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CARTEL CAPITULATION WATCH
The US economic news continues to disappoint:
U.S. March Philadelphia Fed Factory Index Falls
March 18 (Bloomberg) -- Manufacturing in the Philadelphia region expanded for a tenth month in March, a Federal Reserve report showed. The Fed Bank of Philadelphia's general economic index this month registered a reading of 24.2 compared with 31.4 in February. A number greater than zero signals a higher percentage of the manufacturers surveyed reported an improvement in business than deterioration. The index reached a 10-year high of 38.8 in January and has been positive since June.
-END-
The DOW and DOG roared back after it looked like they were headed back down to oblivion. Eventually, they drifted off after the donkey rumor broke to finish at 10,296, down 4 and 1962, down 14. Stock market volatility is back. Wall Street rah-rahs the market up and reality pulls it down.
Thought you might like to know Kelly O’ Meara’s Insight Magazine story is making the rounds in the investment world. It is a bonanza of a story for us silver bulls. Thanks again Kelly!
Spoke with a veteran Café member who has contact with some mainstream precious metals reporters. He presented the Kelly's silver scandal story to them. Because the price is rising so much, they are going to do a story on silver. Casually I mentioned that MIDAS has nailed this move so far for many months and asked if they would like to talk to me about silver. He laughed and came back with, "No Way." If they mention my name or GATA, their editors will take both out of the story.
Great free press we have here in the United States. What a joke!
From The King Report last night:
PPI to be released It should be a whopper; but look at yesterday’s CPI. The CRB Index is at its highest level since 1984. Another 4 point rally and it will be at its highest level since the 1980 record. 1980 marked the worst US inflation since the Civil War. BLS has food prices +0.2% in Feb, +3.3% y/y. Energy rose a ridiculous 1.7% in Feb, +3.8% y/y – with record gasoline prices and oil above $38! They let medical care rise at the highest rate in 6 years +0.6%, but the 4.2% y/y change is bogus. How did they massage CPI lower? Education, communications & computers fell sharply, -1.2% in Feb, -16.2% y/y. Of course the fraudulently adjusted computer prices obfuscate the rise in tuition. And the bulk of the CPI, housing, (which is most rents) is +0.2% in Feb, +2.1% y/y.
In yesterday’s WSJ Jesse Eisinger writes, "Ignore the price our your house, your gasoline, your health care, your food, your business’s raw materials, your insurance and whatever else is rising. The government says there is no inflation here. Move on, folks. Nothing to see." Each passing day, more people recognize the invalidity of government economic statistics.
-END-
The PPI WAS a whopper. U.S. producer prices surged 0.6 percent in January. Wonder what the real number was?
GATA’s Mike Bolser:
Hi Bill:
The Fed added today, March 18th 2004, $15.5 Billion in temporary repurchase agreements, an action that dropped the repo pool a bit to $31.25 Billion. However, the pool's 30-day moving average is definitely tracking back upwards and this is a clue that the Fed wants the DOW's 30-day ma to do the same.
Recaptured
The established linear trend from June 2003 to Dec 2003 has been firmly recaptured by the DOW itself if not yet its 30-day ma. While many TA disciples wait and bet for a DOW crash, it will follow the Fed Master's wishes and track level for a time as its ma moves over to the 10,600 mark around the end of April. Then it will move up.
The latest phase of DOW and repo action is more solid evidence of the interventional power of the Fed and most importantly it is mounting evidence that the Fed cannot tolerate a free market.
Billions are being made by the Fed's primary dealers on this rig job since they know ahead of time where the DOW will be well into the future. With the "magic" of this financial time machine, the dealers such as Merrill, Morgan Stanley and JP Morgan Chase can place massive call option bets and know they will be right. Doubtless many will write books about their investment prowess...emulating the notorious Ivan Boesky, the original inside trader.
Trouble in paradise
But all is not well in the rigged Wall Street casino. The OCC has just released the latest derivative data and it shows JP Morgan Chase with over $27 Trillion [NOT a misprint] in interest rate derivatives. The more stress they are under, the higher the derivatives value rises. The stress emanates from their attempts to rig the long end of the interest rate curve and the rate of derivatives rise is geometric since the 3rd quarter 2002.
