$3000.00 Gold - "The Purest Play Against the United States Dollar."

PRESS RELEASE

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Danish Bank in `Northern Rock' Crisis; 30 Others Being Watched

COPENHAGEN, July 11, 2008 (EIRNS) — For only the second time since World War II, the Danish National Bank has had to extend an extraordinary credit line to a commercial bank, this time to the medium-sized regional Roskilde Bank, one of the ten largest banks in Denmark. The credit line is for 1 million euros, for a period of six months. According to financial insiders, this is the opening shot of a financial crisis which will have a deeper and broader impact on the Denmark's national economy, than Northern Rock did in Great Britain.

Today during a press conference, Roskilde Bank declared that they were faced with insolvency because of the need to write off bad loans, especially those extended for the housing sector. To avoid a run on Roskilde, the Danish National Bank, which functions more like a central bank, decided to issue the credit line. The bank is now looking for buyers to buy all or parts of the bank. Roskilde's depositors are insured, but the stockholders are not. Today, the value of Roskilde Bank's stock plummeted by 37%. In the year since April 2007, stockholders in the bank have lost 1 billion euros.

According to our source in the banking world, firstly, this is peanuts compared to the fact that the U.S. mortgage giants Fannie Mae and Freddie Mac are faced with insolvency. If people in the U.S. would think through the consequences of that, they would realize that we are in the midst of the greatest financial crisis ever — yet they are taking their vacations as if nothing was up.

As for Roskilde Bank, he said that this is just the first sign that the Danish mortgage carrousel — where investors have been buying and selling mortgage-based securities from and to each other, based on geared investments — is grinding to a halt. Danish companies which have made geared investments in Roskilde bank, are now faced with owing more money (which they borrowed to buy the bank stock) than their stock in the bank is worth. Business commentators are speculating about which Danish bank will be next. Thirty of the country's 47 banks are already on a watch list by the Danish Financial Oversight Institution, for too much exposure to the troubled housing and credit market. Three other banks announced write-offs today, and all banking stocks are in the red in stock market trading today.

After Roskilde Bank's press conference, the Financial Oversight Institution also held a press conference. In an analysis afterward, a professor from the Copenhagen Business School said that this is like Northern Rock and the U.S. crisis.

Freddie Mac's Next Hurdle: Raise Cash

The Washington Post is reporting Freddie Mac's Next Hurdle: Raise Cash.

Treasury Department officials were working the telephones yesterday to make sure that Freddie Mac, one of the nation's two troubled mortgage giants, will be able to sell $3 billion of its securities tomorrow in a previously scheduled sale that has now become a crucial test of investor confidence.
Since when in a supposedly capitalistic system should it necessary for the Fed and Treasury intervene in the markets on a day to day basis?

The Post article continues...

It would be only the latest in a series of unusual interventions. In March, the Fed extended a $30 billion credit line to orchestrate JP Morgan Chase's purchase of troubled investment bank Bear Stearns. The Fed then let other investment banks borrow directly from the Fed at favorable rates. And Friday the Federal Deposit Insurance Corp. seized control of California-based IndyMac Bank with plans to liquidate its assets at a cost that could wipe out more than 10 percent of the FDIC's funds.

"Someday this capitalistic economy, or what we used to call the capitalistic system, needs to get back on track and that means failure," said Lee Hoskins, former president of the Federal Reserve Bank of Cleveland. "You can't have risk-taking without failure."
To What Extent Did Paulson Lie?

Now we get to debate the meaning of the following

"Keeping Fannie and Freddie in Current Form"
"There will be no nationalization of Fannie and Freddie"
"A government takeover will not be necessary"
It seems to me that and injection of $15 billion capital into Fannie Mae and Freddie Mac and creating a new class of Government Owned Securities is most emphatically NOT in agreement with the above ideas.

Paulson Is The Great Pretender

Hell there is so much pretending going on it's hard to keep track. For starters everyone is pretending Fannie and Freddie are solvent. If they were solvent there would be no need for a $15 billion injection. Secondly, the government directly owning a new class of shares is not keeping Fannie in its current form.

The big concern is "Where does it stop?" Opening up a $15 billion dollar window will be the first of 10 such operations. This is likely the start of a U.S. Taxpayer Bailout of China. Disgustingly it is a U.S. Taxpayer bailout of PIMCO as well. Flashback May 23, 2008.

Bill Gross Triples Bet On Mortgages

The Financial Times reported Pimco's Bill Gross triples bet on mortgages.

Bill Gross, whose Pimco Total Return fund (PTTRX) is the world's largest bond mutual fund, has tripled his bet on mortgage debt, which now comprises about 61 percent of the fund's assets, the Financial Times said on Friday.

The chief investment officer of Pacific Investment Management Co said his decision to raise exposure in recent months stemmed from the U.S. government's implicit guarantee of debt issued by Fannie Mae (FNM) and Freddie Mac (FRE), the government-sponsored mortgage financiers.

"Government policy is moving to sanctify the status of the government-sponsored agencies," Gross said, according to the newspaper. "It became a question of which institutions would be sheltered by the government umbrella."
"Operation Rescue Fannie" has now morphed into a taxpayer bailout of Bill Gross, China, and anyone else that levered into buying Fannie Mae garbage. It is a moral hazard to the highest degree, for bondholders to be made whole in this mess.

Paulson Is A Blatant Liar

It's now time to point blank call Paulson what he is: A blatant liar.

Flashback July 10th 2008 Paulson: Financial Institutions Must Be Allowed To Fail.

For market discipline to be effective, market participants must not expect that lending from the Fed, or any other government support, is readily available," Paulson said. "For market discipline to effectively constrain risk, financial institutions must be allowed to fail."
Even though I called for it, this is extremely disgusting to see. I am hoping that bondholders participate at least partially over this, but I'm not holding my breath.

Addendum

Several people asked about the "inflationary" aspects of such a bailout. My reply is these bailouts cannot be looked at in isolation. The ongoing destruction of credit will dwarf this proposed bailout. The destruction of credit via defaults and writeoffs dwarfs the stimulus package and will dwarf the next one as well. I have repeatedly said there would be government attempts to contain deflation, just as there were in Japan. Those attempts will do nothing but prolong the agony.

Mike "Mish" Shedlock
[link to globaleconomicanalysis.blogspot.com]

Last evening I went to bed with the futures soaring as if an unlimited government bailout of Fannie Mae and Freddie Mac was a good thing.

See Paulson Crosses Rubicon Lands In 5th Dimension and Operation "Rescue Fannie" Underway - Paulson a Blatant Liar for more details.

It was an instant "gap and crap" especially for the financials as investors immediately had second thoughts. Let's take a look at the scorecard as of 11:30 AM Central.

Equity Scorecard


Washington Mutual(WM) -26% at $ 3.64
Wachovia Bank (WB) -10% at $10.36
Bank United (BKUNA) -17% at $ .64
Lehman (LEH) -05% at $13.72
Merrill Lynch (MER) -07% at $25.50
Fannie Mae (FNM) -03% at $10.00
Freddie Mac (FRE) -09% at $ 6.99
CIT Group (CIT) -11% at $ 6.3
0National City (NCC) -32% at $ 3.00

Earlier today National City Bank was halted but has now reopened. MarketWatch is reporting Commercial banks face heavy sell-off as analysts search for next IndyMac.

Bank stocks were under intense selling pressure Monday as investors and analysts worried that worsening housing and credit problems could claim more banks after the failure of IndyMac Bancorp Inc.

National City shares were briefly halted Monday amid a panic-driven plunge before the company in a statement tried to quell what it called market rumors. "National City is experiencing no unusual depositor or creditor activity," the Cleveland-based bank said. Still, investors shrugged off the news and the shares were off more than 25% at last check.

WaMu shares were also down over 25% in midday trading. Lehman Brothers analysts in a note Monday said WaMu could be forced to substantially boost its reserves to cover an estimated $28 billion of losses on the balance sheet, with $21 billion coming from mortgages. They said home prices and mortgage credit are showing no signs of stabilizing.
SEC Investigating Rumors

Big Brother is at it. The SEC launches securities rumors investigation.
The Securities and Exchange Commission said Sunday it is immediately opening a probe to prevent the spread of false information used to manipulate securities prices.

SEC Chairman Christopher Cox said the investigation is aimed at "ensuring investors continue to get reliable, accurate information about public companies in the marketplace."
SEC Looking For Scapegoats

Is the Fed going to investigate Lehman? Seriously, this is ridiculous. The financial institutions are getting hammered because they are undercapitalized by any rational measure. Earnings suck and are going to continue to suck. If the SEC wants to investigate something why doesn't it start by looking at how and why it and the Fed let this situation get as out of control as it did? The SEC is looking for a scapegoat, when the problem is the Fed and fractional reserve lending.

How Many Bullets Are Left?

Meanwhile take a good look at the institutions in the table above. The question of the day is "How many of those institutions can the Fed possibly bail out?" Three? One? Two?

Minyanville's Todd Harrison looks at it like this. "The Fed has only so many bullets in its gun. The last one will be pointed inward."

If you have money at any bank above the FDIC limit you are living in a complete fog or your are completely nuts. This statement not only applies to individuals but corporations as well. Corporations better be thinking about where they park their payroll.

Mike "Mish" Shedlock
[link to globaleconomicanalysis.blogspot.com]

Lyndon LaRouche

July 13, 2008

July 13, 2008 (LPAC)--With the U.S. and British financial press full of wild speculation about how the Bush Administration is going to intervene Monday morning, to bail out Fannie Mae and Freddie Mac, Lyndon LaRouche today issued a sharp, preemptive warning: "The financial system is already dead. It cannot be saved.''

LaRouche expanded: "If any of the reports of a planned bailout of the two big mortgage lenders, by the Treasury Department or the Federal Reserve are true, I say, 'Forget it.' Any such efforts to delay the funeral of the present global financial and monetary system will only make matters worse.

A bailout will cause an accelerated hyperinflationary explosion, far worse than the hyperinflation that hit Weimar Germany in the autumn of 1923.

Back then,'' LaRouche continued, "Germany had a gun pointed to its head. The gun was called the Versailles Treaty, and Germany had no choice. Today, the United States has a choice. I spelled out the choice in numerous recent locations.''

