assume that even Bernanke can't answer that question.  Let me make it clear that I believe Bernanke lied under oath.

The problem in analyzing the answer to this question is that, notwithstanding Bernanke's feigned ignorance, it would be impossible to know exactly how the money was used in the first place, so it is impossible to form judgements about what the unwinding of these swaps will look like.

I really want to avoid making educated guesses about this topic, because the bottom line is that it would just be guessing.  Perhaps our brilliant Senators should have forced Bernanke to disclose all of the details about these transactions before they voted on his reappointment. But given the trillions being printed by Bernanke and spent by Congress, what's a mere $500 billion among friends?  Having said that, I do suspect (and again we can never prove this) that the swaps conducted with the Bank of England were employed to help fund U.S. Treasury bond auctions during the past year.  And I am completely fascinated to watch how the Fed/Treasury is going to finance the $2+ trillion in new Treasury issuance that is coming this year ($2.2 trillion debt ceiling = $300 billion raise at Christmas + $1.9 trillion just approved by the Senate). 

What all this points to is the growing Orwellian nature of our Government and Central Banking system - AND the growing unwillingness of Congress, the Executive Office (that's you Obama) and the Judicial Branch, to reverse the process of the Government becoming MORE secretive (as opposed to LESS secretive, which Obama promised to do to coax votes and has failed miserably in doing).  All this is to say that I have no idea what the currency swap unwind will look like and I have yet to see anyone else offer a credible explanation.  Maybe if Congress held the Fed and Wall Street more accountable, we wouldn't even be having this discussion...

Thursday, January 28, 2010

Stuttering Hank Paulson At His Finest...

The guy couldn't lie his way out of a paper bag to save his life. I have no idea how the hell this stuttering thief was able to work his way up to the top post at Goldman with that speech impediment. I guess we can only hope that some day someone with power will take a blow torch to this case and re-open it to expose the extreme corruption - maybe justice will be served...

Just for the record, I am highly confident that Paulson damn well knows the answer to every question that was asked here and the degree of stuttering is a perfect measure of the degree to which he's evading a issuing a truthful answer.  The only differences I can see between Bernie Madoff and Paulson is the size of the theft and the fact that so far Paulson has been allowed to get away with it.

Geithner Must Go, and So Should Bernanke...

For anyone who watched the Congressional hearings yesterday, the primary impression that you should have been left with is that the bailout of AIG was engineered specifically with the intent of using Taxpayer money to bail out the big banks who had enormous, reckless financial exposure to AIG.  Specifically Goldman Sachs. 

Secondarily, it should be obvious that Tim Geithner AND Henry Paulson should NEVER have been allowed near the office of the U.S. Treasury, let alone been anointed Secretary (all of this is notwithstanding the fact that Geither's appointment should have been pulled by Obama the instant it was announced that Geithner cheated on his taxes deliberately and over more than one year). 

Having said that, here is what is readily apparent:  This whole thing is a lot more corrupted and the cover-up a lot more profound than we'll ever know unless we get full transparency. Full transparency might lead to some big indictments, like Blankfein and Paulson, the latter of whom would've been Goldman CEO when a lot of those AIG CDO's were structured. One wonders if part of Paulson's agenda in taking the Treasury job was to be in a position to help bailout GS if needed....Anyone happen to notice that when Paulson was asked tough questions that required him to evade the truth that he turned into a complete stuttering fool? He issued his opening statement with absolutely no indication of a speech impediment and when Burton and that kid from Ohio got ahold of him, I could barely understand him thru his stuttering.

Looming in the background, and something which has not received the media attention that it deserves - that is, it should have been placed first and foremost at the top of every single news broadcast yesterday, including Obama's "no hope/just cope" speech - is the FACT that several Congressmen have seen direct evidence that Banana Ben Bernanke BURIED a recommendation by the Fed that AIG be allowed to fail, before any bailout plans were implemented.  Please re-read that if it didn't cause you to fall off your seat the first time.  For that reason alone, the Senate shouldn't even be voting on Bernanke's confirmation.  Rather, the insanely corrupted Ivy-league academic should resign and an investigation opened.

And one last point.  It was very apparent that based on yesterday's testimony, if it wasn't already for everyone paying attention, that Goldman Sachs has literally taken over every important role at every important layer of Government.  And if you don't believe that after hearing yesterday's questioning and testimony, especially from Marcy  Kaptur and a few others, then take a look at this piece posted by which lists the biggest Democratic donors and where they made their money - 10 of the top 15 donors to Democrats made their loot at Goldman Sachs:  GOVT SACHS

