Jobless Claims - The Truth

Once again the Government manipulated jobless benefits statistic - and the number which is the headline number read and reacted to all over the world - is much lower than the "unadjusted" raw number.  The reported number was 404,000, which was a decline from the previous week's manipulated number and lower than the market consensus expectation.  HOWEVER, the actual unadjusted number of claims was 550,594.  So there it is.  The golden truth.  Here's the Dept of Labor press release:  LINK

Even more disturbing in that report - and a number which likely 98% of all market professionals and 99.9% of everyone else in this country who at least attempt to stay informed - is the fact that the total number people claiming jobless benefits under all of the programs jumped by over 401,000 from the previous week.  So nearly 1/2 a million more people either can't find work and qualify for a weekly welfare stipend, or just can't be bothered with looking for work since they do qualify for taxpayer largesse.   The total number of capable workers now feasting on part of your paycheck is 9,607,424.

The truth will set you free.

More Doom For The Housing Market

Note: My vision may be doomy and gloomy, but it is not seeded in pessimism and negativity - rather it is a product of realism and a desire to understand the truth.  The truth is our only hope for salvation.  After all, the truth is the agent of purification...

I find it amusing that everyone with whom I discuss the housing market seems to understand how bad the market is everywhere except in their own area.  I was chatting with someone a couple days ago about Denver area real estate who is expecting a bounce in the Denver market and remarked that Denver seemed to be in better shape than most big cities.  I agreed that Denver's economy is strong on a relative basis but then I pointed out to her that I saw a list published last week of the top-10 cities for the rate of foreclosures and Denver was 10th on that list.  Hmmm...and the foreclosure situation will get a LOT worse this year:  OOPS

That metric leads nicely into this blog post I came across this morning which describes one of the fundamental problems with the housing market - and one to which I have pointed for a couple years:   almost everyone who wanted to, or could, buy a house has already bought a house over the last 10 years and the pool of available homebuyers is drying up.  And to make matters worse, many of those buyers are now in some stage of mortgage default.  With foreclosures piling up and home-ownership rates declining, the pool of actual buyers is rapidly declining, especially relative to real inventory (real inventory = Govt/industry-reported inventory PLUS shadow inventory, where "shadow inventory" is defined as those who want to sell plus all the homes in default/foreclosure but not included in bank REO).  This blog post discusses the declining pool of homebuyers, LINK.  A post of mine earlier this month (or maybe late last month) better quantifies the shadow inventory metrics.

The mortgage bankers association's weekly mortgage application index was released today and showed further deterioration in the purchase index.  Clearly, with interest rates beginning to trend higher and the housing market in a seasonally "soft" period in terms of demand (I'm seeing "price reduced" signs on top of "for sale" signs all over Denver), you would think that anyone thinking about buying a home would want to lock in the current mortgage rates - and take advantage of "price reduced" deals - and that on a seasonally-adjusted basis, the purchase index would at worst be flat.  Historically, the behavioral statistics for the housing market show that buying activity spikes when interest rates start to rise.  We are not seeing this in the numbers this time.

Which leads me to my final point.  By now everyone knows that the latest numbers show that China (and Russia) unloaded some of their Treasury bond holdings in November (the data has a 2 month lag).  This is not good news for interest rates in this country if that becomes a trend, even if the Fed continues to fill in for the declining demand for - and  rapidly expanding supply of - Treasuries in order to make sure Treasury auctions get funded.  And there's no doubt in my mind that the Fed will do this.  Even after the Fed announced QE2, bond prices at the longer end of the curve (10-30 years) started to drop and interest rates rose.  Expect this trend to continue and expect mortgage finance rates to climb and expect even greater weakness in the housing market this year than is expected by most.

With Gold And Silver, Forget The Charts - You Have To Watch Physical "Off-take"

First, having made that headline assertion, the daily chart on gold is starting to look neutral/bullish and the daily chart on silver - if you are a chart-jockey - suggests a bit more downside.