LaRouche cited his recent call for the Federal Reserve to immediately raise interest rates to 4 percent, as a stop-gap measure to prevent a massive flight of institutional capital from the banking system. He demanded that this move be accompanied by clear statements from the Fed that there will be no more Bear Stearns-style bailouts of the speculative bubble.

Instead, the Fed will protect the chartered Federal and state banks, through bankruptcy reorganization, on the model of what Franklin Roosevelt did, when he first took office in March 1933, and faced the same kind of collapse of the banking system that we face now. "Only, today's crisis is orders of magnitude worse,'' LaRouche added, "due to the massive leveraging by the banks and other financial institutions.''

LaRouche warned that Bush Administration and Fed officials, like Hank Paulson and Ben Bernanke, may be on an "ego trip--unwilling to admit that they have failed miserably. But the reality is that they,like the George W. Bush Administration, have failed, with wretched incompetence. For one thing, they failed to reverse the Alan Greenspan monster bubble, which is now blowing.''

LaRouche added that there is no way to even estimate the magnitude of the financial bubble, that has now blown. "The collapse of Fannie and Freddie means the end of the system. And that has already happened, and nothing can be done, within the rules of the current system, to solve that problem. We can keep Fannie Mae and Freddie Mac alive, but only through actions reforming the system, in terms echoing the precedents of President Franklin Roosevelt, that in ways appropriate for the actual conditions of today.

"The only alternative is to implement my three-step solution to the crisis,'' LaRouche concluded. "If the so-called leadership in Washington is unwilling to do that, then this financial system, and, by extension, these United States, are finished. It may be a tough reality to swallow, but it is the only reality that there is.''

Lyndon LaRouche will be delivering an international webcast on Tuesday, July 22, 2008, at 1 PM (EDT). The webcast takes place on the first anniversary of LaRouche's July 25, 2007 Washington, D.C. webcast address, in which he announced that the financial system had already crashed. Days later, the collapse of Countrywide, and other major mortgage lenders, and the blowout of Bear Stearns, illustrated that LaRouche was 100 percent correct.

www.larouchepac.com/node/10981/print

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Bob Chapman

A Complete And Systemic Breakdown
Posted: July 16 2008


What is this?

Second largest bank failure in US history has been duly noted, with a repeat bailout like Bear Stearns, paying down debts still the better plan, PPT supplies another miracle rally for the Dow, but we fear they only delay the inevitable, Fannie and Freddie collateral now Toxic Waste, liquidity drains now wide open, watch for the downward spiral
What you are witnessing is the acceleration of a complete systemic breakdown of the US and world financial systems and economies. It is happening right before your eyes. It is in your face. The Scylla and Charibdis of real estate finance, Fannie Mae and Freddie Mac, which are currently in possession of, or have insured, over 5 trillion dollars worth of mortgages, a good portion of which are nothing but toxic waste, have imploded and will now be nationalized in the most egregious example of moral hazard in the history of the world. As this socialism for the rich transpires, IndyMac Bank has gone up in smoke. This is the second largest bank failure in US history and the largest such failure in over 23 years. Adding insult to injury, 10% to 20% of the FDIC's insurance reserves have just gone up in smoke along with IndyMac just as the hundreds, and what may eventually turn out to be thousands, of bank failures that are anticipated get started in earnest. What does that leave for future failures if only one bank failure wipes out a fifth of the FDIC's reserves? Next up on the chopping block may be Downey, First Federal, Wachovia and Washington Mutual, which are not small fry by any means. Mattresses and freezers may soon be the savings vehicles of choice for those who can't afford a home safety vault as Depression Era mentality becomes the psychology du jour.

If you keep more than $100,000 in any bank account, or if you keep anything of value in a safe deposit box at any type of bank whatsoever, you are simply an idiot. You should use any cash you now have to pay off debt, including credit cards, car loans and mortgages. Then your cash becomes someone else's problem. Trying to keep loans open so you can pay them with inflated dollars doesn't work when your dollars get vaporized by losses suffered by profligate banks or you lose your job due to the implosion of our economy, which, by the way, is a lock. Better to take money earning one or two percent and apply them to debts bearing much higher rates. Keep your emergency cash at home. The excess should be invested in gold and silver of which you take physical possession. Swiss government bonds denominated in Swiss francs are cheap to buy and can cover your larger blocks of cash if you are sufficiently affluent.

We have told you repeatedly that the Illuminists care only about the suppression of precious metals and the viability of the bond market, which is their source of power, and the current proposed bailout of the twin titans of complete and utter financial death and destruction is the penultimate proof of our assertion. These titans of disaster will not be reformed, but instead our government plans to give them equity injections in the form of preferred stock to be "owned" by you the taxpayers through your Treasury Department and/or loans through the Fed's discount window to be supported by US treasuries as collateral. This is supposedly a temporary arrangement of 18 months, but come on, so were the Fed's various facilities for the bailout of the bankster fraudsters, which will be extended indefinitely or at least until the system implodes. The government is not fooling anyone with such foolish drivel and poppycock, as demonstrated by default swaps on US government debt, which more than doubled from 9 to 20 basis points after the announcements by Hanky Panky and Buck-Busting Ben, something which has never happened before in our entire financial history. Yields on treasuries increased even as people were fleeing the stock markets to buy those treasuries, with the Dow tumbling to as low as 10,827.71 on Tuesday before getting yet another miracle rally from the PPT. Normally, flight to treasuries drives yields down, but not this time. Hanky Panky Paulson says these supposedly temporary forms of relief have been set up in advance so he can have a bazooka instead of a squirt gun, thereby giving the market assurance against the collapse of Fannie and Freddie by heading off market panic, but the only bazooka we see is the one being pointed at the US taxpayer who will be taxed and inflated into oblivion as a result. This is nothing less than doomsday for the US middle class, the final rip-off and destruction of both their retirement plans and real estate through hyperinflation, dollar destruction, and the eventual destruction of the real estate markets when the twin titans of financial devastation finally implode and the taxpayers are left holding the bill. If they didn't think they needed this relief in earnest, it would not have been forthcoming! They are only delaying the inevitable.

Who are the winners and the losers in this scenario? It should be pretty clear that Scylla's and Charbdis's stockholders are the losers, and that eventually their stock will be diluted to mere pennies per share by gargantuan government equity injections as losses mount geometrically, basically rendering Fannie and Freddie stock either worthless or nearly so. The big winners are obviously the bondholders of Fannie and Freddie debt, who get a nice bailout like the bondholders of Bear Stearns when they should be taking huge losses for under-pricing what should have been obvious and monumental risk in an organization leveraged at anywhere from 60 to 1 to 200 to 1, which is the type of leverage normally reserved for suicidal madmen and psychopaths. And who are the bondholders? Gee, what a coincidence, as it turns out they are central banks around the world, including those in the US, China and Japan, which each own hundreds of billions in both of the twin titans of financial murder and mayhem. As we said, all the Illuminists care about is the support and viability of the bond markets. The stock markets along with 300 million US citizens can drop off into a bottomless pit and into the fires of hell for all they care.

Aren't you just brimming with excitement at the thought of becoming an unwilling "preferred" shareholder in a toxic waste, real estate Ponzi-scheme leveraged at 200 to 1?! And how will the equity injections be funded for this preferred stock purchase, and where will the collateral for the Fed loans come from? Why, they will come from "brandy new" treasuries created out of thin air by the US Treasury that will then be handed over to the Fed. In the case of the equity injections, these treasuries will be immediately monetized in order to boost Fannie's and Freddie's capital positions, leading to further and immediate aggravation of what is now already hyperinflation and further undermining the dollar. And what will happen to all the treasuries that were created out of nothing to serve as collateral for the Fed's loans to Scylla and Charibdis? These treasuries will be monetized to cover losses as they accrue, losses which will occur rapidly and geometrically as our economy and real estate markets implode. Another possibility is that these treasuries might be exchanged for toxic waste held by the various bankster fraudsters through the Fed's Term Securities Lending Facility for primary dealers and/or its Term Securities Auction Facility for investment banks and brokerage houses. Now wouldn't that be the ultimate in slime-ball financing if the Fed used Fannie's and Freddie's collateral as if these treasuries were part of the Fed's general collateral? Hey Congress, better jump on that one - and we mean pronto!

You must not allow these reprobates and sociopaths to steer our country in this direction. Fannie and Freddie, like the Wall Street bankster fraudsters, must be allowed to fail, and their various shareholders and bondholders must suffer the consequences. Otherwise, we have only been pretending to have markets that are run on capitalist principles. What Paulson and Bernanke are proposing is the next step toward an evil, corporatist, fascist system of government which consists primarily of governmental partnerships with elitist transnational conglomerates where moral hazard is the market mantra, a system which would have made Hitler and Mussolini green with envy. The Illuminati want to consolidate their power by bailing those they want to survive, and by allowing those they want to destroy to fail. The failures which they allow to happen will be absorbed by surviving elitist companies, consolidating their power into fewer and fewer entities for easier and tighter control over resources and production. The Illuminati also want a far greater grant and centralization of regulatory power in the Fed, or in any successor organization, which they might create if they decide to kill off the Fed with all the toxic waste from Fannie, Freddie and the Wall Street fraudsters. Any such replacement organization will be a super entity that makes the Fed look like a paragon of virtue, and the excuse given for its creation will be a cessation to all the corruption, turmoil and abuse of which the owners of the Fed, or of the new super entity, have themselves been the main cause. This is the Hegelian Dialectic on steroids. Create the problem and suggest the solution. And if the solution suggested is not desired by the people, stuff it down their throats anyway but whatever cunning and deceit is necessary in true Machiavellian fashion.
Everyone should listen to Jimmy Roger’s latest lambasting of the US government and the Fed regarding the Fannie-Freddie bailout and the bank failures. He is the only source of truth in the fane-stream media. He is like a breath of fresh air in an arena full of nothing but hot air, and we commend him for boldly speaking the truth. How much longer he will be allowed to make such television commentaries is hard to say, but the longer the better.

