Attempted Raid in gold and silver/CME raise margin requirements again in silver

Harvey Organ, Thursday, March 24, 2011

Attempted Raid in gold and silver/CME raise margin requirements again in silver

 

IMF Prepares For "Threat To International Monetary System"

Submitted by Tyler Durden on 03/24/2011 19:20 -0400

Back in April 2010, before Waddell and Reed sold a few shares of ES, effectively destroying the market on news that Europe was insolvent, we made the following observation: "The IMF has just announced that it is expanding its New Arrangement to Borrow (NAB) multilateral facility from its existing $50 billion by a whopping $500 billion (SDR333.5 billion), to $550 billion." Little did we know that our conclusion "something big must be coming" would prove spot on just a month later after Greece, then Ireland, then Portgual, and soon Spain, Italy, Belgium, and pretty much all other European countries would topple like dominoes tethered together by a flawed monetary regime. Well, based on news from Dow Jones we can now safely predict the following: "something bigger must be coming." As if the IMF's trillions in open lending facilities (many of which have recently been adjusted to uncapped) were not enough, we now learn that the world lender of last resort (which in theory is the Fed, but apparently Bernanke has been getting a little shy lately so is offsetting his direct lending directives to secondary organizations like the IMF, leaving the Fed with only USD liquidity swaps) is about to activate a "Special Funding Pool" - Dow Jones explains: "The International Monetary Fund is expected to soon activate a special funding pool that will boost the fund's ability to prevent or resolve economic crises, two people familiar with the situation said Thursday. One of the people said the activation of the funding--which can only be made by a special request from the IMF managing director to the board--was in anticipation of an expected wave of new IMF programs, including the possible expansion of the Greek bailout package." Wonderful. Global financial cataclysm rinse repeat all over again...

Fukushima Raised To Level 6 On INES Scale: Now Officially More "Serious" Than 3 Mile Island

Submitted by Tyler Durden on 03/24/2011 21:46 -0400

According to Asahi Shimbun which is quoting the Japan NRC, the Fukushima event has just surpassed Three Mile Island in terms of seriousness, and has been upgraded from Level 5 "Accident with Wider Consequences" to Level 6 "Serious Accident." Only Chernobyl is a Level 7 event. We believe Fukushima should get there within 2 weeks as ever more of the current devastation becomes public. Of course, all of this is a paper-pushing formality. What isn't, are people who may be developing serious diseases as the government continues to misrepresent the severity of the situation. 

 

 

 

As Adjusted Monetary Base Rises By Half A Trillion In 2011, Treasury Runs Out Of Debt Ceiling Delay Measures

Submitted by Tyler Durden on 03/24/2011 21:24 -0400

Something very notable happened today receiving exactly zero recognition by the mainstream press: the process of winding down the Supplementary Financing Program ended, with either zero (assuming the entire $25 billion in 56 Day CMB matured without rolling) or $5 billion (as per the Treasury's disclosure), remaining under the SFP. This means that the entire $200 billion buffer that had previously afforded the Treasury breathing room with the looming debt ceiling, is now gone, and next steps include such drastic measures as a partial or complete government shutdown, as no incremental funding will be available to fund the daily deficit. As a reminder, as of today the Treasury had a total of $12.24 trillion in debt, just $70 billion below the ceiling, and $14.172 of debt subject to the limit. Which is not good because as per today's refunding announcement there is $99 billion in 2, 5 and & 7 year debt coming down the line next week. Which means that while the formal debt ceiling will not be breached, the total amount of debt including the fluff not counted, will surpass $12.4 trillion by next Friday. In the meantime, the SFP unwind continues to have a major impact on the adjusted monetary base. As we have discussed in the past, excess reserves continue to go parabolic, purely as a function of the SFP unwind and ongoing QE2, which in turn is impacting the adjusted monetary base, which is now half a trillion greater year to date. As we predicted previously, excess reserves will hit $1.7 trillion by the summer. These rose by $72 billion in the past week to approximately $1.4 trillion, which means that by the time QE2 is over, the Adjusted Monetary Base will hit $2.7 trillion, a $750 billion increase in 6 months. And if QE3 gets the green light, all bets are off. And once this surging monetary base is converted from excess reserves to currency in circulation, that is the moment when Weimar comes a-knockin'.

Meanwhile Afterhours...

Submitted by Tyler Durden on 03/24/2011 18:25 -0400

It appears that someone may have called the bluff on our earlier post of a possible commencement of trading in advance of QE3 (and how anyone could be surprised that QE3 is coming is beyond us - it has been our conviction that the Fed is now on a slippery slope from which there is no return since late 2010), and decided to take our every offer in ES afterhours for nearly 10 points straight. That this trade was very much out of the ordinary is confirmed by the complete absence in any of the traditional correlation pairs (see chart below) such as the AUDJPY. Is the prevalent mindset finally one that QE3 is inevitable? If so, look for gold and silver to follow suit promptly and even promptlier nullify today's latest margin hike by the CME. 

