Raid in silver and gold fail

 

 

Harvey Organ Wednesday, March 9, 2011

Raid in silver and gold fail

 

Bernanke Tries To Explain Why A Ponzi Scheme Is A Perfectly Acceptable System For Post Civil-War America, Fails

Submitted by Tyler Durden on 03/09/2011 16:55 -0500

The following exchange between Ben Bernanke and Senator Kirk is a must watch for everyone who wonders how Ben Bernanke justifies the fact that America is now an open Ponzi scheme. Kirk's question "in laymen's terms this is one part of the government lending another part of the government money, which would not let to long term confidence once the American people understood the basics a little bit better" relates to the open monetization that the Fed does each and every day at least until the end of June. What Kirk did not ask is what happens when the American people realize just how truly preposterous the Ponzi is, and that all the interest "paid" by the Treasury to the Fed ends up being remitted as cash right back to the Treasury as revenue in essence incentivizing the Treasury to spend and borrow more in order to earn more! This is the most circular Weimarian nightmare scenario imaginable, and we can only hope that "the American people" understand this as soon as possible. As to Bernanke's surprise that the US had a currency without any Federal debt to back it up (yes, it is possible to live within one's means, even for a central bank) can we remind the Chairman that the gold on the Fed's balance sheet, all eight tungsten thousand tons of it, is actually Marked to Market to almost $300 billion, and can by definition be used as a pledge to any liability, such as a currency or excess reserves. But oh yes, how could we forget, using just gold as an asset would never afford us the kind of adamantium price stability that we have seen in recent times. Plus how on earth could one infinitely dilute the dollar if the Fed's balance sheet was limited by actual "assets" that do not require Hewlett Packard tech support every now and then.

Advice On How To Trade Gross' Treasury Dump From A Former PIMCO Employee

Submitted by Tyler Durden on 03/09/2011 18:40 -0500

Having worked at PIMCO for 4.5 years, I can tell you that this kind of a major allocation decision was not reached overnight nor was it reached without considerable debate by every senior member of the firm. In other words, the decision to lower total US Treasuries to 0% was discussed by senior portfolio managers, senior account managers and many prominent outside consultants for days and perhaps even weeks before it was finally implemented. They never do anything over there without vigorous debate and discussion. For example, Alan Greenspan is a paid consultant to the firm and often participates in their quarterly Secular Outlook meetings. I don’t know if Mr. Greenspan participated in the debate about this decision but I wouldn’t be surprised if he or others of his stature did. By this move PIMCO is clearly indicating, almost by putting their reputation on the line because imagine the underperformance they face if they are wrong, that bond yields in the US will be rising soon, US Treasury prices falling and liquidity drying up to some degree.

 

 

 

 

Gundlach Sees Munis Dropping Another 15-20%, "By The Time All Muni Shoes Drop It Will Look Like Imelda Marcos' Closet"

Submitted by Tyler Durden on 03/09/2011 14:57 -0500

DoubleLine's Jeff Gundlach appeared on CNBC earlier, and among other things, the muni market was discussed.It appears that the fund manager whom many consider to be roughly in the same ballpark as Howard Marks when it comes to fixed income investing is very much in Meredith Whitney's camp when it comes to his outlook on muni market prospects. Asked by Faber if he believes that munis are ultimately going the way subprime securities did, Gundlach responds "If by that you mean lower, the answer is yes. If you mean crashing, I am agnostic on that." And for all those who love taking out their actuarial tables and their historical default data to refute what is simply common sense, Gundlach has a few words as well: "I don't think you need to know what the default rates are going to be, or need to know how low low is, munis are going to go down. There are going to be other shoes to drop. There might be so many it looks like Imelda Marcos' closet when all the shoes drop because all the states have to deal with this stuff.... Between here and the endgame lies the valley and the valley is full of fear. And I think the muni market is going to go down by at least 15 to 20%. At least." As for Kaminsky relentless advocacy of munis, this time coming out with the always disingenuous "hold to maturity" defense, Gundlach simply made a mockery of that whole spiel: "You know what the definition of an investor? It is a trader who is underwater. People say they hold to maturity until they get scared and sell. It gets scary when the prices start to drop. The fear factor here is going to be palpable." This is probably the single smartest statement ever made on CNBC, where for once a guest actually replied with what is elsewhere known as common sense, instead of ivory tower economic theories that work everywhere but in the market (yes, stocks just like housing can only go up, until they can't). Aside from that cue the congressional subpoena.