Well, all this excitement has sent gold and silver to much higher levels as we predicted, and now the cartel is back to their old tricks as they clutch their chests and reach for their nitroglycerine pills. Up go gold and silver as the dollar crashes, and just like clockwork, the yen goes ballistic and oil nosedives. The liquidity drains are now wide open as the yen has been strengthened since early last Friday by 3 yen per dollar and by 3.5 yen per euro. Protective derivatives such as stock index puts, yen calls and oil shorts that we have recommended are now doing their stuff again to keep the specs from having to liquidate their metals to meet margin calls on carry trade positions. Oil has been blasted big time as the Illuminist banks have been forced to give up some of their speculative gains to hit precious metals, which is JOB ONE at the Fed and for the cartel. It would be interesting to see whether any of these banks acquired a greater short position in oil just before the takedown. Monday's sell-off is now giving the dollar some support as is cheaper oil, and the markets are rallying on Tuesday due to the two big drops in oil prices over the past two days as well as huge boosts from the PPT and "massaged" balance sheets that were better than expected for Wells Fargo. This won't last, and the dollar is headed for 67-68 after breaking 72 over the past two days. Support at 72 cannot go on in the face of 1.8% monthly PPI (21.6% annualized), 1.1% CPI (13.2% annualized), nationalizations of Fannie and Freddie and bank failures such as IndyMac, which is just the beginning. Get ready for some more wild action as the undisputed King of Currencies reigns supreme while economies implode around the world and threats of war and conflict continue to abound.

All world stock markets are now in Bear Market Territory. The FTSE 100 finally caved in, and now all major stock exchanges are off by more than 20% from their highs. This is just the beginning of woes. Like the dollar, stocks worldwide will continue their downward spirals, abbreviated by bear rallies that will be little more than dead cat bounces.

The Politico has an article today detailing the influence Freddie Mac and Fannie Mae have bought in Washington over the past decade. The government-chartered companies had to get bailed out by the Treasury Department and the Federal Reserve earlier this week. To read more about the bailout go here. To read about the millions spent on Washington lobbying see an excerpt below or go here.

If you want to know how Fannie Mae and Freddie Mac have survived scandal and crisis, consider this: Over the past decade, they have spent nearly $200 million on lobbying and campaign contributions.


But the political tentacles of the mortgage giants extend far beyond their checkbooks.



Fed Chairmen Ben Bernanke just told Congress that because of the bailout the companies are "in no danger of failing."

Federal Reserve Chairman Ben Bernanke told Congress Wednesday that troubled mortgage giants Fannie Mae and Freddie Mac are in "no danger of failing."


The Fed chief made his remarks as he appeared before the House Financial Services Committee, in his second day on Capitol Hill to brief lawmakers on the problems plaguing the economy. He appears amid a backdrop of fading confidence in the U.S. financial system and in the national economy.

LaRouche expanded: "If any of the reports of a planned bailout of the two big mortgage lenders, by the Treasury Department or the Federal Reserve are true, I say, 'Forget it.' Any such efforts to delay the funeral of the present global financial and monetary system will only make matters worse.

A bailout will cause an accelerated hyperinflationary explosion, far worse than the hyperinflation that hit Weimar Germany in the autumn of 1923.

George Soros Goes Long Gold


Considering the extent of the oil price decline, gold has remained very resilient as we predicted. Big money interests realize that the long term gold/ oil ratio favours higher gold prices and or lower oil prices. Forbes reported that George Soros has gone long gold and short oil. ( [link to www.forbes.com] The articles states the ratio is 10 to 1 when in fact it is 15 to 1 which would see a gold price at 15 times the price of oil.

Were oil to fall further that could see oil at some $120 a barrel and gold at some $1,800 per ounce which seems extremely likely given the level of macroeconomic and systemic risk - unprecedented in modern financial and economic history.

Today's Data and Influences
The economic calendar contains little of importance today apart from Eurozone trade balance figures. Stocks and oil are likely to remain the key drivers in the currency and gold markets. Citigroup earnings in particular will be keenly anticipated and have the potential to be an important market driver as they are expected to report serious losses.

Gold and Silver
Gold is trading at $955.20/956.20 per ounce (1230 GMT).
Silver is trading at $18.35/18.40 per ounce (1230 GMT).

PGMs
Platinum is trading at $1947/1957 per ounce (1230 GMT).
Palladium is trading at $420/425 per ounce (1230 GMT).

By Mark O'Byrne, Executive Director

US Financial
Break Point Soon
By Bob Chapman
The International Forecaster
7-20-8

Something is going to break, and soon. Banks are insolvent and failing by the hundreds if not thousands. Hedge funds are on the edge of oblivion. Only a tiny percentage of toxic waste losses in real estate and other asset classes of collateral, which will eventually amount to over $1.4 trillion in the US alone, has to date been recognized by the lying bankster fraudsters. Bonds are producing negative rates of return even based on ludicrously understated official rates of inflation (until this month, when we finally got some data bordering on the truth).
Credit markets are frozen, and few can get financing at favorable rates. Banks won't even lend to one another because they do not trust each other's financial statements, which are all bogus.
Our financial system is unregulated, opaque and rife with fraud as our Treasury Secretary suggests we hand the reins over to the Fed, the very organization which is the driving force behind our myriad of woes. The fractional reserve multiplier is not working and bank's have had to resort to the commodity markets to make profits, thus driving up food and oil prices and the cost of raw materials. Food riots are breaking out due to the ethanol scam.
Consumers are tapped out, are in debt up to their eyeballs, are being laid off by the hundreds of thousands, are being pounded by hyperinflation and crazy gas prices and are defaulting on consumer debts across the board at ever-increasing rates. Civil unrest and the potential for revolution are everywhere. A quadrillion dollar caldera of notional principal for credit default and interest rate swaps bubbles, smolders and churns, waiting to erupt into a world-economy-killing cataclysm.
Fannie and Freddie are imploding, and gargantuan government bailouts to save these owners or insurers of over half the mortgages in the US will drive us to higher rates of inflation and levels of direct taxation that are simply unheard of. These higher levels of inflation and taxation are not as far out in the future as most would think. That is because Paulson and Bernanke, who are oblivious to moral hazards because they are sociopaths, are now trying to dump what will be trillions in losses caused by endless banking scams on an ignorant and unsuspecting citizenry.
Rising interest rates due to increased risk and hyperinflation are just around the corner, and double digit interest rates will lock up the real estate markets in a cryogenic state as occurred in the early 1980s. We have gone from being the largest creditor nation in the world to the largest debtor nation in a matter of a few decades as our manufacturing industry and economy have been gutted by free trade, globalization, off-shoring, outsourcing and both legal and illegal immigration.
Bubble after asset bubble have been created and destroyed by a malevolent Fed trying to push us toward a one world government, economy and religion as powered by megalomaniacal, satanic trillionaires who have destroyed our middle class, our Constitution and our moral standards in order to drive us into their version of the ideal Platonic society where we all get to become their feudal indentured servants and slaves. Our trade and budget deficits continue to mount with profligate spending on endless wars for profit and pork-loaded legislation. Our nation is bankrupt. Our gold reserves have been stolen, swapped, leased or otherwise compromised. Our Congress, our Executive Branch, or military and our covert agencies are loaded with traitors and perverts who are driving us into a police state complete with a Gestapo and an SS. We torture, maim and kill for fun and profits. We make the Roman Empire at its most decadent look like Shangri-La.
Entire article ...

Freddie Mac new Issue quickly approved by SEC, New offerings to absorb big losses, Gold escapes general pounding in the market, home builders sentiment index is at record low, depression is a real threat still

