CARTEL CAPITULATION WATCH
The DOW dropped 75 to 10,334 with the DOG sinking 30 to 1990.
The dollar only rose .09 to 90.28, while the euro lost .36 to 120.49.
The 30-year bond was hit pretty hard, falling 29/32 to 103, basis the Sep contract.
What is happening to the US trade deficit is some kind of eye opener. The dollar has been in decline for more than two years now and the trade deficit continues to widen:
8:30 April Trade deficit reported $48.3B, a record, vs. consensus $45B March deficit revised to $46.6B from $46B. **
Trivial items like US budget deficits, trade deficits used to be important to the financial markets. Now, they are numbers to be ignored, just like the real US employment numbers, the disappearing PPI, etc. Why? The Orwellians and Working Group on Financial Markets, the PPT, say it should be that way for the good of America.
The fact that our interest rate structure in the US is determined more and more by foreigners also doesn't seem to faze too many people either:
Most Treasury bonds in foreign hands
By Päivi Munter in London
Published: June 13 2004 20:23
Demand for US government bonds at foreign central banks has for the first time lifted overseas holdings to more than half the paper in circulation.
Figures from the Federal Reserve reveal that $1,653bn, or 50.6 per cent of liquid Treasuries, were held by foreign investors at the end of the first quarter.
Foreign ownership of the bonds rose by $170bn between January and March, with central banks - mainly in Asia - estimated to account for about $96bn of this.
The appetite for Treasuries has been fuelled by attempts to slow the appreciation of national currencies by buying dollars and investing the cash in Treasury bonds. The Bank of Japan, the biggest foreign investor in US Treasuries, spent Y15,200bn ($138bn) on currency interventions in the first quarter.
The surge in foreign central bank holdings has defied a sharp fall in Treasury prices, and a concomitant rise in yields, raising fears the market could fall if buying by the small number of official sector buyers slows.
-END-
Word IS gradually seeping out about the real US employment picture, but in a subdued manner:
REUTERS U.S. jobless rate misses "hidden" unemployed
NEW YORK, June 14 (Reuters) - Buried inside the official U.S. employment report each month is a little-known figure that gives a much less rosy picture of the labor market than the headlines.
The government agency that produces the data also publishes an alternative measure that tries to capture the hidden unemployed, those who are not included in the official unemployment rate for various statistical reasons.
That broader measure is dramatically higher, at 9.7 percent in May, compared with the official level of 5.6 percent.
That's an extra 5.96 million people, in addition to the 8.2 million "officially" unemployed, who are waiting on the sidelines and may at some point step back into the labor force.
Although it receives little notice, the adjusted jobless rate has important implications for Federal Reserve policy-makers because it suggests the job market will not tighten as quickly as some in the financial markets believe….
-END-
GATA’s Mike Bolser over the weekend:
Hi Bill:
After some thought about the current furious onslaught by the Fed and interpreting unpublished data, the Fed may be in the beginning of its end game for gold and interest rates. They are at least setting up a new defense position but aren't doing it with any finesse and that's a worry.
The Fed's end game must force rates higher, deliver some sort of rescue for the trillions in interest rate derivatives (IRD) while ceasing or at least thwarting gold speculation in the US and UK.
Parmalat's interest rate derivatives explosion still resonates across Europe and there may be many more like them waiting for grim announcements. How these IRDs will be resolved is anybody's guess but they must be resolved if rates go higher, as they must. Perhaps by a new class of government bond, take your pick from a basket of new government colored paper.
We know that seismic events have recently occurred through the departure of Rothschild's and AIG from the LBMA PM Fix mechanism. Suppose those things happened because they knew there would no longer BE a PM Fix after a specific date? Instead, the PM Fix would be replaced by a government fixing mechanism....gold at $375...gold at $400...gold at...take your pick.
Should the LBMA stop trading gold and silver as they have been, the COMEX and probably the Australian and TOCOM markets in addition, would necessarily follow suit, effectively bailing out all shorts and trapping all gold and silver longs with zero gain when the rest of the world (ROW) later restarted free gold and silver trading (At far higher prices) in Shanghai, Dubai and Ankara. It is this default risk that so many in our field have ignored for too long.