Wednesday, January 27, 2010

The SEC Passes Regulation Which Only STRENGTHENS Case to Own Gold

The following is from  There is a problem with the link right now so I copied the post:
Suspending Money Market Redemptions Is Now Legel; SEC Approves New Money Market Regulation In 4-1 Vote...Zero Hedge discussed a month ago the disastrous prospects of what would happen if the new proposal contemplated by the SEC, which would allow the suspension of redemptions from Money Market Funds, were to pass. Well, in a nearly unanimous vote, Money Market Funds now have the ability to suspend redemptions, courtesy of the SEC's just passed 4-1 vote. This explains the negative rate on bills: at this point, should there be another meltdown, money market investors will not, repeat not, be able to withdraw their money purely on the whim of Mary Schapiro. As the SEC noted: "We understand that suspending redemptions may impose hardships on investors who rely on their ability to redeem shares." Too bad investors' hardships considerations ended up being completely irrelevant.
Anyone who sees this regulation and feels safe leaving their money in money market funds needs to have their head examined.  The "intent" is to prevent a "run" on money market funds when the next crisis hits.  Essentially the passage of that regulation signals the high probability of such a crisis happening.

As alluded to in the post, the rate on 1-month T-bills has gone negative today.  Think about what this means.  When a big investor is willing to invest short term money and have returned less money than was invested just 30 days ago, it tells us that the  investor is more concerned about getting his money back than he is about making money on his money.  The investor is essentially paying a small fee to insure that his cash is returned with little loss (30-day T-bills would be considered riskless since the Govt can print money to honor the claim). Think about the signal from big investors that is being given here about the perception of systemic risk and the probability of systemic failure.  The rate on 30-day bills went negative for quite some time before the collapse of Lehman and AIG.

This phenomenon only strengthens the case that investors should be putting as much as they can into gold and silver as vehicles for protecting and preserving wealth.   When you own gold, you are not subjected to, and victimized by, the bad decisions and moral hazards being implemented by our policymakers, many of whom are puppets for the big banks who fund their positions of leadership (see today's Congressional inquisition of Geithner and Paulson).  When you own physical gold in your own possession (or a trusted custodian), your investment does not have any risk of counterparty claim AND you have no Government/SEC restrictions placed on your investment, like the SEC regulation just passed.

I will end with a quote from none other than the king of fiat money, Alan Greenspan, who said on September 9th, 2009:  "gold still holds reign over the financial system as the ultimate source of payment."  Keep this in mind when you get your next investment statement from your broker or advisor.

Housing Market Unequivocally Heading South Again...

Week-to-week mortgage applications down 10.9% / New home sales fall 7.6% to 9-month low

The MBA commented that despite low fixed mortgage rates, "there appears to be a smaller pool of borrowers who are willing and able to refinance at today's rates."  Article Link  Although this index can be volatile from week-to-week, we would have expected that refinancings would be accelerating ahead of the big adjustable and option-ARM reset wave starting right about now (see this graph:  Mortgage Reset Wave Coming).  Furthermore, by all media accounts, we have been led to believe that the housing sales market is supposedly bouncing. 

The problem is, and the key phrase in the above quote is "able to refinance".  A large majority of homes that were purchased with ARMs and Pay-Option-ARMs are substantially underwater, meaning that the homeowner must show up with with an armload of cash in order to effect a refinancing.  Otherwise he is stuck with a much higher monthly payment, and one that he did not anticipate having to ever make when he signed up for the funny money mortgage.

And the Case-Schiller Index, which has been indicating price increases in housing resales over the past couple of months is flawed as a true indicator of housing market values.  I've linked a detailed explanation of why CS is bogus, but essentially the argument is that CS reflects pricing based on what is sold. It does not reflect a true statistical sampling of housing values which would include a huge pool of homes waiting to be foreclosed.  Moreover, the seasonal buying mix of buyers for the past few months has skewed housing sales toward "normal organic" resales and de-emphasized foreclosure sales.  Here's the link and it's well worth reading:  Case-Schiller is Bogus.

The bottom line is that all of the evidence is now pointing to another big dive in the housing market, which will ultimately lead to another round of financial collapse, barring an unprecedented amount of money printing by the Fed/Treasury.  In fact, I would argue that once Bernanke is safely reconfirmed, this process will begin.  Make no mistake about it, we are going to find out this year why Turbo-Tax Tim Geithner clandestinely announced the removal of the Government/Taxpayer funding cap on Fannie Mae and Freddie Mac.

Tuesday, January 26, 2010

Does This Look Like an Economic Recovery?

Verizon to Cut 13,000 Jobs as Businesses Reduce Lines

Wonder where the Bureau of Labor Statistics will bury that little nugget in Feb's jobless report.  Here's the full article:  LINK

There is just no way the Fed is going to raise interest rates or pull back liquidity anytime soon, unless it wants to create an economic freefall.  Everything else is just noise.  I am still on record with a forecast that the Fed will, in some form, announce an extension of its "Quantitative Easing" program before June.  This trading bounce in the dollar is temporary and I expect to see the dollar hit new lows sometime this year.  The rest is political rhetoric.