 

 

 

Lipper Reports Largest Ever Weekly High Yield Outflow

Submitted by Tyler Durden on 03/24/2011 18:04 -0400

Just out per Lipper, High Yield recorded its largest weekly outflow ever with a negative $2.8 billion this week. Presumably this is due to the risk off mood in the markets carried over from last week, or maybe just more funds converting out of fixed income and pumping into equities in advance of what even the futures just seem to realize is an inevitability (go ahead, check out the ES chart AH, we dare you). That said, per ICI there was a 3rd consecutive outflow from domestic equity, so perhaps this was simply derisking. Continuing on the Lipper news, the 4 week average dropped from $181 million of inflows to $641 million in outflows, pushing the year to date down by half to just $2.9 billion in inflows. On the other hand, loan funds continues being John Holmes with $9.5 billion in YTD inflows, although just $57 million (down from $686 million) in the last week.

Lear Capital: Will Rising Interest Rates Skyrocket the Gold Price?

Submitted by Zero Hedge on 03/24/2011 18:01 -0400

The great Gold Bull Market of the 20th Century is said to have started in 1972, just after Richard Nixon announced on August 15, 1971, he was taking the United States off the Gold Standard. At that time Nixon realized foreign countries were hoarding more gold and silver-backed currency than could actually be redeemed by the precious metal's reserves we held.

Tokyo Runs Out Of Bottled Water

Submitted by Tyler Durden on 03/24/2011 16:44 -0400

While the broader population continues to read stories of a stoic Tokyo population, casually taking each day of deteriorating news from Fukushima in stride, the reality is far from what is being represented. The latest escalation: Tokyo is running out of bottle water, now that the government disclosed (with a two week delay), that drinking water is irradiated. From Reuters: "Many shops in Japan's capital ran out of bottled water on Thursday after a warning of radiation danger for babies from a damaged nuclear plant where engineers are battling the world's worst atomic crisis since Chernobyl." And if the government appears to be on the verge of losing control (and no city of 13 million can operate without water, no matter how bullish Douche Bank's chief strategist sounds on CNBC) after disclosing this one factoid, what happens when the true extent of the secondary effects from Fukushima are made public: "The government urged residents not to panic and hoard bottled water -- but many shops quickly sold out."If this is long term, I think we have a lot to worry about," said Riku Kato, father of a one-year-old baby." Perhaps it is time for Malcolm Gladwell to do a tipping point analysis of herding mentality, vis-a-vis a decision to participate in a mass urban exodus. Which brings up tonight's $64k question: is Snake Plissken too old for the "Escape from Tokyo" sequel.

Someone Leak Something?

Submitted by Tyler Durden on 03/24/2011 16:04 -0400

Something rather disturbing from a European trading desk... 

 

 

 

And Like Clockwork, CME Hikes Silver Margins Halting Surge

Submitted by Tyler Durden on 03/24/2011 15:16 -0400

In tried and true fashion, just as Silver was about to viciously destabilize the global capital markets as it surged to new 31 year highs, the CME stepped in and did its usual 3-6 half life intervention by hiking initial and maintenance margins on silver futures from $11,138 and $8,250 to $11,745 and $8,700 respectively. This is merely the latest margin hike in what appears to be a neverneding series designed to reduce speculative "fervor" courtesy of endless liquidity. What it will do is merely provide a better entry point for those who by now realize that silver's next stop in the fiat endgame is $40, then $50, and so forth. Naturally, the price drop in silver caused gold to sell off too. And now that the CME accepts gold as collateral, we can't even visualize the reflexive loops that develop once the metal that is also a collateral currency becomes more and less valuable at the same time. 

 

 

 

Mike Krieger Explains Why A Calm Sea Does Not Make a Skilled Sailor

Submitted by Tyler Durden on 03/24/2011 14:03 -0400

In case you wondered where the title for this piece came from, it was actually the message that popped out my fortune cookie during a meal on Monday night. It just summed up so many things for me. It summarized why our culture is so damaged. At the core of the malignancy killing the nation is the fact that we possess the world’s reserve currency that can be created at will out of thin air and forced upon goods producing nations (whether manufacturing or resource goods). This means we do not need to produce to consume, which hollows out the entire core of the economy over time and has made us the generally lazy and decadent society we are today. I mean take for example the C announcement recently of a reverse 1 for 10 stock split. I haven’t heard such an embarrassing press release since reading about how U.S. taxpayers are going to make money from the bailouts. So for the last year all I heard on propaganda channel CNBC was how once C’s shares got above $5 it would attract a whole new class of investors and the shares would soar. Well the stock wasn’t able to hold above $5 so look what happened. Magic, they are just going to make the stock trade at $45 with this scheme. Bankers can’t lose, didn’t you get the memo? Oh and they are paying a whole penny a share in dividends. You have got to be kidding me guys. Pathetic.