Hewlett Packard Getting Ready To Axe 30,000 Jobs

Now all Obama has to do is give them student loans and they can go study sanitation engineering at University of Phoeniz online and they'll disappear from the labor force!  LINK  Great way to once again lower the unemployment rate!

John Boehner: "Obama Debt Ceiling Increase Demand Took My Breath Away" .

I consider gold outside my regular investments.  I don't trade bullion.  I hold it as a unit of wealth.  I know that one hundred years from now, bullion will possess purchasing power.  The dollar?  I don't know.  I do know that the history of every fiat currency is a descent into worthlessness.  No fiat money has ever survived.  - Richard Russell on King World News LINK

It's coming, people.  Both a big debt ceiling increase and a lot more QE.  Anyone who thinks the Fed is serious about not printing any more money is either cluelessly naive or hopelessly ignorant.  The apathy and nonchalance about what is happening in this country is beyond appalling.  And now Charles Schumer, a supposed Democrat, wants to prevent anyone giving up their U.S. citizenship from re-entering the U.S. ever again.  Dare I remind Herr Schumer that is exactly the kind of law the Nazis imposed on Schumer's relatives (my relatives too) in the 1930's?  Those who forget the past are condemned to repeat it (Santayana), Chuck.

Here's a list of Schumer's largest campaign contributors:  LINK.  A mix of wealthy, sophisticated Wall Street, law and accounting firms.  I would like Schumer to come out and publicly investigate the partners and upper management of each one of those firms for offshore tax shelters and tax-evasion schemes.  There's no way in hell that Schumer can say his biggest donors are not also big tax evaders.  No f--cking way.  F-ck you Schumer.

Aah but I digress.  The Fed is already beginning to show its hand on QE.  I don't know if it will be overt money printing/Treasury buying or if they'll use some other kind of veiled money printing scheme, like the massive dollar/euro swap facility that's in place and likely to go parabolic in size.

Circling back the Boehner's statement after his meeting on budget and fiscal issues with King Barack, I have to believe that the number Obama put in front of Boehner for a higher debt ceiling is somewhere in the $18 to $20 trillion range.  And Obama wants this done without commensurate budget cuts.  Here's the LINK

Make no mistake about it, if this country was forced to use a cash in-cash out spending procedure, there would not be any need for a debt ceiling increase.  Until that happens the amount of Government debt issued and outstanding will continue to go parabolic, in bubble fashion:




THIS, my friends is what the chart of an asset class that is in a bubble looks like.  The relative price of gold is probably right around 1985 on this chart.  Gold and silver will never be in bubble-mode until their long term charts look like this.

This is why big institutions, domestically and abroad, are beginning to move their capital into gold.  We haven't even begun to see the massive wave of institutional capital pile into the gold and silver asset class.  We have seen this already in Treasuries, and it's coming to an end.  Thus, the very crux of the reason why the Fed will soon be printing a lot more money and why gold and silver are getting ready to launch into their next cyclical phase higher.

I rarely like to stick my neck out and put a price/timeframe projection on the metals because the market is so highly manipulated.  But I will say that I am betting a lot of my own money that gold will be over $2000 and silver will be over $50 before most people have put up their Christmas trees - that is, if they can still afford one...

Japanese Pension Fund Switches To Gold

The IMF (announced $2.3 billion gold purchase), Soros, Pimco, Texas Teachers Retirement fund - anyone see a definitive trend starting here?

From the Financial Times (Mark at Strategic Energy Research gave me the heads up):

Okayama Metal & Machinery has become the first Japanese pension fund to make public purchases of gold, in a sign of dwindling faith in paper currencies...With institutions warming to gold, too, demand could grow further.

Not much I can add to this article.  Here's the LINK.  You'll need to register for a free password.  The FT is worth the effort.

What I will add to this is that we are seeing Central Banks, large institutions and wealthy global investors openly converting paper money into gold.  Please contrast this with bubbleheads and financial idiots in this country (like CNBC, Bloomberg and Dennis Gartman) who continually pump and promote a fiat, paper currency system in collapse.

Soros Quadruples His Investment In Gold

Everyone in the precious metals/mining stock sector is looking for anything to grab onto for optimism.  Nothwithstanding that this type of sentiment always demarcates a bottom, and notwithstanding the fact that the basic fundamentals underpinning the precious metals - like catastrophic Government deficit spending and disastrous Central Bank negative interest rate policies - get stronger by the day, here's an excellent harbinger of a potential bottom/upturn in the metals/miners:  Soros has quadrupled his exposure to gold via GLD:  LINK.

This sell-off in the miners has become silly.  One particular stock AUMN (which acquired ECU Silver) is now selling at a little over 20 cents per old ECU-equivalent share.  At one time in 2007, ECU was over $3.30/share.  This valuation implies that AUMN's silver in ground is valued at 30 cents/ounce.  That is retarded.  A couple years ago silver miners were selling for $1/oz in the ground.  The price of silver is higher now and margins have exploded.