Wait, there's more:  Home Depot to Cut 1,000 Workers LINK

Monday, January 25, 2010

How Long Before the Demand for Physical Gold Blows Through the Paper Supply?

A massive disconnect is developing between the paper gold market (futures/OTC derivatives) and the physical gold market.  There have been reports from London for several months now of delivery problems and tightness of supply in the physical market.  Evidence of this is observed by the persisently high premiums which have been occurring throughout the various Asian markets (India, China, Viet Nam) for several months now.  There also have been several accountings of delivery problems/delays in London and NY.  Furthermore, the U.S. Mint suspended production of gold/silver eagles several times during 2009 because of a shortage of the gold/silver blanks used to mint the coins.

I wanted to post this excerpt from tonight's Midas report (, which is excerpted from Jim Willie's latest Hat Trick Letter LINK.   Willie's source, a London banker, describes the depleting supply of gold on the London Metals Exchange.  We know that China announced earlier this year that they were going to move their gold from London and other locations to a new depository facility in Hong Kong. This is probably contributing to the tight supply in London as described below by Willie's insider contact:

"During the trend decline or the counter rally for the USDollar, a constant event persists. The London metal inventory is being totally depleted of gold bullion. Fast approaching is the event of GAME OVER for London, a condition that has already reached critical level according to a key reliable source of information with London connections and direct experience there. The paper gold market and the physical gold bullion market have finally separated in a practical manner, meaning actual gold has almost no role anymore in London paper contract settlement. The absence of gold in London requires extraordinary tactics to settle contracts and to obtain gold bullion. Intimidation and bribes accompany gold delivery demands. They have almost zero gold, its supply having been drained in high volumes since early December, a process currently in acceleration. The opportunity to convert fiat money into precious metal weight is closing, at least at prices considered reasonable. The London gold banker [Willie's source] said, "There is going on a lot more than meets the eye. The physical system is actually consolidating bigtime and is organizing itself with lightning speed, totally hidden from pretty much anyone, even the so-called insiders. The paper precious metal market and the physical precious metal market have defacto disconnected. The paper and physical gold markets currently operate in parallel universes. The outflow of physical metal from bank vaults is happening at a mind bending pace." The true gold price might very soon become unknown, an extremely positive development. Gold market disruption leads to chaos, followed by much greater clarity. Like a bankruptcy process, the event is sudden but the cleanup takes weeks as dust settles. Right now, we see strong attempts using naked gold short contracts at the London metals exchange (LBMA) and the COMEX in the United States to drive down the gold price. It is all illegal and permitted. Margin calls have hit, forcing further selling of paper contracts. Before long, no gold metal will be available until clarity and prosecutions begin."

The "clarity" as described above refers to the process of establishing bona fide price discovery in the physical gold market.  For at least the last 15 years, the price of gold has been set by the highly manipulated paper markets in New York and London.  As physical supply becomes scarce at current price levels, we are transitioning into a market in which the real price is defined by the price level at which a large seller of physical is willing to sell to a large buyer.  India's 200 ton purchase from the IMF established the low end of this range at $1049.  As of now, the IMF is the only entity that visibly has a big chunk of gold for sale.  And we know both India and China have expressed interest in acquiring all of the IMF gold, not just the announced 403 tons for sale.  Assuming the IMF - in the spirit of maximizing sales proceeds - isn't waiting to see if the price goes lower before it sells more, it's safe to assume the rest of the IMF gold for sale won't change hands until the price of gold is at least as high as the recent all-time high of $1220, otherwise it would have sold the rest around that level to either China or India.  If the information from Jim Willie's insider source in London is accurate, it is reasonable to assume that we will see a much higher trading range for the price of gold in the near future, as the market will have to adjust to a higher price level as a mechanism of price discovery in order to "discover" the price at which a large seller is willing to sell.

Looks Like Bernanke Was Saved By Big Bank Payouts to Senate Republicans...

Big banks exercised their 1st Amendment right, as upheld by the Supreme Court last week, and utilized the funding of some Senate Republican flex-spending accounts to buy support for Bernanke:
Ben Bernanke's future as the leader of the Federal Reserve was in doubt late last week, but he's been bailed out by a strange coalition: The White House and the Senate Republican leadership.  Here's the article:  Bank Money For Republicans Saves Bernanke
If nothing else, this demonstrates the fact that Corporate America has become our Government.  Based on polling conducted before Senate reconfirmation hearings, Americans strongly opposed the reappointment of Bernanke.  Last week his reappointment was in serious doubt, but the Republicans, who mostly opposed him, now seem to have found Bernanke religion.  You can connect the dots for yourself.

Sunday, January 24, 2010

Here Come the Retail Layoffs...