After the markets closed on Friday, the announcement came that Freddie Mac plans to sell $5.5 billion dollars worth of new common and/or preferred shares to private investors, when its current market cap is only 6 billion. Of course, they had to register the new issue with the SEC and get its approval in order to do this, and on Friday, they filed with the SEC, which quickly approved the new issuance. This was no surprise of course because the SEC and Freddie are run by the same kind of people. Freddie recently got caught up on their SEC filings after years of what really amounted to total noncompliance due to what you might call some "major accounting issues" even though technically they were granted an exemption from filing because of their GSE status.
So, even before the Treasury injects equity into Freddie by purchasing new issues of its shares with monetized treasury bonds created out of thin air, and/or before Freddie borrows from the Fed on treasury collateral which consists of those same ethereally created treasuries, the elitists plan to draw in new sucker-dupes so that both the current shareholders and new shareholders alike can get blasted with a huge dilution of their stock value. We ask who the suicidal maniacs are who would venture to buy these new issues?
First, note how the timing of this announcement, which came after markets closed on Friday as just noted above, was the same time frame used for the news about the IndyMac Bank closure. This kind of timing manipulation is used by the elitists whenever they wish to prevent market panic, allow a cooling off period before markets reopen and/or keep as many people from seeing or hearing the announcement as possible as they get underway with their weekends.
You can bet your sweet bippy that if precious metals have any bad news, if that were even possible at this point, it would make front page news on Monday just before markets opened. So much for a free press. Instead we get the inane, people's bane, fane-stream media.
If Thomas Jefferson were alive today he would be absolutely disgusted at the goings on in our government and in our press right now. In fact, he would most likely call for a revolution! Ron Paul is our Thomas Jefferson, and the elitists are quaking in fear at the revolution in thinking which Dr. No has bravely engendered with his presidential campaign.
Next, note how much US government and Freddie officials obviously believe Freddie to be undercapitalized after claiming outright only days ago that both Freddie and Fannie were and are adequately capitalized. Among those claiming adequate capitalization before this announcement was none other than our beloved Treasury Secretary, Hanky Panky Paulson, on loan from Goldman Sachs, and Senator Chris Dodd from Connecticut, elitist bootlicker and Chairman of the Senate Banking Committee. From their mouths to God's ears. These reprobates give serpents a bad name. If they had been with Adam and Eve in the Garden of Eden, who knows what perverse lies they might have sold to our progenitors? You think we have problems now? We would probably have the Adam and Eve First National Bank. Can you just imagine? These two pieces of work are truly unbelievable. Buck-Busting Ben and Cheney the Wienie round out the new Rat Pack of liars and scalawags.
Then look at what will happen to the price of Freddie's shares. The Freddie share price closed way down at $5.26 on Tuesday based on all the scary bailout news, but ended the week with a price of $9.18 when new sucker-dupes jumped in based on government and fane-stream media hype about a potential bottom in the real estate markets and the patently false and misleading earnings reports of Wells Fargo and Citigroup which left investors with the impression that Freddie and Fannie might not be in as much trouble as everyone thought. Short-covering was another major factor which accounted for the higher share price.
The potential for the new proposed Freddie issue was enhanced by the increased stock price because the higher price allowed more capital to be raised using fewer shares, but the new shareholders and old shareholders alike could find themselves owning stock worth substantially less because of the resulting dilution and mounting overall losses from a tanking real estate market, which Freddie admits! Can you believe it? All those new shareholders could end up with an instant haircut! And that does not even take into account the potential for the purchase of new Freddie shares by the Treasury in a bailout situation, which is inevitable! Sometimes we wonder if we are still conscious or whether we have been hooked up to the Goldilocks Matrix pod where everything turns out juuust riiight. As the Mogambo Guru might say: "Hahaha! Morons! Hahaha!"
Somehow, with over a trillion dollars of mystery off-balance-sheet toxic waste assets, Citigroup coughs up only $2.5 billion in losses for the second quarter. Can we suggest that we are more than a little skeptical of this figure? Enough said. The same pathological lies will also be spewed forth for all the other banking fraudsters this quarter. After all, we have incumbents that have to be reelected to keep the Illuminist scam wagon rolling down the road. We recoil in disgust at such unmitigated arrogance in financial reporting. Can you imagine the potential liability of the CPA's involved in this mess?
How do these people sleep at night? They probably sleep just fine, because they are all sociopaths, or they wouldn't be working for these elitist institutions.
Gold has been implacable this week. The cartel's best efforts have yielded little more than a brief tamping down of gold below 1,000. Despite the best efforts of the Illuminati, gold is still trading over $950 and silver is still over $18.
Despite an $18 dollar per barrel takedown of oil from peak to trough this week, the largest such decline ever, and phony dollar rallies galore, gold is still more than $100 per ounce over its recent lows. The resource stocks have been pounded mercilessly with naked shorting, yet are still maintaining the same levels as two weeks ago on July 3.
Lease rates are negative or near zero for both gold and silver, but no one wants to lease gold or silver for subsequent sale due to the potential to get vaporized if any untoward event occurs, such as more bank failures or the outbreak of a war or conflict. The naked shorts of the SLV shares and illegal rationing of Silver Eagles by the US Mint are barely keeping silver from exploding to new highs.
This resiliency in the precious metals has many facets and reasons for support. The CPI and PPI are at 26 and 27-year highs. The Fed pumps $500 billion monthly into the banking system just to keep it from freezing up. M3 rages at 17% to 18%, thus locking in years of hyperinflation no matter what the Fed does. The Fed has no credible way of cutting rates or even threatening to cut them as the ECB hikes to levels that are more than double the Fed funds rate.
The dollar is quickly reaching new all-time lows against the euro and has recently scraped up against its all-time lows this past week on the USDX. It is headed for 67 to 68.
This presents the potential for establishing a dollar carry trade, which would take the dollar quickly to new lows. All major stock market exchanges around the globe are in Bear Market Territory, having plunged to 20% or more from their most recent highs. Various Arab nations are threatening to break dollar pegs. Wars and threats of wars abound everywhere in Georgia, Kosovo, Iraq, Iran, Syria, Lebanon and North Korea. Inflation is raging worldwide, which means that populations across the globe are quite literally being taxed to death by their governments. This just simply cannot continue.
Something is going to break, and soon. Banks are insolvent and failing by the hundreds if not thousands. Hedge funds are on the edge of oblivion. Only a tiny percentage of toxic waste losses in real estate and other asset classes of collateral, which will eventually amount to over $1.4 trillion in the US alone, has to date been recognized by the lying bankster fraudsters. Bonds are producing negative rates of return even based on ludicrously understated official rates of inflation (until this month, when we finally got some data bordering on the truth).
Credit markets are frozen, and few can get financing at favorable rates. Banks won't even lend to one another because they do not trust each other's financial statements, which are all bogus. Our financial system is unregulated, opaque and rife with fraud as our Treasury Secretary suggests we hand the reins over to the Fed, the very organization which is the driving force behind our myriad of woes.
The fractional reserve multiplier is not working and bank's have had to resort to the commodity markets to make profits, thus driving up food and oil prices and the cost of raw materials. Food riots are breaking out due to the ethanol scam. Consumers are tapped out, are in debt up to their eyeballs, are being laid off by the hundreds of thousands, are being pounded by hyperinflation and crazy gas prices and are defaulting on consumer debts across the board at ever-increasing rates.
Civil unrest and the potential for revolution are everywhere. A quadrillion dollar caldera of notional principal for credit default and interest rate swaps bubbles, smolders and churns, waiting to erupt into a world-economy-killing cataclysm.
Fannie and Freddie are imploding, and gargantuan government bailouts to save these owners or insurers of over half the mortgages in the US will drive us to higher rates of inflation and levels of direct taxation that are simply unheard of.
These higher levels of inflation and taxation are not as far out in the future as most would think. That is because Paulson and Bernanke, who are oblivious to moral hazards because they are sociopaths, are now trying to dump what will be trillions in losses caused by endless banking scams on an ignorant and unsuspecting citizenry.
Rising interest rates due to increased risk and hyperinflation are just around the corner, and double digit interest rates will lock up the real estate markets in a cryogenic state as occurred in the early 1980s.
We have gone from being the largest creditor nation in the world to the largest debtor nation in a matter of a few decades as our manufacturing industry and economy have been gutted by free trade, globalization, off-shoring, outsourcing and both legal and illegal immigration.
Bubble after asset bubble have been created and destroyed by a malevolent Fed trying to push us toward a one world government, economy and religion as powered by megalomaniacal, satanic trillionaires who have destroyed our middle class, our Constitution and our moral standards in order to drive us into their version of the ideal Platonic society where we all get to become their feudal indentured servants and slaves.
Our trade and budget deficits continue to mount with profligate spending on endless wars for profit and pork-loaded legislation.
Our nation is bankrupt. Our gold reserves have been stolen, swapped, leased or otherwise compromised. Our Congress, our Executive Branch, or military and our covert agencies are loaded with traitors and perverts who are driving us into a police state complete with a Gestapo and an SS. We torture, maim and kill for fun and profits. We make the Roman Empire at its most decadent look like Shangri-La.
The greatest depression of all time looms at our doorsteps. The barbarians are at the gates, but no one notices or cares. It is nothing short of surreal. Those without gold or silver will make great sport for the barbarians, who also happen to like the "barbaric relic" known as gold, because they are more intelligent than the average US citizen.
Large specs have become wise to the manipulations of the PPT in suppression of precious metals and maintain protective derivatives against such manipulations. The next wedding and jewelry seasons in India, the Orient and the Middle East are upon us. Open interest for August gold on the COMEX has gone up over 100,000 contracts in the past month, and there are already 112,500 contracts of open interest for December futures as everyone tools up for a big fall rally.
The number of contracts of open interest on Goldman's COMEX gold shorts are at record lows. We still have two weeks before August contracts get rolled over at the end of July, and then all hell will break loose. So take your positions now in gold and silver, or turn green with envy as the rest of us make magnificent profits. It may be now or never. After the elections, there will be a no-holds-barred unraveling of the system, assuming we even have elections, and there is no telling how fast and how high gold and silver could rocket. If you stay on the sidelines, you could miss the whole thing.
If you were wondering about the stock rallies, don't. The yen went wimpy right on cue to support stock markets just as oil was taken down in record fashion to further support stock markets and to suppress precious metals. Since Wednesday, the carry traders have gotten back into it with a reduction of the value of the yen by two yen per dollar and by three and one half yen per euro. Add in the Fed's out-of-control repo pool for funding, the PPT's usual manipulative efforts and the pathological lies shown in banks' financial statements, the drop in oil to support the dollar, and the rally mystery is solved. Elementary, my dear Watson.
Note that this was options expiration week, so most of the rally was powered by a short-covering rally ignited by the PPT to drain value from protective derivatives carried by large specs to protect themselves from the PPT. Fortunately for us, most of the specs probably got out when the Dow hit 10,800. Specs should short oil over 140 and a Dow over 12,000. Note that dollars chased from bonds, treasuries and money markets back into foreign stocks usually causes the dollar to weaken.
Since this did not happen, it is a clear sign of intervention by the PPT, which will soon subside since they simply cannot keep this pace up for very long in such a gargantuan forex market. Gold and silver are headed much higher, and will now regroup for the final assault on $1,000 for gold and $21 for silver that will take us to new heights and more unexplored territory.
The home builders' sentiment index fell two points in July to record-low 16, with all three components of the survey also dropping to historic lows, the National Association of Home Builders reported Wednesday.
At 16, the NAHB/Wells Fargo housing market index shows that only one-in-six home builders has a positive view of the market. New subdivisions have become ghost towns, with current sales dropping off and with the traffic of prospective buyers drying up in recent months. Few builders anticipate any improvement in sales in the next six months.

PRESS RELEASE

-------------------------------------------------------------​-------------------

Nation's Youth Facing Depression-Era Unemployment Rates
July 15, 2008 (EIRNS)—The national jobless rate for U.S. youth is the highest in six decades, according to a report by Northeastern University's Center for Labor Market Studies. Fifty-one percent of the nation's teens were employed in 2000, a mere 37% of teens are employed (about one in three) when the study was made in April, and probably less today. According to them, the teen employment rate has been deteriorating for over a year, since the fall of 2006, and today, an additional two million teens are unemployed. Youth today are fighting with immigrants and lay-off victims for the same entry-level jobs. Quoting the report, "Low income blacks, hispanic teens face the equivalent of a Great Depression." The metropolitan area with the highest unemployment rate is Washington, D.C., with 86% unemployed youth, but Chicago, Detroit and New York were all above 80%.

What the report noted, that coverage in today's Washington Post overlooked, is that the entire job market had shrunk by 30% since the beginning of the year.