It is therefore my recommendation that your readers take appropriate steps to guard against such an occurrence. Entities such as the Central Fund of Canada [CEF], its counter part in Australia at the Perth Mint, small exploration gold equities such as J Pacific Gold and Samex Gold plus many others such as Golden Star Resources are relatively immune to shorting intervention and would survive any cataclysmic COMEX closure. Any qualtity debt-free gold exploration firm with a good portfolio will be a haven. And of course the price of physical is getting better and better each day as the off-take rises. Getting physical metal later, simply won't be an option at these prices. As Professor Fekete warns, "Zero supply, infinite demand". We must heed his warning.
It is the COMEX contracts themselves that seem the most vulnerable to such an unthinkable event. There will be no warning, only an announcement after the fact and a return of paper equity with no opportunity to move to another vehicle before trading restarts.
The above opinion may seem alarmist and to the mainstream gold community it is clear heresy but this is what I think may happen if not now then later. The glum faces at the G-8 only reinforced my feeling on this point. Surely the US asked for more central bank gold as they did from Spain and Portugal going into the Iraq War, putting their leaders on a public dais as a perk for their all around cooperation. Portugal later announced their gold sales. It didn¹t appear that the US got much of anything from the G-8 on Sea Island except perhaps some gold jawboning from the French Central Bank.
If there is to be such an extreme action, it may come around the Fed meeting which begins on June 29th or the following weekend (July 4th).
Mike
Chuck checked in over the weekend too:
Bill:
Have you ever seen so many bearish chart driven predictions on gold as have come out over the past couple of weeks? I'm not surprised that Russell has turned very cautious. He is a trend follower. His most bullish predictions were at gold and silver tops.
Everyone is scared to death of being in another 20% drop while everyone in the regular stock market couldn't care less about a 20% drop. I would be surprised if the sentiment indicators don't drop very sharply again here. The facts remain that the HUI to gold and silver to gold are at historically bullish levels. I read the drop in the open interest as very bullish and the COTS shift must regarded as such also.
We are sitting on a financial time bomb here, and many gold bulls are out of the market believing that they will know when the trumpet sounds to announce the very bottom. That is why I like Hoye's stuff. He gives you reasons for why he is bullish on gold and bearish on the markets. There are far too many advisors who turn 180 degrees when the lines drop a little.
The problem is that everyone is either totally bullish or totally bearish and most can't allow for base building. I am very comfortable in my positions concentrated in the exploration companies. For instance, IMA continues to announce unreal numbers. That property will be the largest silver find in history when it is drilled a little more. The stock is behaving very well. It will prove why we won't be able to fine tune this market…..
One more thing - I think that this means something, but the puts are piling up not only in the bullion but also in the XAU and Newmont. I suspect that there is a massive building of pessimism here as many are looking for the next break down. I don't think the precious metals are going to accommodate these people.
Have a wonderful weekend. Chuck
NEWSMAKERS - CENTRAL BANKERS IN THE NEWS
THE ELEPHANT IN THE ECB'S ROOM
You know the story about the elephant in the room? It was a very large elephant, so you could hardly miss it, but because people didn't want to talk about it, they pretended it wasn't there.
This week thousands of copies of an estimable and long-awaited book by the ECB have thudded onto the desks of central banks around the world. "Risk Management for Central Bank Foreign Reserves" is jam-packed with excellent articles. Just to pick out a few of the best. There is Pierre Cardon and Joachim Coche, of the BIS and ECB respectively, on strategic asset allocation; Roberts Grava of the Latvian central bank on corporate bonds; Mark Dwyer and John Nugee (DST International and State Street Global Advisors) on risk systems; and interesting case studies by central bankers from the Czech republic, Hong Kong, Slovakia, Brazil, Venezuela and Israel. There are contributions from investment bankers from JP Morgan Fleming and others. All this plus a thoughtful introduction by Carlos Bernadell of the ECB and colleagues.
This book can even stand comparison with the volume produced by Central Banking Publications called "How Countries Manage Reserve Assets".
Yet there is one big thing missing. Something nobody wants to talk about. It's a four letter word. G-o-l-d. Now, don't all groan!