Walmart kicks it off by sacking 11,200 Sam's Club workers, which represents 10% of the Sam's Club workforce Article Link.  This is somewhat surprising because Wall Street and the financial media have been selling the idea that discount retailers were thriving in this environment.  To make matters worse, U.S. retail credit card defaults hit near-record levels during the holiday season.  Here's the link:  Credit Card Defaults

I went on record last month with a prediction that the 1st quarter would see a huge surge of layoffs in the retailing sector and that at least one major retailer would hit the wall.  We know Zales is in restructuring negotiations with its creditors, so I get 1/2 credit for the bankruptcy call so far. 

It looks like Wall Street is looking for a +4% GDP number for Q4 this Friday.  This will be a bogus number.  Recall that Q3 GDP was initially reported to be 3.5% but was revised down to +2.2% by the final reading reported in December.  I suspect that any uptick in Q4 GDP was fueled by heavy Government spending, something which will continue but which will pile even more debt onto the hopeless Treasury debt-load.

Friday, January 22, 2010

A VIew From the Trenches: Is the Dollar Going to Roll Over Here?

This week's action has been a pure paper-driven cartel smack. The gold lease rates creeping higher are testament to the supply squeeze, especially the one in Asia (Shanghai premiums are an unheard of $10+ over spot, Viet Nam $30+).  If the big physical buyers start to look for big supply below $1100 and it's not there, we could see a moon-launch in the next few weeks. China doesn't want paper, nor does India, Viet Nam, Russia, etc. Also, I'm not going to go out on a limb and call a dollar top here, but the momentum indicators are starting to roll over and there's some decent resistance at the 78.70 level/200 (simple)dma, which is where the dollar ripped in reverse yesterday. Our spineless leader's empty tirade against Wall Street yesterday may do nothing more than stimulate even more "diversification" away from the greenback.

Furthermore, we now know that the intent of our Government is to spend its way into AT LEAST a $2.2 trillion deficit this year, which is reflected by the year-end debt limit ceiling raise by $300 billion PLUS the additional $1.9 trillion debt ceiling raise being superficially debated in Congress.  That's the minimum spending deficit this year, as States will need billions in loans and Unemployment Benefits will no doubt be extended.  To be sure, Government payroll (of which Extended Unemployment Insurance beneficiaries are a part) may be the only source of Democratic votes in November. Anyone who looks at that picture and thinks the dollar can go higher from here is taking too many hits from the bong.

One more point:  I'm horrified by the lack of public outrage over the Supreme Court decision yesterday upholding the right of big business to spend as much as they want getting their people elected to Congress/the Presidency.  That pretty much seals the transition of our way of Government from democracy to fascism:
“Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power” - Benito Mussolini

Thursday, January 21, 2010

Goldman's Earnings: The Market-to-Market Miracle at 85 Broad St.

Nice try Lloyd "I am the real Jesus" Blankfein.  Next time you announce your earnings, make sure you bring plenty of lube for everyone who is willing to bend over and believe what you have to say.  I know that at least Steve Liesman is buyin' it.

Goldman's earnings were ushered in with great fanfare on Bubblevision TV (CNBC and Bloomberg).  And of course this is based solely on looking at the net income number, which blew away estimates and expectations.  Of course, as per usual, there is a much different story to tell if you examine the bowels of a financial statement, especially bank financial statements.  So I took out my "Greg House" marker pen and board and took a look at Goldman's 8-K SEC filing, which contains an expanded version of the press release that the monkeys on CNBC regurgitate.

The bottom line is that a substantial portion of Goldman's net income for Q4 '09 appears to have been derived from marking up illiquid positions sitting in its Fixed Income operations and is not attributable to the interest rate and currencies segment of FICC, which means the numbers came from fixed income products like mortgage and asset-backed securities. 

I'm going to summarize and analyze some of the details from the 8-K, but the link to it is here:  GS 8-K.

Most of Goldman's revenues (66%) come from its "Trading and Principal Investments."  In Q4 '09 Goldman reported $6.4 billion in net revenues for TPI vs. negative net revenues of $4.4 billion in  Q4 '08.  The negative number is based on the massive write-downs Goldman took at the end of the year last year (remember those huge markdowns Wall Street took?), before Tim Geithner funnelled billions of taxpayer dollars to monetize a lot of these catastrophic "Principal" bets. 

Specifically, the big bump in revenues came from Goldman's "Fixed Income, Commodities and Currencies" segment within its TPI Division.  Regarding the Q4 '09 results, Goldman states:  "The increase in net revenues [in 2009] compared with the fourth quarter of 2008 reflected significantly improved results in credit products and mortgages."  Translation:  "the FASB and SEC extended the timeframe and framework by which we can mark up to fantasy all of the remaining positions that Tim Geithner has not yet monetized."