There are limits however, to the risks any Fed bank can assume before its powerful credit committees step in and demand a solution...usually a merger with another bank that has less derivatives exposure. Thus, we hear of yet another rumored merger at JPM.
That these "mergers" are being forced in ever shorter intervals is an alarming clue to the nearness of a real banking crisis that will be unlike any other.
DIVG update
The DIVG 200-day ma (yellow trace) is still in a linear up move and this remains very positive as example #1 of the gold cartel's retreat-in-progress.
http://www.pbase.com/gmbolser/interventional_analysis
Mike
Chuck checked in this afternoon:
The contrast in the two markets today is so obvious. Here you have gold up sharply, then capped, then the XAU ends soft because of the imminent capture of the Egyptian. The those who think this is going to change the fundamentals and technicals can't panic enough to buy stocks. Catch the killer, and let the market do what it must do. I am still amazed by this market.
How about that MAHENDRA!!! The guy is GOOD! Would somebody please take his gold and silver predictions over the past three years and compare them with the precious metals analysts at Goldman Sachs, JP Morgan Chase and Morgan Stanley. He puts them to shame. To think there are people out there who think these Wall Streeters have any credibility when it comes to gold and silver. My oh my!
First copper, then silver:
Copper Rises on Increased Demand in Japan, Dwindling Stockpiles
March 18 (Bloomberg) -- Copper futures in New York rose to a two-week high on speculation of increased demand in Japan, the world's third-biggest consumer, at a time of dwindling global supplies.
The dollar's decline to a one-month low against the yen will make copper, which is priced in dollars, cheaper for buyers in Japan. Copper prices have climbed 31 percent this year as accelerating economies in China and the U.S. boosted demand for homes and appliances, forcing manufacturers to tap inventories because mine production and recycled scrap couldn't keep pace.
``There's not enough copper in the world at these prices to satisfy everybody's demands,'' said Tony Nappi, a trader at Triland USA Inc. in New York. ``We had Far East buying'' today that was probably prompted by the decline in the dollar against the yen, Nappi said……
Inventories at warehouses approved by the London Metal Exchange, the world's largest metals market, have plunged 47 percent this year, falling 6,000 tons today to a six-year low of 229,050 tons.
-END-
First oil, then gold and silver:
Thursday, March 18
Shell Cuts Reserves as U.S. Probe Widens
LONDON (Reuters) - Royal Dutch/Shell cut its oil and gas reserves for the second time this year on Thursday in a fresh blow to investor confidence, as U.S. regulators stepped up legal probes into the debacle
Shell's decision to slash its proved reserves by 20 percent in January has already sent shockwaves through the industry, cost its two top bosses their jobs, and wiped billions of dollars off its stock market value.
Thursday's reserves cut was much smaller, at just 220 million barrels for 2003, and 250 million for 2002, compared with the original restatement of 3.9 billion barrels.
-END-
From George Ure and http://www.urbansurvival.com
PPI Numbers: Inflation at a 7.2% Annual Rate!
Here's the long awaited lowdown on the PPI. From the government figures out this morning, ask yourself if these make sense:
(Chart not available)
First things first. The total. 0.6% for the month is only about half of our predicted annual inflation rate for 2004 of 13% (based on a lot of hard work) but in an election year, we don't expect to see total honesty and transparency in numerical data controlled from the top. Notwithstanding the political point, the PPI is up in this reporting period at a 7.2% annual rate. Now let's ask some honest test questions:
Food: Did you see food prices go down 1.4% in the month of January? I did - but only because we moved from Boca Raton to rural Texas. No one I know saw anything they eat go down.
Energy: Did it go up 4.7%? That's way low. Has anyone told these good old boys that the price of oil is at record highs and it started up that path in December?
Except food and energy, you're expected to believe the finished goods were up year on year (YOY) 3.3%. Pass me the crack pipe, wouldja?