At the last count gold valued at current prices accounted for $166 billion (44%) of the euro area's massive external reserves of some $376 billion; it was 59% of France's reserves, 53% of Italy's, 52% of the Netherlands and so on. It is part of the ECB's pooled reserves. Movements in the gold price can have big effects on the balance sheets, reserves and profits of central banks. Historically, gold has always been the quintessential official reserve.
Yet there is not a single article on gold reserves in this book. Can there really be nothing to say about it? Or nothing the ECB wants said? It is mentioned casually, en passant, in three of the articles but the only discussion of any depth that "Newsmakers" can find from a quick read is in the article by Bert Boertje and Han van der Hoorn of the Netherlands Bank, who say that "gold can be seen as the ultimate war chest". The result of their interesting "balance sheet" approach is to predict a move away from gold and other so-called "high risk" assets towards domestic assets, which is in fact happening.
One can't help thinking that the editors took one look at this elephant and decided to talk about something else - anything else. I wonder why?
This is how the poem goes for those who don't know it (the author is unknown):
There's an elephant in the room.
It is large and squatting, so it is hard to get around it.
Yet we squeeze by with, "How are you?" and "I'm fine," and a thousand other
forms of trivial chatter. We talk about the weather. We talk about work.
We talk about everything else, except the elephant in the room.
-END-
Telling it like it is:
Good Morning Bill
Hope you had a pleasant weekend.
I'm watching our favorite metals with continuing amazement, as the markets stubbornly refuse to reflect the unsustainable and unpleasant reality of the US and global economic situation pressing in from all directions, aided by the lack of disclosure by the dishonest Trojan Horse mass media.
I attribute this to the unrelenting, heavy-handed "full court press" manipulation of the ESF, FED, PTB, etc. Their primary desperate mission seems to be to perpetually deceive all as to the nature and origin of the consequences of THEIR irresponsible and unconstitutional meddling in all things monetary. They unremittingly continue to lie to confuse, mislead and mask the problems, and, when the damage they've caused becomes undeniably apparent to most, they will lie to avoid shouldering the blame for their actions, which imo are the main and perhaps sole cause of our imposed debt-based dilemma. The ongoing gold and silver price-fixing betrays the ulterior motives of these antisocial tyrants. All that remains, in my mind, is to speculate upon the "solution" these career criminals have prepared to obscure the origin of the unfolding consequences of their betrayal of the real interests of this country and our people.
I'm resiliently sticking with what I know to be REAL, despite the persistence of ongoing manipulated market relationships. I do not believe the looking-glass world created from behind the curtain by the money power wizards, no matter how temporally powerful, is sustainable beyond the short-term. Perception of the precarious US economy, as it changes from denial to realization and the attendant shock and despair, will produce changes unpredictable even to the jaded perpetrators of monetary fraud.
Regardless of the vicissitudes of the markets, gold and silver in hand continue to provide their owners with a tangible assurance that no matter how bad the fallout, there will be an "other side" to what appears to me to be an inevitable crisis.
Regards, Tom K
Another scandal brewing on the horizon?
Bill,
Jim Currie gave me your name as someone who might assist the small companies and investors who have been robbed blind by short sellers. I have been reporting on this issue for several months now, and the scope of the scandal has floored me. The response we have gotten from readers has been amazing. We are motivated entirely by passion, not profit, and have no hidden agenda in this issue, other than trying to be a voice for the small investor. If there is anything I can do to assist you in your efforts, please let me know. I believe that this is the single most important issue facing America today, bar none. I am enclosing a couple of links to articles we have written on the subject, I usually try to write them so that the average reader can understand the issues, even though they are incredibly complex. If I have a talent that will help expose this scandal, that is it. Thanks again for your efforts.
"Is Dateline Losing Credibility Over StockGate Story Delays?"
http://www.faulkingtruth.com/article/?Investing101&1005
"Financial Terrorism In America"
http://www.faulkingtruth.com/article/?Investing101&100
"The Berlin Connection?"
http://www.faulkingtruth.com/article/?Investing101&1004
"StockGate: A Call To Arms"
http://www.faulkingtruth.com/article/?Commentary&1006
Mark Faulk
-END-
Aucklund Ed:
Bill:
The other day someone wrote on a chat board that everyone wants to get into Gold at the LAST MINUTE. I've been thinking about this over the weekend. I think he's right.