They specifically cite "credit products and mortgages," which means most of the revenue bump this quarter came from the kind of garbage that buried Lehman and Bear.  How do I know this?  Because they explain in the 8-K with respect to the FICC business:  "Net revenues in interest rate products and currencies were significantly lower [in Q4 '09] compared with the fourth quarter of 2008, while net revenues in commodities were essentially unchanged."  This means that most of the revenue differential in the FICC segment, which represents close to 40% of Goldman's total revenues for the quarter, came from fixed income products AND most of that revenue is likely can be attributed to mark-to-fantasy accounting.

Just to mention Goldman's other operating segments:  Asset Management revenues were 10% lower in Q4 '09 vs. Q4 '08 and Investment Banking revenues were up 58% in Q4 '09 vs. Q4 '08 - but IB represents a mere 11% of Goldman's revenue base.  The 600 pound gorilla is the FICC segment of Goldman's operations and that's where the proverbial canary in the coal mine is caged up.

Of course, we have to wait until Goldman files its 2009 10-K to see the most recent balance sheet and cash flow statement,.  And since it's a 10-K, they have 90 days to file it.  By then everyone who participates in the financial markets will be on to the next crisis and forget to look at the entrails buried in the Goldman 10-K in order to get a slighly better idea just how accurate my analysis is.  Until then, unless Goldman is willing to lift its skirt and show the world why I am wrong, we can assume that Goldman's profits are no more real than than the fiat paper used to buy Blankfein's next Mercedes.

Tuesday, January 19, 2010

An Appeal To The People of Massachusetts:

1/19 update: A stunningly large margin of victory for Scott Brown.  Thank you Massachusetts.  Scott Brown was behind in the polls by 9 points just two weeks ago and won by 7.  A huge margin, especially given that registered Democrats outnumber registered Elephants in Mass. by 3 to 1.  And this wasn't just about the healthcare bill.  This was the voting public's disgust with Obama and his betrayal of those who crossed party lines to help elect him just over a year ago.  Here's a quote from an AP newswire article covering the election:  "'I voted for Obama because I wanted change. ... I thought he'd bring it to us, but I just don't like the direction that he's heading,' said John Triolo, 38, a registered independent who voted in Fitchburg."   The anti-Obama revolution is now in full swing.  He promised sweeping Change but has delivered nothing more than George W dressed in drag.

1/18 update:  Yesterday Obama said in his campaign for Coakley speech the people should vote for Coakley because:   “Bankers don’t need another vote in the United States Senate -- they’ve got plenty.”  THIS is coming from the man who's largest campaign contributer was Goldman Sachs.  THIS is coming from the man who has more bankers enlisted as advisors and in his cabinet than you'll find at a Friday happy hour in downtown NYC.

That comment should get "duplicitous statement of the year award" because Wall Street's best friend is the man who made the comment.  Not only could Obama have stopped the TARP money that financed huge bonuses, but he could have stopped the bonuses from being paid.

Please vote for the Republican candidate.  The Healthcare Bill is nothing more than one massive transfer of wealth from the taxpayers to BigPharma, Big Hospital Corporations and Big Insurance.  Here's an example:  there are 50 million uninsured in this country - the Bill requires everyone to buy insurance - if you can't afford it, the Government (read:  YOU the Taxpayer) will pay for it.  That's 50 million more insurance premium payments per month for the insurance industry. Most of that tab will be picked up by the Taxpayer since most people who are uninsured are uninsured because they can't afford it.  Forget about all the Constitutional violations in this Bill.  Follow the money:  Big Pharma has spent $100's of millions in advertising to support this legislation.  Ultimately they will be paid back in spades with your money.


Friday, January 15, 2010

Will The CFTC Actually Regulate Gold and Silver Futures Positions?

Short answer:  "No."

If you read thru the following analysis from the Financial Times and assume that the CFTC might adopt similar rules for gold/silver trading, then the conclusion is that the CFTC will do nothing more than spray Godzilla with some bug spray.  This would be 100% consistent with everything else the Obama Administration has done with regard to reform which, "appears" to protect the public against predatory big financial firms and corporations, but does nothing to actually Change the corrupt reality.  Here are some key points:

"Thursday’s CFTC proposals on position limits in the energy markets were largely seen as a ‘light touch’ by industry voices. This is because, quantifiably speaking, they set loose limits that hardly went beyond those already enforced by exchanges in the form of accountability limits"

"First, they appear to have ruled that passive long-only funds (along with funds generally) would never be eligible for exemptions.

Second, they initiated a “limited risk management exemption” for swap-dealers who were previously eligible for bona fide hedger exemptions;

Third, they appear to classify the speculative operations of bona fide hedgers and swap-dealers completely separately;

Meanwhile, it could also have a bearing on the prop desks of banking institutions — although it’s not clear to what extent a physical presence on the prop side could offset the restrictions."