Now, having said that, I believe - as do several others, so my view is far from unique - that we have seen a transition in the dynamic of the precious metals market in which the sheer global demand for physical gold/silver has largely taken over the ability of U.S.-Anglo banks to manipulate prices lower using paper gold (Comex/LBMA futures/forwards).  See this essay for clarification on Comex manipulation:  LINK

The original thesis for this idea, at least of which I am aware, was put forth by GATA over 10 years ago.  One of the best datapoints for monitoring global physical "off-take" is to watch the very visible  import premiums being paid in the eastern markets (India, China, Viet Nam).  The easiest way to keep track of this is to subscribe to the Midas report at http://www.lemetropolecafe.com/ to access "JB's" global market commentary.  This is from his report that will be in tonight's Midas:

AM $3.83, PM $6.53, with world gold at $1,364.14 and $1,358.16. Ample, and lavish, for legal imports...local Shanghai gold closed at a premium of $16.55 to world gold of $1,361.95...local Vietnam gold stood at a premium of $40.35 to world gold of $1,362.57

These observed premiums are very high right now, especially for China and Viet Nam, indicating the high probability that these markets are voraciously buying physical gold (and silver). 

This is not to say that we won't experience manipulated market corrections, like the one underway in which the gold cartel has engaged in massive short-covering at the expense of "hot money" speculators who piled into the paper market recently.  But in general I think we can expect to see the illegal manipulative activities of the western bullion banks - aided and abetted by the regulators who look the other way (CFTC/Gensler) - sharply curtailed by the power of eastern market forces...got gold?  Better get some while you can.

Friday Tunes

With the news just getting worse by the day (the real news, not that which is manipulated and cleansed for general public consumption), I thought I'd let everyone greet the weekend with this cover by Widespread Panic:



Have a great weekend!

Observations On The Government Spending Bubble, The Dollar and Government Lies

Here's a great chart I borrowed from:  HERE

The amount of debt represents the difference between Government revenues and Govt spending.  Does this chart show any signs of a Government that has the ability to reduce its spending deficit?  Now, the Fed balance sheet is growing multiple billions by the day, so the real spending deficit is even bigger than is represented by the above graphic.

I'm all for the tax cuts just passed, but it has to be offset by cuts in spending.  Not only will we NOT get cuts in spending, the budget grows by the day more quickly than pinocchio's nose.

Here is what the market thinks about the U.S. Government's ability to manage its finances:

(click on chart to enlarge)

For sure, we get some technical dead cat bounces along the way, and a reader always busts my stones when we get one (but is radio silent when the dollar resumes its descent lol), but Geither - in so many words with his China rhetoric yesterday - essentially told the world that the U.S. is going to print the dollar to much lower levels.  Bernanke is putting those words into action.  It's a serious Comedy of Errors.  Here's a great analysis of the U.S. dollar situation I sourced from King World News blog.  I agree with this view:  LINK

And what is even more humorous to me is that everyone in this country is discussing the dire multi-sovereign fiscal crisis going on in Europe.  The fact is that California alone is in worse shape than several countries over in Europe combined.  Then layer on top of that Illionois, NY, NJ, etc.  I don't have time to add up the numbers, but if you include the full present value of Federal entitlement liabilities, State pension unfunded-liabilities, State/municipal debt obligations and private debt in this country, we would all wonder why news about the situation in Europe is even in the news.  Besides, China has already said it will prevent a collapse in Europe.  I have not heard China make that proclamation about this country, nor will we after Geithner took his water pistol to a battle field of political rhetoric.  It was more pathetic than Poland's calvary trying to defend against Germany's tank and air attack.

Two of the biggest Government lies that grow and perpetuate on a monthly basis are the monthly employment and inflation reports.  For a great explanation of the golden truth about the real numbers, this interview with John Williams is a must-read:  Govt Lies

Those of us who have been investing in precious metals for at least the past decade have known all along that the Govt economic reports are bogus.  The analysis of this is now starting to seep into the mainstream media, to an extent.  Certainly not the most common sources of news like the night time local t.v. news broadcast or daily newspapers.  But it's getting a lot more exposure and acknowledgement in blogosphere. 

One more must-read.  This guy has become my favorite economic analyst and his writing style is superb:  Alisdair Macleod

One has to wonder how long it will be before the Obama people decide to curtail what is allowed to be posted on the internet....it gets more Orwellian by the day.  Protect yourself with gold and silver.