PRESS RELEASE

-------------------------------------------------------------​-------------------

Spanish Real Estate Bubble Bursts, with First Big Bank Default
July 15, 2008 (EIRNS)—The Spanish real estate sector, often described as the "sick man of Europe's housing branch," went into critical condition, with the declaration of bankruptcy of Martinsa Fadesa, one of Spain's biggest real estate banks, last night. The bank had failed to get a bridging loan of EU150 million, which it needed to secure another urgent refinancing loan of EU4 billion. The fact that the loan of EU150 million failed, is indicative of the situation, as negotiations had already begun several weeks ago in order to prevent the full default of Martinsa Fedesa. Especially the three biggest creditors of the troubled bank, La Caixa, Caja Madrid, and Banco Popular, had hoped to save Martinsa Fedesa, because they are themselves troubled. The deadline for the loan expired on July 7, and when the bank tried to get state support, it was denied.

The bankruptcy of Martinsa Fedesa is now over a debt of EU5.4 billion, but many commentators say that is not the full picture. In any case, many other banks in Spain—as also outside Spain—involved in Spanish real estate, are right behind Martinsa Fadesa on the brink. Throughout the country, about 700,000 homes cannot be sold. In Castilla-La Mancha, Don Quixote's region, almost 70% of houses built over the past three years are still unsold. Many other European banks countries are involved in the Spanish housing bubble.

Anticipating the bursting of the bubble, Prime Minister José Luis Zapatero Rodríguez last week blamed the European Central Bank for making matters worse by raising interest rates in the teeth of the crisis, calling the move "irresponsible." More than 98% of home loans in Spain are priced off floating rates linked to Euribor, which has risen 145 basis points since August.

Similarly in Eastern Europe, there is high exposure to the exploding mortgage loan interest rates. Insiders have pointed out that, several hundred thousand Eastern European citizens have taken adjustable-rate loans from West European and other banks, especially from Austria, Switzerland, Sweden and Finland.

The GUARANTEED winning bet, is to take what this turd 'tard says (IF you can even figure that out), and


do EXACTLY the opposite!
-

HOMES DEPRECIATING AT A RATE OF $411.00 PER DAY

As the charts above show (click on them for bigger versions,) local real estate’s slide from last June’s pricing peak has been ugly. The median selling price fell $150,000 to $495,000 in a year. That equates to the typical home depreciating at the rate of $411 a day, $17 an hour .. or a penny every two seconds.

Highlights from June’s report …

Homebuying dropped, May to June, for the first monthly drop in count of closed deals of 2008. Read more HERE!
Median selling price rose, though, for the first monthly gain since November. Read more HERE!
O.C. foreclosures remain high. Read more HERE!
Around SoCal, Inland Empire gets boost from bargain hunters eyeing foreclosures. Read more HERE!
Click HERE to see how your ZIP code’s housing fared in June.
Worth noting, though …

Re/Max stats of pending deals, while slowing, suggest boost in closed deals ahead. Read more HERE!
Economists think housing pushes O.C. economy near recession. Read more HERE!
What do you think?

lansner.freedomblogging.com/2008/07/16/oc-home-slump-equals-4​11-a-day-loss-off-peak

Wednesday, July 23, 2008



Death Spiral Financing at WaMu, Merrill Lynch, Citigroup


Reuters is reporting WaMu has $3.33 bln loss, may be cut to "junk".


Washington Mutual Inc, the largest U.S. savings and loan, posted a $3.33 billion second-quarter loss on Tuesday as souring mortgages forced it to set aside more money for loan losses.

"We are planning for continued softness in housing for the next several quarters," Chief Executive Kerry Killinger said in an interview. "The capital that we have in place is sufficient to manage through this period. We have no plans at this point to raise additional capital."

Washington Mutual said its mortgage unit lost $1.35 billion in the second quarter, while retail banking posted a $2.04 billion loss. Credit cards generated a $175 million loss, while profit in commercial banking fell 29 percent to $87 million.

Washington Mutual also said that Killinger, Chief Operating Officer Steve Rotella and Chief Financial Officer Tom Casey will not receive annual incentive payments under a company bonus plan, in light of its performance in 2008.
What a travesty of justice! It's not easy to lose money in nearly every phase of operations. One might think that such performance would be rewarded. But no! In an amazing superhuman sacrifice the CEO, CFO, and COO of WaMu will all decline bonuses.

Plans To Raise Capital vs. Need To Raise Capital

It is interesting how statements like "We have no plans to raise capital" can get completely distorted from reality.

Check out this bullish Comment about Washington Mutual I found on Yahoo: "No Need to Raise Capital....... Very Bullish. Long till 2012".

Here is the reality.

WaMu "Can't Raise Capital"

Please consider Washington Mutual Drop Wipes Out Most of TPG Holding.

Three months ago, with Washington Mutual's shares at $13.15, a group of investors led by Forth Worth, Texas-based TPG agreed to buy $7 billion of stock at $8.75, a 33 percent discount.

As losses mount, a clause in the TPG agreement makes it more costly for WaMu to raise capital or be acquired. If WaMu is sold for less than $8.75 a share or is forced to raise more than $500 million in equity, it must compensate TPG for the difference, according to filings with the U.S. Securities and Exchange Commission.

"We don't know how their investment plays out, but we also don't know how this affects WaMu to the extent they need to raise more capital," said Steven Davidoff, law professor at Wayne State University Law School in Detroit. "They really can't raise equity."

Death Spiral Financing

It is now time to explore the implications of the desperate deal that Washington Mutual made with TPG. Please consider Lack of Transparency = Shareholders Get Ratcheted.

Following are a few highlights from the above lengthy, but well written article. I condensed this down as best as I can but inquiring minds will definitely want to read the entire article.

Even though hundreds of billions of dollars of capital have been raised by the financial sector over the past several months, which of the investors in a financial institution have made money since their initial investment? Answer: Zero.

We can’t think of one. They are all underwater. When Abu Dhabi first invested $7.5 billion in Citigroup last November, Citi’s stock was $35. Subsequently, when Citi did their $14.5 billion raise in January, the stock was trading at $30. Today Citigroup’s stock is under $20... and it keeps falling. Merrill Lynch did a combined raise of $12.8 billion in December and January at $48. Now the stock is under $35… and also falling. Warburg Pinkus made their now infamous $1 billion investment in MBIA at $31 per share. MBIA has fallen over 80% since and is now trading at under $5 per share.

Those who participated in Ambac’s $1.5 billion rights issue in March are down a similar amount, 80%, as the stock now hovers under $2. Bank of America made their initial investment in Countrywide Financial last August at $18 per share (rather surprising to us, given that Countrywide looked to be going bankrupt if BofA didn’t come to the rescue). Bank of America subsequently made a takeover offer in January. Today Countrywide shares can be got for under $5 per share.

TPG invested in Washington Mutual to the tune of $7 billion at $8.75 per share, a substantial discount at the time to WaMu’s stock price of $13. Today WaMu’s stock is $6. Last month AIG raised $20 billion when their stock was trading at $37 per share. Today AIG stock is just above $30 per share. Even those who participated in Lehman Brothers’ $6 billion equity offering last week at $28 per share are already underwater, with LEH currently trading below $24 (year-to-date Lehman’s stock is down over 60%).

Ironically, thanks to full ratchet provisions, this promises to lead to further dilution and even weaker stock performance going forward.

There were at least some smart investors who noted the downward trend and successfully negotiated for downside protection. We know of at least two cases (though there are doubtless others); namely, Merrill Lynch’s $12.8 billion investment from Temasek (the Singapore sovereign wealth fund) and Washington Mutual’s $7 billion raise from TPG (a private equity firm).

Quite unbeknownst to the general public at the time, downside protection was built into these equity raises to protect these investors. They are called “look back” provisions or “full ratchet” compensation.

We believe it is more accurate to call them “death spiral” securities. They work as follows. The investors in the equity raise would have their investment “protected” by a provision which states that should the bank afterwards raise money at a lower price than what they paid, these investors would be compensated retroactively by having their initial investment priced at this lower price, thereby being issued new shares for free. It doesn’t take a mathematician to see how these provisions can result in massive dilution should the bank subsequently raise even a paltry amount of capital. A new offering will trigger a lower price because of the dilution it would cause, which would trigger even more dilution because of the lower price, which would then trigger an even lower price because of the even higher dilution, etc. This is why we call such securities a death spiral.

However, unless the bank goes bankrupt, these investors can’t lose. And we already know to what lengths the Fed will go to prevent a banking bankruptcy. It’s heads I win, tails I win.

They can even short the stock in the expectation that it will go down and still not lose. At the next financing, which is sure to come, they will be made whole... even making money on the short!
Add Citigroup To Those In Death Spiral Financing

The above article mentioned Merrill Lynch and Washington Mutual in death spiral financing schemes. Add Citigroup to the list. I talked about this way back on January 15, 2008 in Cost of Capital "Ratchets Up" at Citigroup and Merrill.

Is it any wonder that Citigroup is desperate to dump $500 billion in assets? The saving grace for Citigroup is that it has assets to dump. The big question is ho much those assets will fetch. I believe it will be far less that Citigroup thinks. I am still sticking to my estimate that Citigroup will survive, just nowhere remotely close to its current state.

Now take a good hard look at WaMu. It is losing money at nearly everything it does. It is in deep serial trouble over Alt-A loans alone.

With that in mind, many have been asking for an update on the WaMu Alt-A pool I have been tracking. The article has been out for some time. The title is certainly not obvious, and those who missed the update can find it in Fannie and Freddie Waterfalls Are Too Big to Bail.

Desperation At WaMu

Think about the implications of a company either desperate enough or dumb enough to issues $billions in shares at $8.75 when the stock was over $13 at the time. The ratchet provisions made it likely those in the deal immediately shorted it. Even if there were short restrictions, there are ways to execute synthetic shorts (writing deep in the money covered calls for example).

Even if TPG took no action on its own accord, others understanding the implications of the ratchet agreements WaMu agreed to, probably shorted the hell out of it. Any company that desperate or that stupid is begging to be shorted into oblivion.

The CEO, CFO, and COO all ought to get fired for agreeing such terms as well as for not seeing the need to raise capital until shares fell to $13. Then again, those executives paid the ultimate sacrifice of foregoing their bonus for a quarter.

WaMu Is Screwed

Washington Mutual is screwed. It cannot raise capital by equity deals even if it wants to. Those who translated "We have no plans to raise capital" into "No Need to Raise Capital" are sadly mistaken.