Here's the link:        The CFTC: Nothing Is But What Is Not

My conclusion is that the CFTC, in a manner consistent with all Government actions w/regard to big banks, will put in some kind of enhanced regulation that will be nothing more than form with very little substance. In fact, if the above analysis is accurate, it would appear that regulation would be headed in the direction of making it even more difficult for a big speculative fund to take on a big concentrated long position as a way to speculate against the big bank shorts. It also looks like there will be loopholes large enough to drive an army of tanks thru. I stand by my call that the CFTC will do nothing to stop the large concentrated short positions in gold and silver - nothwistanding some form of regulation that does nothing more than patronize the public but does nothing of substance.

In fact, my new expectation is that any CFTC regulation in the metals will make it more difficult for speculators to trade and make it even easier for the big banks to rape and pillage the gold and silver paper markets.  Sorry Ted. (Everyone should read the 1st comment posted below)

Thursday, January 14, 2010

Great Quote

I stumbled on this quote tonight and thought it was an accurate reflection of what's going in our system:
We haven’t had true capitalism since 1913. We live in a corporate fascist state dominated by the military industrial complex, the financial banking complex and now the healthcare industry complex. It is fascinating that the health industry has spent $396 million in 2009 on lobbying and the financial industry $334 million while Congressmen debate the future of both industries. These industries surprisingly have received a windfall in the legislation that has been put forth by Congress. The system is so corrupt and rotting from within that elections will never result in necessary reform. Corporations are spending $3 billion per year to bribe (lobby) your elected officials. Whose interest do you think Congress is looking out for? (source:  link)
As you may or may not know, 1913 was year that the Federal Reserve Act was voted into law.  I recall that about 7 years ago, a colleague of mine and I were discussing how the financial/economic/political collapse of this country was going to unfold.  I remember my colleague remarked back then that "we would eventually see things happen in this country that will blow our minds."  I can truly say that, although we anticipated a lot of the carnage that has transpired, the outright brazen fraud and corruption both on Wall Street and in the White House/Congress is truly mind-blowing.

Wednesday, January 13, 2010

Prominent Mining Executive Says Gold Will Eventually Go To $5,000

Rob McEwen is one of the most well respected professionals in the precious metals business.  He built Goldcorp into one of the world's biggest gold mining companies, with the lowest mining cost per ounce.  Now he runs the junior exploration mining company, U.S. Gold.    When I first got into this sector over 8 years ago, Goldcorp was a $2 stock.  It's now over $40 and pays a monthly cash dividend.  I think it's safe to say that McEwen's views should at least be taken into consideration and respected.

Rob was interviewed on Bloomberg yesterday and said he believes gold will hit $2000/oz in 2010 and eventually hit $5000/oz. in the 2012-2014 timeframe.  I know a few years ago McEwen was the first visible mining executive to call for $1000 gold.  This interview is short and worth watching (kudos to Ed Steer at Ed Steer's Gold & Silver Daily):       VIDEO LINK

Tuesday, January 12, 2010

Federal Workers Earn More Than Twice The Average American

Check this out from Casey's Daily Dispatch:

"As you probably expected, the loss of employment has occurred entirely in the private sector, as Uncle Sam grows more bloated each day. If you happen to be in the private sector, it also might not psych you up too much to know that the average pay per federal worker in 2009 was reportedly $75,419, while per capita average annual income across the U.S. is only about $36,000."

Next time you have to wait in line at the grocery store, don't get pissed at the check-out clerk because they earn less than the typical Federal employee and they are infinitely more productive.  Here's the link to Casey's newsletter, which is free and worth subscribing to for the cost of an email:  LINK

Here Is Why Dollar Bulls Are Wrong

and why Dennis Gartman will end up looking like an idiot for promoting getting long the U.S. dollar. The big Wall Street banks have accumulated a record short position in the U.S. dollar - the chart is courtesy of the erudite and savy Trader Dan Norcini at

The red line represents the big Wall Street banks and the massive size of their bet against the U.S. Dollar, the black line represents the Dennis Gartmans of the world and the institutions who are betting against the big banks; the blue line represents the small-fries who robotically trade based on what they hear on CNBC...the small fries and large funds will get fried once again by Wall Street:

US-Dollar-Chart-COT-as-of12-29-2009 -

If you follow the real money, you might make some of your own.  If you listen to the shills on CNBC, you are guaranteed to end up waiting in line for Government entitlements.

Sunday, January 10, 2010

Hey Harry, Exactly What Does "A Negro Dialect" Sound Like?

I was going to leave this one alone, but the more I thought about it and discussed it with others, the more convinced I am that Harry Reid should - at a minimum - relinquish his leadership position in the Senate, finish out his term, pull out of a re-election bid, and go back to Nevada and crawl back into his racist, bigoted, redneck desert cave and disappear from civilized society. 

But this won't happen because Obama needs Reid in order to jam through the wildly unpopular health care bill that Reid is in charge of dragging through the Senate using any unsavory, corrupted political tactics required to get the job done.  So Obama has exercised political expedience and turned the other cheek for the sake of saving his arrogant political agenda.