The Dragon Is Hungry For Gold - Demand Outpaces Supply In China

I have regarded recent reports of market "tightness" in gold/silver bullion with a bit of skepticism, because the dealer I use to accumulate bullion coins, Tulving, seems to be swimming in gold/silver eagles.  However in the past few days some large buyers of silver (like Sprott) have mentioned that they are experiencing some delivery delays for bars and are becoming a bit nervous about the existing above-ground availability. 

THEN, there is this: 

Premiums for gold bars jumped to their highest in two years on Tuesday as worries about inflation drove investors in China, the second-largest consumer of the precious metal after India, to bullion ahead of the Lunar New Year..."There's a sudden surge in demand. Demand from China is very good and they are paying very high premiums. Refiners can't meet the demand," said a dealer in Singapore.

Here's the article LINK

You can easily track the premiums being paid for gold in countries like India, China, Viet Nam and Turkey at http://www.lemetropolecafe.com/ in the nightly Midas report.  Based on the activity in the eastern hemisphere, plus the accelerating demand for silver eagles as reported by the U.S. Mint, I would suspect that at some point the "boy who cried wolf" shortages will actually become very real.

 I also suspect that, over a longer timeframe, the entities who utilize the "fractional" method of bullion banking - Comex, LBMA, Scotia, JPM, HSBC, etc - will find themselves in a bit of trouble when the eventual "call" on the metal they supposedly safekeep happens and we find out the cupboard is mostly bare.

And even further down the food chain, the investors who have placed their full faith in the "credit" of these banking entities will be quite shocked when the paper investments - like GLD and SLV - that use these banks as custodians start plummeting in price as the spot price of gold/silver does a rocket launch.

The only question in my mind that remains is how long it will take for this sequence of events to unfold.  It has taken a lot longer than I originally expected back in 2002 for a lot of this mess to become real, so I don't cast out timetables anymore.  I will say that a long-time, very perceptive friend of mine opined recently that our system won't totally cave in until the Comex defaults on the delivery of physical metal (changing the rule to enable cash settlement is a "de facto" default).  It is at this point that a very terrifying dollar crisis will grip our system.  It's anyone's best guess when this will happen...Do you know where your bullion is?

Wow My friend and colleague Jesse sent me this - I don't have link but you can probably google the title to get the source news article:

SINGAPORE, Jan 11, 2011 (Dow Jones Commodities News via Comtex) -- Demand for gold bullion from Australia's Perth Mint has been unrelenting since gold's price dropped below $1,400 an ounce, a senior Mint official said Tuesday.

"At the moment demand is such that we cannot meet all the enquiries that we are getting," said Nigel Moffatt, Treasurer of the Perth Mint, one of the world's largest gold refiners and distributors.

"Demand for our coins and medallions is strong, but the biggest demand is coming from banks and traders looking for kilo bars," he told Dow Jones Newswires.

One-kilogram bars are the most popular trading instrument in Asia's physical market

What The Heck? Is Bloomberg News Serious?

Take a look at this headline:

Wall Street Dumps Most Treasuries Since 2004 on Growth

You've got to be kidding me.  Wall Street has been "dumping" their Treasuries into the Fed, which has been printing money like a Weimar paper company for over 2 years now.  In fact, just last week, Wall Street unloaded over 1/2 of one of the most recent Treasury issues onto the Fed's balance sheet.

Here's the link to the Bloomberg fantasy report:  Dr. Mr. Fantasy

The golden Truth about rising Treasury yields (tanking prices) is 2-fold:  1)  Globally, investors are buying less Treauries because of the accelerating credit risk of the U.S. Government.  And the Fed/Treasury has a printing press, so outright default will not happen.  But when the Fed has to monetize new Treasury auctions like the one referenced above, that is a "de facto" default; 2) Accelerating inflation.  If you don't believe inflation is here, stay tuned.

It gets more surreal by the day, people...

“I, however, place economy among the first and most important republican virtues, and public debt as the greatest of the dangers to be feared.” - Thomas Jefferson