I don't know when this sell-off in the sector will end and the next move up will commence, but I just got off the phone with a longtime friend in NYC who told me that he just spoke to a very plugged-in "insider" (i.e. politically connected) type who told my friend that a massive QE in Europe and in the U.S. is coming and that this is the flush in precious metals that you want to use to back up the dump truck and buy because there might not be another opportunity like this going forward.

Back to Soros, I've noticed over the years that he has had good success as a market-timer in gold and mining stocks.  As a matter of fact, he was the largest shareholder at one point in the predecessor company (Apex Silver) that became Golden Minerals that took over ECU.  He sold Apex almost at its apex.  At any rate, it is my strong belief that he uses GLD to index the price of gold for trading purposes.  He's smarter than me and must know the potential Enron-type legal structure that belies the GLD trust structure.  I would also bet a lot of money that Soros, given that he is a Holocaust survivor and Nazi occupation escapee, has accumulated a massive personal holding of physical gold.

For what it's all worth...

It's Simple - Think Like A Criminal

When you see that money is flowing to those who deal, not in goods, but in favors – when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you – when you see corruption being rewarded and honesty becoming a self-sacrifice – you may know that your society is doomed.  Ayn Rand, "Atlas Shrugged" (Francisco D'Anconia money speech)

A good friend and colleague asked me my thoughts on the recent blogosphere posting over the weekend about the disclosure in JPM's 10-Q of pending litigation related to mortgage originations at JPM, Bear Stearn and Wash Mutual totalling $120 billion.

The original source article which discusses this litigation is HERE

Let me be clear about one thing before I express my view on how this will turn out. I am 100% convinced that the housing bubble was precipitated and perpetrated by complete fraud, corruption, racketeering and felony activity. I think the people who were running the big banks involved like Countrywide, Washington Mutual, Bear Stearns, Merrill, Lehman, Bank of America, Wells Fargo and JP Morgan should be properly and rightfully investigated and prosecuted in criminal jurisdictional venues that are free from political influence and cronyism. Given that the Government, especially the Obama Justice Department, not only refuses to investigate and prosecute the big banks - thereby enabling the massive fraud and corruption to continue - we know this will never happen.

Many people over the past few years have asked me how I've been able to discern and predict the massive dislocations and events of collapse that have occurred and are unfolding. It's really quite simple. You just have to understand that our system has been taken over by, and is being run by, criminals. So you just have to think like a criminal. Once you free your thought process from any assumptions that people in power are "good" and our leaders are working for the people who voted them in office, then you can think objectively and thoughtfully about what is happening in the United States.

I read through the litigation disclosure in the footnotes to JPM's latest 10-Q. Here's the LINK

If you read carefully and between the lines in the sections preceding the part about the potential $120 billion face value liability, you'll see that much of JPM's recent mortgage-related litigation has ended in settlements or is being litigated with many plaintiff claims being denied or substantially reduced in scope. Part of the problem in litigating plaintiff claims of fraud is the law and legal precedence gives the courts a lot of leeway for interpretation in how legal theory and precedence is applied. For instance, if you read through the footnote that starts on pg 158 of the 10-Q, you'll see that plaintiffs named JP Morgan as a defendent on claims related to Bear Stearn and Wash Mutual on the theory that JPM was the successor to Wash Mutual. Claim denied.

Quite frankly knowing what I know about the legal process, especially at the District court level, plus hearing plenty of war stories from a good friend who is a trial attorney in Denver, most District court judges are the by-product of heavy political and economic influence. Why? Because in many States like Colorado, County court judges are appointed by the Mayor and District court judges are appointed by the Governor. In other words, the process of judicial appointment has been completely politicized. If you don't think that politicians' decisions about judicial appointments are influenced by economics, then you are miserably failing the requirement of thinking like a criminal in order to understand what is happening in this country. If you think like a criminal, you'll understand that in our current legal system judicial decisions at the District court level are heavily prejudiced in favor of the party with bigger economic influence.

Circling back to the $120 billion disclosure in JPM's 10-Q, understand that this is a number that JPM's auditor required JPM to disclose on the premise that there might be a 2% chance that JPM would ultimately be subjected to a claim this big. But also, per the previous comments, understand that the likelihood of ultimately seeing some kind of actual settlement of even 10% of this amount is quite low. Why? Again, think like a criminal. Does anyone really believe that a District court judge is going deny the many motions of objection or dismissal that JPM will inevitably file using tenuous legal arguments and barely relevant appellate court citations in order to object to most of the claims?

To be sure, ultimately there will likely be some kind of settlement. But it will be at a small fraction of the $120 billion total prima facie claim and it will ultimately be predicated on the ability of JPM's counsel, Sullivan and Cromwell and Greenberg Taurig, to beat down the plaintiffs with litigation chicanery. Greenberg Taurig specializes in buying politicians and influencing the Government. I'll take Greenberg's ability to maneuver the courts and defend JP Morgan over any plaintiff attorney in the country.

The Financial World's Worst Nightmare

"We're getting to the heart of why you own gold"  - long time friend and colleague,
               Wistar Holt (Holt & Shapard Capital Mgmt)

I think every useful blog under the sun has re-hashed the JP Morgan/Jamie Dimon bombshell dropped on the market last night, so I'm going to try to be brief, to the point and hopefully add some "color" and information that is new.