WaMu desperately needs to raise capital. However, those death spiral financing arrangements it made means WaMu can't raise capital. And if WaMu can't raise capital, it stands to reason it would have no plans to do so.

Mike "Mish" Shedlock
[link to globaleconomicanalysis.blogspot.com]
Click Here To Scroll Thru My Recent Post List

Death Spiral Financing at WaMu, Merrill Lynch, Citigroup
Posted by Michael Shedlock at 1:30 AM Print

michael rivero:

So far this week we saw Wachovia get socked for an $8.86 billion loss with a layoff announcement of 10,750 employees, while Washington Mutual got hammered for a $3.3 billion loss and increased its beleaguered loan-loss reserves by $3.74 billion to $8.46 billion as it announced expense cuts and asset sales. This is nothing. This is just the beginning. This is just window dressing to protect incumbents. Together with the science fiction and fantasy we got last week from the banking sector, these latest financial statements from the banking sector should receive a Nebula Award from the Science Fiction and Fantasy Writers of America. Gene Roddenberry could not have dreamt up financial statements that were more phantasmagoric.

Quotes from the depression


September 1929
"There is no cause to worry. The high tide of prosperity will continue." — Andrew W. Mellon, Secretary of the Treasury.

October 14, 1929
"Secretary Lamont and officials of the Commerce Department today denied rumors that a severe depression in business and industrial activity was impending, which had been based on a mistaken interpretation of a review of industrial and credit conditions issued earlier in the day by the Federal Reserve Board." — New York Times

December 5, 1929
"The Government's business is in sound condition." — Andrew W. Mellon, Secretary of the Treasury

December 28, 1929
"Maintenance of a general high level of business in the United States during December was reviewed today by Robert P. Lamont, Secretary of Commerce, as an indication that American industry had reached a point where a break in New York stock prices does not necessarily mean a national depression." — Associated Press dispatch.

January 13, 1930
"Reports to the Department of Commerce indicate that business is in a satisfactory condition, Secretary Lamont said today." - News item.

January 21, 1930
"Definite signs that business and industry have turned the corner from the temporary period of emergency that followed deflation of the speculative market were seen today by President Hoover. The President said the reports to the Cabinet showed the tide of employment had changed in the right direction." - News dispatch from Washington.

January 24, 1930
"Trade recovery now complete President told. Business survey conference reports industry has progressed by own power. No Stimulants Needed! Progress in all lines by the early spring forecast." - New York Herald Tribune.

March 8, 1930
"President Hoover predicted today that the worst effect of the crash upon unemployment will have been passed during the next sixty days." - Washington Dispatch.

May 1, 1930
"While the crash only took place six months ago, I am convinced we have now passed the worst and with continued unity of effort we shall rapidly recover. There is one certainty of the future of a people of the resources, intelligence and character of the people of the United States - that is, prosperity." - President Hoover

June 29, 1930
"The worst is over without a doubt." - James J. Davis, Secretary of Labor.

August 29, 1930
"American labor may now look to the future with confidence." - James J. Davis, Secretary of Labor.

September 12, 1930
"We have hit bottom and are on the upswing." - James J. Davis, Secretary of Labor.

October 16, 1930
"Looking to the future I see in the further acceleration of science continuous jobs for our workers. Science will cure unemployment." - Charles M. Schwab.

October 20, 1930
"President Hoover today designated Robert W. Lamont, Secretary of Commerce, as chairman of the President's special committee on unemployment." - Washington dispatch.

October 21, 1930
"President Hoover has summoned Colonel Arthur Woods to help place 2,500,000 persons back to work this winter." - Washington Dispatch

November 1930
"I see no reason why 1931 should not be an extremely good year." - Alfred P. Sloan, Jr., General Motors Co.

January 20, 1931
"The country is not in good condition." - Calvin Coolidge.

June 9, 1931
"The depression has ended." - Dr. Julius Klein, Assistant Secretary of Commerce.

[link to www.safehaven.com]


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Monday, July 28, 2008



Macon Mall Faces Foreclosure


Macon.Com is reporting Macon Mall faces foreclosure.


Foreclosure action has begun against Macon [Georgia] Mall because of nonpayment on a $141.2 million loan, and a new management company has been approved by the court to take control of the 1.4 million-square-foot facility.

"We don't expect any operational interruptions to the mall," said Brooke Houghton, spokeswoman for Chicago-based Jones Lang LaSalle Americas Inc., the court-appointed retail management company now managing Macon Mall. "We don't think there will be any impact on the stores or the customers we serve. We are open and ready for business as usual."

According to court documents, in June 2005 when New Jersey-based The Lightstone Group borrowed $141.2 million, Macon Mall LLC and Burlington Mall LLC in North Carolina were used as collateral for the loan, as well as rents and other income from the properties. The company purchased the two malls about the same time in 2005 for $166 million. The loan currently is held by LaSalle Bank National Association as trustee for a trust that holds and owns a pool of loans including the one for Macon Mall. The trust filed the complaint.

Since the loan was made, Parisians and the Piccadilly Cafeteria have closed at the mall, and Linens-N-Things - part of the mall property, even though it's not inside the main building - is in the process of closing.

In a letter filed in the case, "Dillard's has apparently communicated its intent to close its store location at Macon Mall."

Based on an appraisal "the value of the property has fallen approximately 60 percent since June 30, 2005."
The Shopping Center Economic Model Is History. More mall foreclosures are coming. 50-60% writeoffs will be common, and dozens of already stressed banks will fail as a result.

Mike "Mish" Shedlock
[link to globaleconomicanalysis.blogspot.com]

Same as always, total



-

Paulson's Bail-Out Proposal
Tantamount to High Treason
July 31, 2008 (EIRNS)—This release was issued today by the Lyndon LaRouche Political Action Committee (LPAC).

POSSIBLE $8 TRILLION BAILOUT OF FANNIE AND FREDDIE

Washington intelligence sources reported to EIR that Treasury Secretary Henry Paulson was demanding that Congress pass legislation that would have no limit on the debt that the United States could incur in the Fannie/Freddie bail-out bill that was just passed and signed by George Bush. But, this insane demand was rejected as un-Constitutional by senior members of Congress, who are not about to give up the Congressional duty of oversight. EIR's source said that this "no limit" demand was made because Paulson knows full well that the cost of a bail-out of Fannie and Freddei alone could be over $1 trillion in the immediate period, with the already-known bad mortgages topping $1.3 trillion. Broader losses would be as high as $8 trillion, the source said, when the anticipated bank failures are added in.

Any such proposals, Lyndon LaRouche reiterated yesterday, are tantamount to high treason. There is no way to cover these losses with a bail-out. The only solutions are the three steps that LaRouche laid out at his July 22 webcast.

Don't know about the rest of you, but I strongly feel that physical gold and silver is insurance, and not for market trade. PM's are measured in weight and not in terms of paper. An ounce weighs the same as it always did.

Now, about the actions of the PPT. These jerks have decided to allow India, China, and Japan (our biggest creditors) to steal gold by using their collection of inflated dollars to buy it. This to "make up" for the shitty 2-4% interest they are getting on their T bonds, while Paulson and Bernanke print money like a Xerox machine for us peons at home.

The gold market is one of the very smallest of all commodity markets, and therefore it can be manipulated quite a bit with minimal capital.

Since there is very little cash gold to sell, (try buying some if you dont believe it. You will find the best prices are at least $45 per ounce over the "spot" price) Therefore, the PPT MUST HAVE short-sold NON-EXISTANT (paper) gold for the USD and the Pound to Asia. This is a very short term blip, because when the Asians try to take delivery, physical gold will not be available. They can only trade their paper.

When the Zionists attack Iran, wich will probably be around first to mid September, just watch the PM moonrocket explode.

That this is a bear trap is obvious to one who monitors the prices of gold and the Dollar index.

For example- in Mid March, gold was at $1020 per ounce. The Dollar index was at 71.2.

Today, gold traded at $830, 19% below the $1020 high and the dollar index was 75.8, or 6.8% above its march low.

Thus, It is reasonable to assume that the PPT has leveraged nearly 3 times more gold than exists.

The result will be an explosion in the USD cash (physical) gold price which will be well beyond belief.

If the result for gold is similar to other commodities, you will be paying nearly 3 times the current price for food, as well.

If you have physical, hold for smiles. If not, well now is a good time to jump in.

Here is what Jim Sinclair said today--

Posted On: Monday, August 11, 2008, 11:37:00 AM EST

How Do You Explain Last Week's Gold and Euro Action?

Author: Jim Sinclair

Dear Friends:

What definitions and explanations can be derived from the gold and Euro action last week? Here they are:

1. The intervention without any doubt has established that gold is a currency. Because the Euro will trade at $2 or more before this drama has finally ended, gold is guaranteed to follow - probably in multiples of the Euro’s action.

2. In hindsight, intervention started when the Euro was at $1.5975. This reveals the point above which no intervention can have any appreciable impact. That level is $1.6025 three times for 24 hours in a row.

3. Paulson’s desire not to remain Secretary of the Treasury says that any plan currently in place will play out in 161 days at the most. That does not say that current markets have a 161 life but rather that everything between now and day 161 is short term, camouflage, spin and inherently weak from a market perspective. Paulson's decision not to remain in this most prestigious financial position speaks to the degree of danger that the psychologist-packed Plunge Protection Team (PPT) has worked so diligently to keep mass perception from being focused upon.

Summary:

Everything remains the same but the fear factor has increased. What's happening in the stock market at the moment is no more than another bear market rally in which the purchase of index puts on the Rhino (when the market appreciation resembles a Rhino horn) makes sense.

Gold will rise to $1,200 possibly 90 days later than anticipated. Gold will trade at $1,650 or more before the second week of January 2011. The US dollar will trade at .62 USDX and after great efforts to stop the decline trade at .52 USDX. Black Boxes are primarily momentum driven so keep an eye on that fact in terms of the US dollar versus the Euro.

Respectfully,

Jim

Good update.

To read full article: google: "mish's"

Tuesday, August 12, 2008



Fannie, Freddie Common Stock Is Now A Call Option


John Hussman had some interesting comments on Fannie Mae's last earnings statement in Nervous Bunny.