 

 

Murray Pollitt: They don't fear inflation; it's their policy

 

Buy gold's dips, key Chinese economist advises

 

 

Following 7 Weeks Of Market Topping Inflows, Retail Once Again Turns Its Back On Dropping Stocks With $3.1 Billion Outflow

Submitted by Tyler Durden on 03/09/2011 17:21 -0500

It was to be expected: after 7 consecutive weeks of inflows during which the market drifted aimlessly, while seeing insiders dump a few billion to witless retail hot potato chasers, forming what some are calling a quadruple top, not to mention various revolutions and now counter-revolutions in MENA, the retail investor has once again said enough and turned their back on stocks. The beneficiary: taxable bond funds, which saw a whopping $4.8 billion in inflows, despite attempts by everyone in the propaganda machine to dissuade investors (read Baby Boomers) from putting their money into fixed income and reroute capital to stocks. Well, in an age of immediate demanded gratification and POMO-adjusted Newtonian third laws, every future inflow better be met with a greater than expected spike in the market, or the resulting outflow in the next week will be vicious. Also those hoping that the ongoing outflow from munis will finally end, will have to wait at least one more week: the week ending March 3 saw $711 million in muni outflows. Of course, following today's spanking by Jeff Gundlach we wouldn't hold our breath on a massive resurgence in capital allocation to an asset class which one of the greatest fixed income minds is due for a 15-20% correction. Yet what truly boggles the mind, is Legg Mason's response on how the $672 billion asset manager plans to deal with billions in sudden redemption requests: "Those outflows will be largely offset by market appreciation," said Nachtwey, chief financial officer of Legg Mason." In other words, the Ponzi will continue... or else Legg Mason is dunzo.

If The Gold/Copper Ratio Is Truly A Harbinger Of Market Weakness, Here Are Some Pair Trade Ideas

Submitted by Tyler Durden on 03/09/2011 16:06 -0500

Two days ago we pointed out the dramatic change in the ratio of copper to gold, which moved at the highest rate of change since June of 2010. Today, the rate of change is even higher at 4.3%. And with copper starting to seriously take on water, a curious observation emerges: is the gold-copper ratio, which on an inverted basis was virtually a tick for tick correlation conjugate for the S&P, now simply a harbinger of where the stock market is headed. All else equal, once the Chinese exuberance dynamics which appear to have stalled out in copper, move to equities (which as Finisair demonstrated yesterday is only a matter of time) we believe, as the attached chart shows, that the fair value of the stock market is about 120 points lower. Since this is a relative comparison, those who do not wish to trade a single series, can put on a pair trade of short the Gold/Copper ratio (predicting it will decline from the current 3.4 - it is shown inverted on the chart below) and short the S&P in expectation of a compression. 

 

 

 

In The News Today

Posted: Mar 09 2011     By: Jim Sinclair      Post Edited: March 9, 2011 at 1:28 pm
Filed under: In The News

Jim Sinclair’s Commentary
The toll that has been taken by the financier Fat Cats is beyond belief. Add the present long term weather cycle to peak oil with a smattering of planned, coordinated events in the Middle East and the West is yesterday’s news. Standards of living will not in this century, if ever, challenge the 2004-2006 period.
Gold, as the last man standing, will go further in price for a greater length of time than most expect and few say. Like the average cost of regular fuel shown so often, where in hell did they buy those groceries? I want to go to that store.

Why you’re paying more for groceries

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Flying Blind

Posted: Mar 09 2011     By: Greg Hunter      Post Edited: March 9, 2011 at 1:07 pm
Filed under: USAWatchdog.com
By Greg Hunter’s USAWatchdog.com
 
Dear CIGAs,

Last Friday, the Bureau of Labor Statistics (BLS) reported the economy created 192,000 new jobs and the unemployment rate fell to 8.9%.  The good news was reported almost everywhere as a turning point in the U.S. economy.  For example, CNBC said, “U.S. employers hired more workers in February than in any month since May last year and the unemployment rate fell to a near two-year low, the strongest sign yet the recovery has become self-sustaining. . . . “We have moved into the expansion phase of the economic cycle and the economy is self-sustaining,” said Brian Levitt, an economist at Oppenheimer Funds in New York.”(Click here for the complete CNBC story.)

But if you look deeper into the numbers, as John Williams does at Shadowstats.com, you don’t see the turnaround picture.  In fact, just the opposite is going on.  In his latest report, Williams estimates the government is routinely overstating job growth by “230,000 jobs” a month.  Using simple math, 192,000 created jobs (according to BLS) subtracted from 230,000 overstated jobs gives you an actual net loss of 38,000 jobs.  I called Williams to check my analysis, and he told me it is not that simple because the government’s estimations are “the worst in modern economic history.” Williams says unemployment numbers are “openly misleading” and virtually “worthless.”

In an interview yesterday from his San Francisco office, Williams told me when it comes to calculating unemployment numbers, the BLS is “flying blind.” He admitted, “It is hard to put an exact number on the actual job losses last month, but we likely lost jobs—not gained them.” He added, “The job losses could be as high as 30,000 for last month.”
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