I've also thought for a long time that the Fed would NEVER again raise interest rates. They're trapped. The consequences of raising rates to those holding the wrong interest rate derivative contracts, to the housing market and construction industry, to those who swapped long term debt for short term debt would be too dire for the Fed to move.
Well EVERYONE now thinks the Fed will raise rates in 2 weeks by at least 25 basis points, many are now calling for 50 points.
This may happen but IF it does raise rates the Fed will not be moving voluntarily. The Fed will NOT be moving to prevent future inflation nor to slow down the economy. No, the Fed will only move because it has NO CHOICE. The market will be FORCING the Fed's hand.
Today the US trade deficit came in at a shocking $48 Billion. Did the Dollar move on this horrendous news? No.
Last week US Debt hit $7,214,624,032,891.61. The Congressional debt limit is $7.384 Trillion. At the rate Government is spending money it won't take long (some say mid summer) to hit this Debt limit which either has to be raised JUST before an election or the US goes into default. Bankrupt! Did this news move the Dollar? Well yes, perversely it went up last week!
Today US 5 yr TSY hit a new yearly low of 40.81 and currently as I write is sitting at 40.70 which is still a new low. 10 yr and 30 yr TSY are just above their lows. Japanese 10 yr bonds have now fallen for 13 days straight.
On the commodity front Copper inventories in London and NY are now at 238,000 tonnes after falling 2900 tonnes today. Lead is down to stocks of 53,300 tonnes having falling 575 tonnes today. Nickel is down to 9354 tonnes after falling 378 tonnes today. The drawdown on these and other stockpiles has been relentless and point to a mid summer ZERO inventory level. Either the world economy slows down dramatically or we will see metal rationed by higher prices before labor day.
Meanwhile Gold and Silver and precious metal shares have no friends. The Gold charts all indicate things will only get much worse.
How can this be? Why do investors prefer to hold Dollars and Yen over Gold? Why? Because they're afraid of higher US interest rates? The argument is that this is bad for Gold. What they're not looking at YET is the growth in the US money supply which is up at an annualized rate of 10%+ so far this year and this rate is accelerating.
So they sell their Gold. And what do these investors now hold?
Perhaps US Dollars which are being inflated at the rate of 10 to 20% this year! Or US Bonds which on top of the above inflation of the money supply are dropping to new lows. Or maybe Japanese bonds which have fallen 13 days in a row.
But the day will soon come when those who have sold their Gold will want back in. They will soon realize that NOTHING has been done to reduce the US trade deficit or Reduce the US budget deficit. More importantly, the market will realize that despite high price inflation, despite the crazy money printing, the tiny 25 or 50 basis point hike of June 30th has sent the US economy reeling. They will realize that everyone is on the wrong side of the trade and they will all try to get in to gold at the LAST MIINUTE. And they will come to understand the true meaning of that old saying:
There's no rush like a Gold Rush.
Be right, sit tight. Don't try to time it. The CRISIS is now!
Got gold?
Cheers from Auckland. Ed
Seems most of us in our camp think the same way:
Hi Bill,
Another discouraging day for gold bulls after the largest trade deficit ($48.3 billion) in history! With import prices running at an annual 8.4% pace this year and CPI at an annual 4.5% a rational investor would expect the dollar to be tanking and gold to be trading north of $450. I guess the FED and their agents are doing a great job of convincing people that a fast growing CPI, a record trade balance and a fast growing public debt don't matter anymore as long as the printing presses keep running and Mr Greenspan keeps telling people everything is alright.
I guess our patiences are being tested to the limit but we have got to hang in there.
Regards,
Mario Innecco
Had the pleasure of meeting Willem Middelkoop and Eric Hommelberg last evening at a dinner party thrown by Samex’s Jeff Dahl. Both flew in from The Netherlands. Fun guys and very bright. Willem is a financial market journalist who is not afraid to speak his mind. He sends us this missive:
Teil I