With regard to Fannie Mae's report, the most interesting figure wasn't the reported $2.3 billion loss, but rather the much larger deterioration in the reported fair value of Fannie's balance sheet. We can observe what's going on by comparing Table 32 of Fannie Mae's Q2 2008 10Q filing with the same table in Fannie Mae's Q1 2008 10Q filing.

As of June 30, 2008, the fair value of Fannie Mae's common equity (that is, the book value available to common shareholders) was -$5.39 billion, compared with a March 31 fair value of -$2.07 billion. What's notable here is that this deterioration (-$3.32 billion) was even larger than the -$2.30 billion loss that Fannie reported to investors, which was itself about four times higher than the loss analysts had estimated. Note that balance sheet losses are excluded from earnings. Financial stocks tend to be reasonably valued when they trade at tangible book value, but simply put, Fannie Mae has no tangible book value. The common stock is now a call option.

Even if we include the fair value of preferred equity, we find that on a fair value basis, Fannie Mae is operating at a gross leverage multiple of 72.7 (total assets comprised primarily of mortgage loans, divided by shareholder equity). In other words, a slight 1.4% deterioration in the value of Fannie's book of assets will wipe out all of the remaining shareholder equity. This makes Long Term Capital Management look like a conservative strategy.

Stupid AND wrong , as usual.



-

Gold Prices must go up! A lot! Why?

Paper money is fraud, and paper money growth has been tremendous. In the Spring of 2006, the Fed stopped publishing numbers for M3 (M3 is the best measure of money in the banks) when M3 was about $10.3 trillion.

The dollar, which is said to be a "unit of account", no longer has any accounting!

But a private company is keeping track of M3, and M3 is soaring past $13.5 trillion, over a 19% increase per year.

True inflation, which is the rate of money creation, is over 15% per year!

The Federal Reserve is accountable to you, but only if you do something about it, such as buy silver and gold!

Central banks are running short on gold, and are starting to buy gold again. Currently, the U.S. "officially" has 261 million ounces of gold. (If they have the gold!)

If U.S. money - $13.5 trillion in M3 - were backed by "U.S. gold", there would be over $51,724 dollars for every one ounce of gold!

The total value of all the paper money and bonds in the world is about $100 trillion, and all the gold ever mined in all of human history is just under about 5 billion ounces. So, world money, divided by world gold, gives a figure of $20,000 per ounce!

World central banks are running out of gold, and some are starting to buy gold, such as Russia, China, South Africa, South Korea, and more! The central banks claim to have about 30,000 tonnes of gold, but they may have less than half of that, as most has been lent or leased into the market over the past ten years.

In sum, at $1000/oz., there is about $5 trillion dollars worth of gold in the world, but there is: $500 trillion in derivatives, $100 trillion worth of bonds and $40 trillion worth of paper money! Therefore, bonds and paper money must go down, and gold must go up!


Why does gold matter?

Especially if we are no longer
on a gold standard?

Even though the U.S. dollar is no longer backed by gold, any holder of dollars could wise up at any time and start buying silver or gold. China, for example, could spend their $1.3 trillion U.S. dollars in bonds and buy gold anywhere in the world, such as Switzerland, Dubai, Tokyo. They could even send agents to buy gold at any of the 4,000 or more coin shops in the U.S. The dollar could drop 50% or more overnight, and there's not a single thing the U.S. government, you or I could do about it.

Annual gold supply from mining is about 2500 tonnes. With 32,151 troy ounces per metric tonne, that's 80,377,500 ounces of gold. I estimate that if China bought that much gold, the price of gold would jump up to about $2,000/oz. At $2000/oz., that would cost about $160 billion, which is just over 10% of China's U.S. dollar bond holdings. A prudent diversification into Gold on China's part could cause the dollar to lose 50% of its value overnight.

When France redeemed U.S. dollars for gold in 1971, it ended the gold standard. This was not the fault of France, it was the fault of the U.S. for printing too much paper money, and the U.S. general public and politicians have not yet learned our lesson.



Gold is money, because of its fundamental nature.

Gold is the perfect commodity for exchange for the following reasons:


Gold is liquid and easily traded, with a narrow spread between the prices to buy and sell (about 1%).

Gold is easily transportable, because it has a high value for its weight.

Gold is money because it is divisible, you can divide it into coins, or re-melt it into bars, without destroying it.
Also, gold is interchangeable. It can be substituted for another piece of gold with no hassle.
Gold is also nearly impossible to counterfeit, as genuine gold is easily recognizable.
When measured by weight, gold is easily countable, and verifiable.
Gold is money because it is a great store of value. It is not subject to decay, rot, or rust.
Gold has an intrinsic value, because it is rare, highly desired by the world over, and is a luxury item.


There is not a single other commodity with those attributes, except, perhaps, for silver. Since gold is too valuable to be used for small transactions, there is potentially more monetary demand for silver. When gold becomes money again, silver will be desperately needed to make change. Platinum and palladium may come close to gold, but they are not so easily recognized by the masses, and are used mostly by industry.



About 10 years ago, M3 was about $4 trillion, and silver was at $5/oz. By the spring of 2008, M3 is exceeding $13 trillion, and silver is at $20/oz. Relative to the recent increase in money supply, silver is as cheap as it ever was!


Here's why silver is a better investment than gold:


Silver has all the same monetary properties of gold, and more!

The historic price ratio of silver to gold shows that about 10 ounces of silver would buy one ounce of gold, a 10:1 ratio. Recently, the ratio is about a 50:1 ratio (with silver at $20/oz., and gold at $1000/oz.) As the silver to gold ratio returns to historic values, from 50:1 to 10:1, you may make over 5 times more money investing in silver, than gold!

Silver prices may rise to exceed the 10:1 ratio, for the following reasons:

More than all of the silver produced by the mines each year is consumed by industry, which leaves little to no room for substantial investment demand. A marginal increase in investment demand will drive prices sky high.

Most silver is produced as a by-product of mining gold, copper, zinc, or lead. Higher silver prices might not substantially increase the amount of silver mined each year. Consider, in 1980, when silver prices went up to $50/oz., less silver was mined than in 1979!

Higher silver prices may not cause much reduced demand. Why? Because most silver consumed by industry is used in tiny quantities in each application, such as in film or electrical contacts, therefore, rising silver prices will not easily slow down growing industrial demand.

Additionally, as paper money continues to falter, people will buy silver and gold without regard to price, or they will buy simply because prices are going up! Because many investors today are momentum investors, and won't be able to ignore the gains!

Each year, silver mines produce about 650 million ounces of silver. 200 million ounces come from recycling and about 100 million ounces come from investor or government sales. That's a total of about 1000 million ounces. Of that total:
about 42% is consumed by industrial use
about 28% consumed by jewelry
about 20% consumed by photography
about 5% consumed in coins and medallions
That's 95% of total available silver each year! This implies either a "surplus", or "investment demand", of about 5% total. At $20/oz., that's only $1 billion per year of net investment demand.

Since the 1950's, silver use and consumption, has made silver more rare than gold, in above ground, refined and deliverable forms. Estimates suggest there are 200-300 million ounces of refined, above ground silver available to the market at the present time. There are about 125 million ounces of silver at the NYMEX, the big commodity exchange in New York. The ETF SLV has about 180 million ounces.

Each silver contract at the NYMEX is a promise. There are too many contracts, too many promises to deliver silver that may not exist. Each contract is for 5000 ounces. There are often over 200,000 contracts for 5000 ounces, that's a total of 1000 million ounces of silver promised to be delivered. With recent market trends of defaults and bankruptcies, these contracts are at risk of default. Yet the exchange has only about a third of that in real silver. How can they promise to deliver more silver than exists? If they fail to deliver silver, then confidence in the world's entire financial system may collapse. Industrial users of silver may have to shut down their factories. To prevent this, users will bid silver prices much higher.

Due to the risk of default in silver futures contracts, I suggest that you avoid buying futures contracts, avoid options, and avoid storing your silver with anyone else! Take delivery of your silver, and put your silver in your own safe!

Despite silver's intrinsic properties as money, silver began to lose its status as money starting in the late 1800's, as nations stopped using silver, and started using only gold as money. Over 100 years of this "demonetization" has caused a serious drop in silver's value, and this trend is about to be reversed as investors re-learn that silver is a great store of value because of its intrinsic properties.

As paper money continues to waver, the neglect of silver's use as money will end. Once again, silver will be valued based on other measures of value, such as a day's wage, or a ratio to gold. If silver exceeds its historic value - as I expect it will - due to the scarcity - from its importance in electronics and photography - then perhaps a silver dime, a silver quarter, or a silver dollar will be worth far more than a day's wage, as it once was.

Wednesday, August 20, 2008



Fannie, Freddie $223 Billion Debt Rollover Problem


Fannie and Freddie have a looming $223 Billion Debt Rollover Problem.


Aug. 20 (Bloomberg) -- Fannie Mae and Freddie Mac's success in repaying $223 billion of bonds due by the end of the quarter may determine whether they can avoid a federal bailout.

Fannie, based in Washington, has about $120 billion of debt maturing through Sept. 30, while McLean, Virginia-based Freddie has $103 billion, according to figures provided by the government-chartered companies and data compiled by Bloomberg.
My Comment: It is a near certainty taxpayers will be bailing out Fannie and Freddie. The only questions now are about the size and exact nature of that bailout.

The Treasury will probably be forced to buy as much as $30 billion of preferred shares in both Fannie and Freddie by the end of next month, according to Bill Gross, who manages the world's biggest bond fund at Pacific Investment Management Co.
My Comment: Bill Gross made a huge bet on Fannie and Freddie. So far, I do not think it is working. More on this below.

Freddie Mac "continues to have strong access to the debt markets at attractive spreads," spokeswoman Sharon McHale said. Fannie spokesman Brian Faith declined to comment.

Investors this week demanded an extra 104 basis points in yield to own Freddie's five-year debt rather than Treasuries of similar maturity, the most since reaching a 10-year high of 114 basis points in March. The gap narrowed to 74 basis points after Paulson's announcement. A basis point is 0.01 percentage point.