How do you make the stats look good when you don't like them? You change the reporting methodology:
Effective with this release, the Producer Price Index (PPI) includes data for 65 resampled and 21 newly introduced industries classified according to the North American Industry Classification System (NAICS). The Bureau of Labor Statistics periodically updates the sample of producers providing data for the PPI to reflect current conditions more accurately when the structure, membership, technology, or product mix of an industry shifts. The first results of this systematic process were published in July 1986. Subsequent efforts have been completed at 6-month intervals. For information on specific index additions, deletions, and recodes that are effective with this semiannual update, see the January 2004 issue of the PPI Detailed Report or contact the Division of Industrial Prices and Price Indexes, Section of Index Analysis and Public Information at ppi- info@bls.gov or (202) 691-7705.
"Resample" means you can start over again in statistics - which may be what's going on here. On the other hand, we all know that steel prices were uyp 20-30% in January alone, based on numerous reports we have published previously including increases in rebar, piping for the fire equipment (sprinkler) business, and bulk steel. So, do you think they showed up in this report after resampling? From Table 2 at http://www.bls.gov/news.release/ppi.t02.htm we note that construction equipment was up at a 9.6% annual rate (0.8% for the month). Things like that.
But where's the BIG HOLE in this report? Take the biggest increases and watch the weighting (see the Relative Importance column). Looking at Table 1 for this report at
http://www.bls.gov/news.release/ppi.t01.htm
versus table 1 from December (2003) at
ftp://ftp.bls.gov/pub/news.release/History/ppi.01142004.news
we find that in the December report, when Finished Consumer Foods were up 7.7% from the previous year, their weighting was 20.672 but in the current report and with just one month the finished consumer foods up 4.1% from year ago numbers was weighted 21.479.; Beginning to see how this weighting stuff works?
Looking at Table 2 from this January
http://www.bls.gov/news.release/ppi.t02.htm
versus last January
ftp://ftp.bls.gov/pub/news.release/History/ppi.02202003.news
we can work out why our house rebuilding is costing more than expected. Plywood, for example is up 19.2% for the year-on-year report. Gee, yah think this might have some impact on housing starts? (Duhhh...) Steel mill products up only 4.9% YOY?
No thanks, I can't buy that one.
One that will really ripple through the economy - and the fast food business in particular is the 52.1% YOY rise in soybean prices. Then there's the 72.2% increase in Iron and scrap steel prices - those I can buy.
The bottom line to this report is that inflation is back - and the 7.2% annual rate of increase in the PPI numbers this month is only the tip of the iceberg. Just wait till next month.
-END-
On Japan and the yen:
Bill Murphy,
I suppose many people are speculating on why Japan says after March 31 they will no longer buy dollars and sell yen to hold down the yen vs. dollar rate.
While it is true Japanese warn of their actions obliquely, they do warn. If you don't hear, that is your problem, as you will be reminded should you complain. These statements have to be taken seriously.
To be sure, the reasons are likely many-faceted, but there is one overwhelming reason why March 31st is Bye-bye dollar day. For decades, the Japanese government has always bid up the dollar in the months leading up to March 31st because that is the end of their fiscal year. By bidding up the dollar vs. the yen the repatriated US dollar profits are significantly enhanced in yen terms - the terms that show up in profit and loss statements, and which determine their corporate taxes. Some FX speculators in the know have made fortunes piggy-backing on this trade.
Even worse for the dollar, after the profits have been repatriated, after March 31st the government usually sells some of the dollars they bought to drive down the dollar vs. the yen briefly to make the annual export of Japanese corporation's investment capital in the US larger in dollar terms for a given yen amount - favoring the balance of payments both ways.
The cessation of support for the dollar followed shortly after the 31st by supporting the yen vs. the dollar could whipsaw the dollar severely – but they can always say, it isn't as if they didn't warn us.
Stuart
Golden Star Resources is my largest share holding. Good news today:
Golden Star shares rise on results, gold price
Thursday March 18, 12:56 pm ET
TORONTO, March 18 (Reuters) - Golden Star Resources Ltd. (Toronto:GSC.TO - News) shares jumped 9 percent on Thursday, boosted by a strong gold price and encouraging sample results from its joint-venture Yirisen gold project in Sierra Leone.