First, Jamie Dimon did a superb job of throwing very expensive, opaque lipstick on the world's ugliest pig and catering the to the Wall Street analysts and media who take what he says and spin it to the public in the best possible light.  In fact, I just saw one headline on Marketwatch that said "JPM stock is lower due to a a bad trade."  A "bad trade?"

What we just saw last night was the result of Wall Street's equivalent of unsupervised special ed. children playing with financial nuclear triggers.  How do I know this?  I used to be one of those unsupervised kids back in the 1990's, when the magnitude of the capital being played with was a small fraction of what it is now.

This is not a "bad trade."  This is a massive proprietary (i.e. bank trading/speculation portfolio) position that has blown up.  Dimon fraudulently refers to it as "an economic hedge" that didn't work as well as they expected.

Jamie Dimon is either completely ignorant of what is going on in JPM's speculation-ridden proprietary trading operation or he's lying.  Or a lot of both.  If he's clueless, then he should be terminated by the board immediately.  If he's lying, he should be investigated by the Obama Justice Department.  But we know the latter has no chance of happening, as Eric Holder's Justice Dept has taken financial fraud prosecutions to a 20 year low.  Not surprising since JP Morgan and other Wall Street banks are the heart of the client list of Eric Holder's pre-Justice Dept law firm.

With regard to the idea that - as Jamie Dimon put it - this is a $2 billion dollar economic hedge that didn't work.  Make no mistake about about it, the true size of this horror is easily several multiples of that reluctantly disclosed "error."  This quote is from a good friend who has spent his career at four different Wall Street firms, including the pre-collapse Lehman - in other words, he knows quite a bit about what goes on behind the scenes in bank risk portfolios:  "Saying this is less than ten times the disclosed amount is being generous."

What we know for sure is that there is a derivatives trader in London working for JPM who was running a trading/capital position that is thought to be as large as $200 billion.  For JPM/Dimon to publicly claim that the embedded loss in this position is only 1% is complete fraud.    To begin with, JPM's stated book value as of 12/31/11 is $183 billion.  There is no way in hell that JPM would call a surprise conference call to disclose a loss from a bad hedge that amounts to less than 1% of shareholder equity.  Even by today's absurdly loose accounting standards, anything less than a 5% event is not considered to be meaningful. 

What this tells us is that JP Morgan's liquidity is potentially threatened by what is unfolding in its $78 trillion derivatives book (per recent OCC filings).   Even worse, despite all the claims to the contrary, and Dimon's insistence of JPM's "fortress" balance sheet, the risk managers at JPM have no idea how to hedge $78 trillion in exposure and this myth about "net" vs. "notional" derivatives exposure is complete fraud.

The other disclosure by Dimon last night that really irritates - and one that is part of the expensive lipstick he liberally applied - is the remark that JPM has $8 billion in "unrealized" gains in its "available for sale" portfolio.  Give me a break.  I would challenge Dimon to go ahead and sell those holdings at market and let's see what the real number is.  I would not be surprised if what is realizable is a small fraction of that.  While we won't know what the true mark to market status of JPM's book value is, I would bet meaningful money that it is less than half of what is being stated in its 10k/10q filings.

Beyond all of this, we really don't know much.  JP Morgan did a masterful public relations job at obscuring the facts and minimizing the data and details that would be meaningful to any analyst who is looking for the truth.  But we should expect nothing but this kind of useless bullshit given that the Obama Government has made it clear that they are not going to do anything to implement supervision and law enforcement on the group of banks and individuals who have contributed and raised the most amount of money for Obama's 2008 and current election campaigns.

For source material and good articles on some of the numbers I used above, please read these links:
JPMorgan Whale Harpooned?,  Financial Times,  Bloomberg

Those do not take long to read and will shine some light on the truth in the context of my commentary.  Have a great weekend.

Could This Be The Start Of "The Big One?"

JAMIE DIMON'S TEMPEST IN A TEAPOT

I wondered why the SPX futures crapped out right after the market closed.   JP Morgan disclosed that it has lost $2 billion on synthetic credit derivative bets in its Chief Investment Office division.  Not sure why JPM had to wait until the market closed. Surely they knew about this before the market closed.  LINK

Rest assured that the true magnitude of losses is several multiples of this "mark to fantasy" disclosure.  Also note that the Chief Investment Office is the division in which JPM conducts its precious metals trading/manipulation activities.

I have to believe, given that Wall Street is monkey see, monkey do, that several other Too Big To Fails have similar problems with their credit derivative portfolios.  But don't lose sleep over this because the SEC, CFTC, FINRA, FASB and the Justice Department will see to it that Wall Street will never have to honestly disclose its true financial condition.  The big collapse that eventually ensues will be used to cover the mess and they'll blame everything on Europe or Iran. 

This is what I envision:  Jamie Dimon gets on tv and says "we didn't see this coming, but some rogue dressed in white Islamic rags wearing a Star of David around his neck, gold coins falling out of his pockets and speaking Italian came rushing onto our trading floor and detonated a bomb stuffed in his underwear.   Our systems blew up and Wall Street collapsed - sorry dudes."