Monday, February 8, 2010

Some Monday Observations...

First, the run on bullion last week in the U.S. was bona fide.  We were trying to buy some sealed mint boxes of 1 oz. silver eagles today. One national dealer had 4 boxes only and wanted spot + $2.69. Tulving, APMEX and CNI are cleaned out. Tulving told me they didn't know when their next order from the Mint would be in and would not sell any with an "expected delivery" date. This is what was interesting: CNI also would not sell sealed mint boxes with an "as of" ticket AND they told me that the Mint has become very unreliable in terms of sticking to an announced delivery date. This is the first time I can recall that sealed mint boxes were not available on an "expected delivery" date basis. Sealed boxes of silver maple leafs are still available, but what makes the silver eagle situation interesting is that the U.S. Mint is legally obligated to produce enough silver eagles to meet demand.  January set a record for silver eagle sales in the U.S. and we still have a very small percentage of the population buying bullion. Imagine what this will be like when a much higher percentage of the population decides that holding U.S.dollars is too risky.

Second, in the irony of all ironies, the Mortgage Bankers Association just unloaded it's headquarters, which it purchased less than two years ago, for a whopping 48% loss.  Here's the link to the story which I sourced from http://www.bankimplode.com/LINK.   I don't want to be labelled as a grave-dancer, but that story makes me laugh.

Third, the delinquency rate of Prime Jumbo mortgages inreased for the 32nd straight month to just under 10%.  This would be the category of mortgage that was used to finance McMansions bought by white collar social climbers who didn't have enough for a down payment large enough to make the monthly payment manageable and who likely have lost their job or have income tied directly to the bubble areas of the economy (think real estate brokers, high end car salesmen, stockbrokers, mortgage bankers, etc).  Here's a link to the article:  Housing Situation Getting Worse.

Finally, I'm starting to see a lot more commentary which points out how absurd it is that the financial media in this country insists on reporting about how bad the sovereign troubles are in Europe, when in reality the situation in the U.S. is worse than in Europe, with several large States on the brink of bankruptcy.  Case in point, Greece has about $408 billion of outstanding debt, of which roughly $152 billion is external. California has around $540 billion in total debt, including general obigation bonds, municipal bonds and special project/funding facilities.  Add to that the $21 billion projected budget deficit for this year plus the fact that California is currently borrowing heavily from the Treasury to pay unemployment claims and essentially California is completely bankrupt.

The point is that, despite what you hear in the news, the economic conditions in this country continue to deteriorate.  I mean, what's the message being signalled by the fact that the Mortgage Bankers Association, of all entities, has decided to sell its building rather than wait for the market to improve?  Obviously insiders do not believe in the "improving economy" theme or the "real estate is at a bottom" theme that is being propagated by the propaganda machine in this country.  And, as suggested by the run on gold and silver bullion last week, increasingly people are starting to understand the Truth and are expressing this understanding by exchanging "full faith and credit of the U.S. Govt. notes" (i.e. dollars) for gold and silver, otherwise known as "real money" for the better part of 5000 years.

18 comments:

  1. Its true Greece is small to the EU in comparison to say CA is to the USA... But this is what people were saying about the subprime fiasco, its the conatgio thats the issue here. If the EU does not handle the Greece situation correctly then this debt crisis could spread to other member states and break the EU down.

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  2. Very interesting. Any ideas on who the big buyers are of the Eagles?

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  3. @gyc: I think the buyers run the whole spectrum from individuals to hedge funds to even smaller local coin dealers who buy from Tulving when the Mint is out, since local coin dealers get rediculous mark-ups, especially on silver eagles.

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  4. I think that Precious Metals will be up ina single day by more than 200% without advise

    I think of this like an elastic...boooom

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  5. Anonymous: agree. but the relativity of the situation is there is not as severe as it is here. that's what's so hilarious. technically the U.S. Government is insolvent, and it would have already collapsed if it the dollar wasn't the global reserve currency.

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  6. And one more point, at some the countries that are rolling their Treasury holdings on refunding auctions will, at some point, stop rolling and will expect to be paid out, thereby reducing their Treasury exposure. This is when they've decided that they no longer are interested in holding onto quickly depreciating U.S. dollars.

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  7. I think Japan is going to dump US treasuries if the media here does not leave Toyota alone soon.

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  8. LMAO... you a grave-dancer? perish the thought.

    BTW, that was me pulling into Tulving's vault with my forklift the other day.

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  9. Dave I read a true bear market will be when people are selling the usd and us stocks... My question is can we expect to see, say google, at say 10 bucks?!?! This is what John Williams is warning about a dumbing of us assets and the usd by the rest of the world. So do you think the stock makret will tank as the usd is tanking? I'm guessing investors at that point will feel the common shares will no longer be worth anything. Whats your take on this?

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  10. anliu: hard to say how this whole thing unfolds. I disagree that a "true" bear market requires the dumping of stocks and the dollar. we could have hyperinflation which causes the dollar to tank hard and the stock market soar, until the dollar completely collapses, in which case the stock market would collapse.

    I guess if we get into a situation where the dollar is going zero and the stock market is going toward zero, then we might be more worried about a big war.

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  11. Dave with all the talk about the fed surreptiously monetizing the treasury auctions, why haven't these actions disrupted the fx market... more specifically why hasn't the bottom fallen out for the usd?? This usd rally, regardless of the excuses, is un-belivable in the face of fiscal reality.

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  12. That's a great question. The simple answer is that the dollar was extremely oversold with extreme short interest and it was overdue for a technical bounce. Currencies tend to overshoot both to the upside and the downside. Look at July '08 when the dollar was on the verge of breaking to all-time lows and then proceeded to make a move over the next 9 months that took it from 72 to 90.

    The other answer to the question really has no one right answer. Of course on a fundamental basis the dollar is way overvalued. But relative to other currencies in the USDX index? Hard to say. Right now the perception is that the euro, yen and pound, the 3 largest weightings in the USDX are in bigger trouble than the dollar. I don't beleive that's the case but that's what the market is trading on right now. On the other hand, the commercials/banks are now record short the dollar and the large trader/specs are record long the dollar and record short the euro. Rest assured the commercial/banks will win that trade, which means the dollar may soon head back down.

    The other component is that the currency markets are highly manipulated and right now it's not in any of the large Treasury holder's interests to see the dollar fall precipitously. I think it's impossible to know just how much the Fed intervenes and how it intervenes in all the markets, especially the dollar and Treasuries, without getting full transparency. But I've read some great analysis that explains how interest rate derivatives, and I'm sure other OTC derivative structures, currency swaps, etc, are used to manipulate the Treasury and currency markets.

    Ultimately, my view is that we will reach a point in time when the Chinese and OPEC say "no more dollars - you must pay us in our currency or no trade." That's when the dollar will truly collapse.

    Hope that helps and I'm positive there are lot other components to answering the question.

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  13. Yo dood, Watch da metals ahoy, next week should be interesting. Longer than I've been in months and ready for quick & violent gains.

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  14. dave i don't know about u, but watching rich dad poor dad, Kiyosaki pump gold is making me wana throw up and sell my gold stash!

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  15. They call this the bicycle pump. It is called the bicycle pump because the only thing being put is hot air. The aim is to clean out the retail investors, do not listen to CNBC or MSSNBC look at the COT reports and do what the professionals do. The best bull to slaughter is a reatil bull. That is you and I.

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  16. I think one (monday)morning we will wake up and find gold and silver bullion gone to the moon.

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  17. No question about that. It's not a matter of "IF" but of "WHEN"

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