Reid's comment reflects incredibly poorly on the people of Nevada who support him and on the Democrats who are standing by tolerant and without rebuke.  Rest assured, if a Republican was caught making the same remark, Al Sharpton and Jesse Jackson would have a lynch-mob gathered outside of the offending politician's office demanding his political scalp and I'm sure Obama would be taking a much different public tact.

It's beyond contemptible that Obama has rolled over like this on Reid's remark. To begin with, using the term "negro" harkins back to the 40's and 50's when blacks were "separate but equal." I wouldn't be surprised if Reid secretly thinks there should be separate bathrooms and water fountains in the Senate building for whites and "those colored Congressmen with the funny dialect."

Reid's remark was in direct contrast to the spirit and message of Obama's campaign and election victory, which is that Americans have transcended racism and that our educated, advanced society is blind to skin-color.  Obama is pathetic for not at least censuring Reid over this and I predict there will be a backlash from a fair portion of his black support base. To be quite frank, Reid's language was so patronizingly colloquial and seeded in bigotry that he should do the right thing and resign immediately.

Friday, January 8, 2010

Musings On The Markets - "A Penny For The Old Guy"

It appears as if the Asians tried to "game" the Comex by dumping gold overnite ahead of the jobs number and got their fingers burned. This is an epic reversal for the metals on a "jobs lost" Friday. This is incredibly bullish.

The Fed has made it clear that they are going to have to ramp up their printing press, the Treasury yield curve is starting to price in an acceleration in inflation - either dollar devaluation/money supply expansion or actual price inflation, or both - and the Obama Government loses credibility now on a daily basis. The stock market - contrary to the babbling ignorance expressed by those on CNBC/Bloomberg (and now NPR) - is not reflecting the expectations of robust economic growth, but rather the clear and present signal that the Fed has no choice left but to hyperinflate the money supply in order to monetize growing Treasury issuance and the accelerating collapse of commercial and residential credit markets. If we have any kind of surprises this year, it won't from an unexpectedly strong economy but from an unexpected move higher in gold.

On an anectdotal note: we were surveying the home listings in the Denver area online last night and were quite stunned by the large number of listings in zip codes most affected by bubble-pricing. Even more shocking was the number of homes for rent on Craigslist. Oh ya, there are now 37 million people in this country - over 10% of the population - now on food stamps.  Our economic system is drifting into an economic Heart of Darkness - "Mistah Kurtz He Dead."

This just in:  the Government household survey show 680,000 jobs were lost in December.  This report, which never gets any televised media exposure and won't reported in newspapers tomorrow, is considered to be infinitely more accurate than the HIV-cocktail headline-reported number.

Thursday, January 7, 2010

Enough Is Enough: Time To Fire Geithner

Geithner is a true scumbag and that should have been quite apparent in the way that he released the news that the Treasury was removing the bailout limitations on FNM and FRE on Chrstmas Eve, when no one was around to see the news as it hit the wires.  It was also done strategically like this in order to avoid the Congressional approval that would have been required had the decision been implemented just 8 days later in the new year.  But Geithner should have never been given the job of Treasury Secretary in the first place after it was revealed he was a habitual tax cheater.  Shame on Obama for not withdrawing his nomination of Geithner and shame on Congress for confirming the appointment.

NOW it appears as if Tim Geithner intentionally told AIG to violate SEC laws by instructing them, as then-Chairman of the NY Fed, to withhold information from the public about the details of the close to $200 billion taxpayer bailout of AIG.  From Bloomberg News:
The Federal Reserve Bank of New York, then led by Timothy Geithner, told American International Group Inc. to withhold details from the public about the bailed-out insurer’s payments to banks during the depths of the financial crisis, e-mails between the company and its regulator show (Here's the link:   Time To Dump Geithner)
We already know that Geithner paid out 100 cents on the dollar, using Taxpayer money, to the banks involved, knowing full well that market value was, at most, 30-40 cents on the dollar and likely a lot less.  But even more stunning is the email evidence showing that Geithner instructed AIG to hide these fetails from public - details which AIG was going to originally disclose:
AIG said in a draft of a regulatory filing that the insurer paid banks, which included Goldman Sachs Group Inc. and Societe Generale SA, 100 cents on the dollar for credit-default swaps they bought from the firm. The New York Fed crossed out the reference, according to the e-mails, and AIG excluded the language when the filing was made public on Dec. 24, 2008.
Enough is enough, Barack.  Time to start cleaning up your first-year catastrophe and try to start doing the right thing for the people who gave you the benefit of huge doubt and voted for your platform of change and reform.  As it stands now, the only difference between Obama and his predecessor is that Bush never made any attempt to lie about the fact that he was going to screw the Taxpayer for the benefit of Big Corporate America.