Fannie spreads approached a 10-year high of 104 basis points on Aug. 18, from 74 basis points on July 28. In the decade before 2008, the spread averaged 43 basis points.
My Comment: Spreads are at record highs. Why Freddie spokeswoman Sharon McHale would call record spreads "attractive" is a mystery.

After receiving authority last month to inject unlimited capital into Fannie and Freddie, a Treasury spokeswoman this week said Paulson had no plans to use his new power.
My Comment: Paulson has virtually zero credibility at this point, on the dollar, on Fannie, on anything.

Freddie's 5.57 percent perpetual preferred shares are trading at $9.37 to yield 15.3 percent, compared with $17.99 and a yield of 7.77 percent on June 30 before the crisis erupted. Fannie's 5.5 percent preferred shares yield 16.4 percent, up from 7.83 percent on June 30.
My Comment: Those preferred yields suggest that bondholders may not be made whole by whatever shape the bailout takes. Pimco just might find itself on the wrong side of its bet if bondholders participate in some of the losses. And certainly equity holders will be wiped out in any kind of bailout.

Minyan Peter was discussing various bailouts today in Fannie, Freddie and Countrywide Issues Affect Everyone.

On Freddie and Fannie I expect that the government will invest in those entities at a capital level just below the now explicitly US guaranteed senior debt – think “super-senior" subordinated debt with warrants. To do anything different would provide a windfall to existing subordinated debtholders and preferred and common shareholders, which I believe would be politically unpalatable. At the same time, though, while common dividends will be eliminated, I expect that the existing preferred stock dividends and subordinated debt interest coupons will be paid.

On Countrywide, I have always felt that the question was never “Will Bank of America (BAC) buy Countrywide?” but “At what price will BofA buy Countrywide?” Well, it has now become clear that the price to be paid is going to come not just from BofA and Countrywide shareholders, but from Countrywide debtholders as well. My best guess is that BofA will drag the uncertainty out as long as it can, continuing to release more and more troubling data about the Countrywide portfolio.

Ultimately, though, I expect that BofA will tender for the bonds – at a substantial discount to par – and book some level of gain in the process. Remember, having closed the deal that no one thought he should close, Ken Lewis needs to find some way to save face with his board of directors.

But I hope by walking through these two examples, you can see that every deal will be different, and more importantly, given the magnitude of pain to be inflicted, everyone will be impacted.
$233 Billion is a an enormous amount of debt to have roll over between now and September 30, especially in this market. And there is a decent chance the bond market chokes on those rollovers. That is one reason why Paulson asked for a blank check to buy unlimited amounts of Fannie and Freddie bonds.

If the Fed does step in to bankroll those bonds, it may want "super-senior rights". Fear of that possibility is pushing those spreads to record levels. Paulson's resolve to not use the authority he asked for is very likely to be put to the test.

Mike "Mish" Shedlock
[link to globaleconomicanalysis.blogspot.com]
Click Here To Scroll Thru My Recent Post List

However at the end of the gold day, jewery accounts for half of all raw gold sales........high gold prices sink jewery markets worldwide..and cause jewery stores in high end luxury items to close thier doors...who would pay 1,500.00 for a plain gold wedding band..get real...already jewery makers are turning away from real gold jewery in favor of other metals...that means half of the raw gold sales globably will cease....................til gold resmes a realistic price..average consumers are hit with inflation and will not be able to purchase expensive gold jewery.....

World's Largest Gold Refiner Runs Out of Krugerrands (Update1)

By Claudia Carpenter

Aug. 28 (Bloomberg) -- Rand Refinery Ltd., the world's largest gold refinery, ran out of South African Krugerrands after an ``unusually large'' order from a buyer in Switzerland.

The order was for 5,000 ounces and it will take until Sept. 3 for inventories to be replenished, said Johan Botha, a spokesman for Rand Refinery in Germiston, east of Johannesburg. He declined to identify the buyer.

Coins and bars of precious metals are attracting investors as a haven against a sliding dollar and conflict between Russia and its neighbor Georgia. The U.S. Mint suspended sales of one- ounce ``American Eagle'' gold coins, Johnson Matthey Plc stopped taking orders for 100-ounce silver bars at its Salt Lake City refinery and Heraeus Holding GmbH has a delivery waiting list of as long as two weeks for orders of gold bars in Europe.

``A lot of people are worried about the dollar, they're worried about inflation and now we have geopolitical risk with what's happening in Russia,'' said Mark O'Byrne, managing director of brokerage Gold and Silver Investments Ltd. in Dublin. O'Byrne said his company's sales are up fourfold this year, heading for a record since its founding in 2003.

Gold rose to a record in March and is 25 percent higher than this time last year, while the dollar dropped 7.4 percent against the euro. Silver is up 15 percent in the period.

Salt Lake

French Foreign Minister Bernard Kouchner said European Union leaders meeting in Brussels Sept. 1 will discuss sanctions against Russia after it recognized the independence of two regions of Georgia. U.K. Foreign Secretary David Miliband said yesterday Russia was trying to ``redraw the map'' of Europe.

Johnson Matthey's Salt Lake City refinery doesn't have the capacity to meet investor demand for 100-ounce silver bars, said spokesman Ian Godwin in London. He wouldn't comment on whether the company may expand capacity or end production.

The refinery usually gets orders for 1,000 ounce bars from banks and silver grains from jewelers, Godwin said.

Rand Refinery has manufactured, marketed and delivered more than 46 million ounces of Krugerrands since the gold coin was introduced in 1967, according to the company's Web site. Krugerrands are minted at the South African Mint from gold coin blanks supplied by Rand Refinery.

Gold for immediate delivery rose $2.29 to $829.19 an ounce by 5:24 p.m. in London. Silver gained 10.5 cents to $13.60.

To contact the reporter on this story: Claudia Carpenter in London at [email protected]

B

BACK BELOW $800
Gold demand soars. Price falls. What's going wrong?
Physical demand for gold is surging but the price keeps taking serious knocks. What's happening.

Author: Lawrence Williams
Posted: Wednesday , 03 Sep 2008

LONDON -

Gold market manipulation conspiracy theorists should be having a field day. The past few weeks have seen solid evidence that physical gold demand from individuals is soaring. We have seen the U.S. Mint having to suspend one ounce Gold Eagle coin sales because of what it terms ‘unprecedented demand', Indian gold sales have picked up enormously in the past few weeks leading to purchasers having to wait several days for deliveries as the traditional sellers are short of gold, while yesterday we hear that Abu Dhabi, a major trading centre for precious metals, has seen gold sales rise by 300 percent in volume and 250 percent in value in August compared with a year ago.

According to a Reuters report quoting Abu Dhabi Gold and Jewellery Group Chairman Tushar Patni "It was the best month the market has seen in almost 30 years and it compensated for any drops we have seen earlier this year. We had never expected that if gold fell below $800 an ounce we would see a 300 percent increase in volume and 250 percent in value, especially as many buyers are abroad on holiday."
Switzerland's UBS - the world's largest trader of gold bullion, noted yesterday that "Physical demand continues as of Monday with a near-record day of Indian demand prompted by the dollar and crude induced sell-off of the gold price". The Swiss bank also noted the huge liquidation of long positions on the Comex and OTC markets in the U.S., which has been a major contributor to the gold price fall and went on to comment "This combination of heavy long liquidation and stellar physical demand remains the main reasoning behind our strong call in gold (although supported also by a technical view on the dollar from our Technical Strategy colleagues)." See Rhona O'Connell's Mineweb article on the UBS buy signal on gold - UBS urges clients to buy gold - we already are say investors.

But, yesterday and today, despite the apparently good news on demand, the gold price plunged by over $40 an ounce and, at the time of writing was trading just above $790 an ounce. Something doesn't seem to add up!

However, conspiracy to depress the price isn't necessarily the answer. As my colleague Barry Sergeant points out in his analysis of today - Dollar at 12-month high. Gold plunges. Resource stocks dive - it is the resurgence of the dollar which is driving down not only gold, but virtually all resource stocks. In particular the oil price seems to be inexorably plunging back to around $100 a barrel - may even go lower if the trend continues - and the gold price of late seems to have been wedded to the oil price coat strings. Until the oil price is seen as stabilising, then it looks like gold will find it hard to break out. Although there are plenty of major ‘conservative' analysts out there who have gone on record out as saying they expect gold to bounce back in the final quarter of the year.

An interesting note from New York State based American Precious Metals Advisors comments that "Indian housewives are far better forecasters of the gold price than most of us paid to do the job -- and, today, Indian housewives are buying the yellow metal. Indian jewelry manufacturers are paying as much as five to six dollars an ounce above the world market price of gold, reflecting tight local supplies -- and, even so, delivery times are several days above normal."

The note opens with the statement "Gold near US$800 remains vulnerable in the near term to a stronger dollar but is underpinned by rising physical demand in key global markets, deteriorating macroeconomic and financial environments, accelerating inflation, and tight supply/demand fundamentals for the metal itself." And the note concludes "The key for gold, in the longer term, is that inflation everywhere -- in the United States, Europe, Japan, India, China, Latin America -- is accelerating. China and India, the biggest gold consuming nations, each have recently reported double-digit year-over-year consumer price inflation rates. Measures of monetary policy -- growth in broadly defined money supply and real (inflation-adjusted) short-term interest rates -- are already at inflation-fueling levels. There's no doubt about it, inflation is a global phenomenon -- and the acceleration of consumer-price inflation in the major gold consuming countries and regions, especially India, China, and Japan, will support investment and hedge demand even as gold moves higher."

As almost anyone reviewing the gold market will point out, gold price fundamentals are strong. Production is slipping - leading gold producers South Africa and Australia are both reporting production declines and although increases in China will take up some of the slack the overall global trend would seem to be downwards, despite the sharp overall gold price rise over the past three years. Big new gold deposits are not being found - or if they are are in increasingly difficult and hostile political or geographical environments, or frequently both.

Sooner or later gold will react positively. The dollar will stabilise or fall back again as perception of the true state of the U.S. economy returns. There will be more serious fallouts from the ongoing credit crisis with more bank failures on the horizon, while growing global sabre rattling suggests some uncomfortable political times ahead. All positive for gold. At some stage the big money which drives all investment will recognise this and precious metals will benefit. It is only the timeframe which seems to be in doubt.