As Chuck mentioned, gold shareholders couldn’t wait to unload their holdings late as we approached the 4 o’clock bell. Been this way all year. The XAU closed at 101.09, up 2.05 and the HUI finished at 228.63, up 6.69. Still, the HUI is one good looking chart. This rounded bottom formation is a strong one technically. Gold/silver shares should rocket higher in the weeks and months ahead as they come out of a strong base.
HUI
http://bigcharts.marketwatch.c…&o_symb=hui&freq=1&time=8
Golden Star Resources led the HUI higher, climbing 47 cents to $6.34, up 8.01%.
GATA BE IN IT TO WIN IT!
MIDAS
Appendix
The Rumor Mill News Reading Room
http://www.rumormillnews.com
FANNIE MAE ADMITS LARGE DERIVATIVES LOSSES
Posted By: Rosalinda
Date: Wednesday, 17 March 2004, 4:49 p.m.
In Response To: Snow Requests Meeting With Fed (Fiat_Lux)
Source: FDIC, combined wires
In its annual report filed on March 15, US mortgage giant Fannie Mae said that its losses stemming from derivatives contracts closed during the years 2001-2003, amounted to almost $15 billion.
Its reported losses on closed derivatives contracts were $1.7 billion for 2001, $5.8 billion for 2002, and $6.9 billion for 2003.
Last week, London`s Financial Times presented a study by an independent research institute claiming that Fannie Mae`s derivatives losses had been in the range of $24 billion, and were estimated at a little over $15 billion, after tax.
Today's FT says that Fannie Mae also reported losses on open hedge positions of $5.3 billion for 2003; these can potentially be recouped if held tomaturity.
In a filing with the Securities and Exchange Commission (SEC) on the same day, Fannie Mae further announced that due to "volatility in the market last year", its derivatives holdings surged by an incredible 59% (last year) to above $1 trillion.
Furthermore, Fannie`s short-term debt (coming due within 12 months) increased by 27%, to $484.1 billion, while longer-term debt went up by 1.7%, to $477.1 billion.
In a special report put out on March 1, the Federal Deposit Insurance Corporation (FDIC), issued a strong warning concerning the exposure of US commercial banks and S&L`s in debt titles issued by Fannie Mae and Freddie Mac, the so-called Government Sponsored Enterprises (GSE).
Not only in the case of a liquidity crisis at one of the GSEs, but already as a consequence of a formal withdrawal of their implicit public guarantees, the debt titles issued by Fannie and Freddie could plunge in value, thereby causing massive losses at commercial banks and S&Ls.
Total unsecured GSE debt held by FDIC-insured banks and savings
associations amounted to $296 billion at the end of the third quarter 2003.
On top of this, the same banks and savings associations held $763 billion of mortgage-backed securities (MBS) issued by Fannie and Freddie.
For the average US commercial bank, these holdings add up to 151% of their core capital; in the case of the savings associations, it's even 181%.
There are actually a number of FDIC-insured institutions which "have very high concentrations of GSE-related securities that amount to more than 500 percent of their TIER 1 Capital."
This means that a 20% plunge of Fannie and Freddie debt title could wipe out the entire core capital of such banks.
[Sources: Fannie Mae 10K filing, March 15, 2004; FDIC]
SEVEN COUNTERPARTIES ACCOUNT FOR 74% OF FANNIE MAE'S
TRILLION-DOLLAR DERIVATIVES PORTFOLIO, Fannie Mae revealed in its annual 10K filing with the S.E.C. Fannie Mae has 23 derivatives
counterparties, and seven of those institutions, each holding between 6% and 16% of the total, account for 74% of Fannie's $1.04 trillion derivatives portfolio; with the remaining 16 counterparties each holding 5% or less.
Those "counterparties consist of large banks, broker-dealers and other financial institutions that have a significant presence in the derivatives market, most of which are based in the United States," Fannie Mae said.
The counterparties were not named, but they are likely led by the usual suspects, JP Morgan Chase, Bank of America and Citigroup, and perhaps investment banks such as Merrill Lynch, Morgan Stanley and Goldman Sachs.
U.S. commercial banks also held $982 billion in mortgage- backed securities at the end of 2003, up from $912 billion at the end of 2002, according to the FDIC's latest quarterly banking profile.