Geithner should be terminated immediately and investigated for tax fraud and violating SEC laws.  The evidence is clear and unambiguous.  This should also lead to a full investigation of Geithner's background.  It's probably too late for Obama to save his chances of being re-elected, but at least he can start laying the groundwork for the future of this country by upholding his campaign platform promises and embarking on real Change and reform.

Monday, January 4, 2010

Bernanke Is Either A Complete Idiot OR An Unambiguous Liar...

In some respects, I would say that both descriptions apply.  With regard to his speech yesterday - which has attracted quite a bit of attention as well as raised a lot of eyebrows - I would assert that Bernanke has taken the "politically pragmatic" tact, which would otherwise be known as "lying one's ass off and passing the buck."

Bernanke asserts that the low interest rates were not responsible for fueling the housing bubble and that regulation was "too late" to stop the whole process.  This is utter and complete nonsense. Quite frankly, in many years of watching and evaluating statements made by policy-making officials, I have never seen a statement as absurd and lacking credibility as ones made by Bernanke yesterday.  I find it hard to believe that Bernanke actually believes this garbage explanation - and if he does then his role as Fed Chairman should be terminated immediately, because his academic, intellectual and professional credibility would be called into question. 

With respect to interest rates, it was both the low interst rate policy implemented by Greenspan, and extended down to zero by Bernanke, that directly contributed to the blowing up of housing prices by allowing buyers to pay substantially higher prices which were justified by lower monthly payments derived from lower interest rates.  Even more significant was the continued flooding of money into the system, directly by the Fed ramping up the money supply and, indirectly, by the Fed relaxing capital standards, which allowed banks lend a lot more money against their balance sheet and assume more risk in the form of bigger mortgages and much higher mortgage debt/equity ratios.  Moreover, the capital flood provided by the Fed allowed the monstrous expansion of the securitzation machine operated by Wall Street, which fueled the ability of both the GSE's and private banking sources, like Countrywide, Washington Mutual and Lehman (Aurora Loan Services), among many others, to raise hundreds of billions in very risky capital and in the form of deadly off-balance-sheet derivatives.  The Fed, led by Bernanke, knew all of this was occurring and yet did nothing to curtail the deadly systemic mortgage finance machine.

As for Bernanke's statement that regulation came too late to stop the bubble, that comment is as patently absurd as his statement about interest rates.  Why?  Because the regulatory checks and balances were already in place.  It was the lack of enforcement of these regulations that allowed the massive ratings fraud perpetrated by the rating agencies, enabled the complete deterioration of mortgage underwriting standards that fueld the Alt-A/subprime boom and permitted the catastrophic amount of leverage which was assumed by all financial intermediaries.  Contrary to Bernanke's statement, it was his own lack of enforcement of many of the regulatory functions which fall under Fed oversight, among other Federal agencies, which allowed lending fraud at all levels to fuel home prices to such economically and financially presposterous levels.

I thus would request that the real Ben Bernanke please step forward.  Are you the political animal who made a disingenous attempt to evade your role in the ongoing collapse of our economic system, or are you the imbecile who gave a speech with statements so ludicrous that they insulted the intelligence of anyone who bothered to pay attention to what you said?  Our system absolutely does not need a lot more regulations piled on top of the ones already in place.  It does need leaders and policy-makers who are willing to do the right thing and honestly and rigidly enforce the existing regulations.  I believe it's too late for tu Ben?

Saturday, January 2, 2010

Viet Nam's Decision To Close Its Gold Trading Floors

I have yet to see a credible "official" reason for the closing of the Viet Nam gold exchanges.  I just got off the phone with a colleague, however, who does business with some Cambodians.  The person he deals with told my colleague that there is significantly more demand for gold in Cambodia and Viet Nam than there is supply and that most of the gold that is sold to the citizens in those countries is smuggled in.  This account is consistent with the excellent reporting on Viet Nam gold trading provided on a daily basis to the Midas report at by John Brimelow.  Viet Nam has quietly become one of the largest gold importers of gold in the world.  Apparently, as per the Cambodian source, the voracious appetite for gold is now endemic to all of Southeastern Asia.  Even more interesting, this source told my colleague that Honk Kong and Singapore are slowly usurping London as the nexus for global physical gold trading.

I have postulated for a while now that part of China's long term goal is to become the largest owner of gold and to control the global gold trading market as part of its plan to become a global economic superpower.  All the indications are there that this is now occurring, including its recent move to allow - and even encourage - its citizens to accumulate gold and silver.

Getting back to Viet Nam, I suspect that the Government's decision is an attempt to increase control and regulation of the gold market, as Viet Nam was actually the largest importer of gold in 2008.  Apparently this large amount of buying has put downward pressure on the dong (Viet Namese currency), as citizens have been en masse dumping the sovereign currency in exchange for gold.  Ultimately, I believe this will put upward pressure on the global price of gold, as investors in Viet Nam rush to buy as much gold as they can before the end of March, which is when all 20 gold trading floors are required to stop operations.