Gold steady/silver rises/Jobs report tomorrow

Harvey Organ, Thursday, July 7, 2011

Gold steady/silver rises/Jobs report tomorrow

The U.S. gov't just declared war on senior citizens
The fraudulent inflation "fix" being considered by Obama and Congress... 






America's food supplies are more fragile than you realize
"It wouldn't take much to make it difficult to acquire food at any price..." 





 



The Market is Perfectly Set Up For Another 2008 Crisis

Posted by: Phoenix Capital Research

Post date: 07/07/2011 - 14:03

Not only is the financial system more leveraged than during the Tech bubble, but mutual funds are more heavily invested than at any time in the last 40+ years. To say that the potential for a full-scale market collapse is high would be a gross understatement. Should the market begin to crater, the margin calls (when an investor has to put up more capital to cover a losing position that was bought using borrowed money) could be absolutely enormous.

The World's Biggest Hedge Fund Complete Blow By Blow On What Happens If The Debt Ceiling Is Not Raised 

While it is a 99.9% given that the soap opera on the Hill will be over very shortly (most likely courtesy of an outcome that will send the AARP in an apoplectic yet powerless to change anything fit of rage), there is always the chance that politicians will screw something up. After all America is in its current predicament primarily courtesy of the same politicians who are now scrambling to retain face with the electorate, while at the same time perpetuate the status quo. Which is why we present this just released analysis from the world's biggest hedge fund, Bridgewater, which asks the logical question: "what happens if the debt ceiling is not raised" and provides it answer in excruciating detail. The primary focus is what happens to Treasury holders as this would be the security impacted first and foremost: "As we in detail go through some of the largest holders of Treasury securities and the various places where Treasuries are used in collateral and index agreements, it looks to us like there is a fair amount of leeway to not immediately react in the event of a default. It doesn’t look like most of these entities would need to either immediately liquidate their holdings or renegotiate contracts where Treasuries are used as collateral due to ratings downgrades. While it looks this way, we can’t be certain of this, because there are so many financial interconnections where a ratings downgrade or default on Treasuries could create unforeseen knock-on effects. And of course, there is the risk, albeit small, of a more substantial loss of confidence in whether the US will continue to pay on Treasuries, which would become an increasing risk if the debt ceiling negotiations drag on for a while after the official default. That could lead to significant liquidation of holdings and logistically disastrous renegotiations of contracts." Granted, this is the worst-case outcome. For the various shades of gray, and for the other implications of a Default, none of them pretty, read the report below.

 

Two Views On What To Expect From Tomorrow's NFP Number: From Goldman Sachs And From David Rosenberg 

In advance of tomorrow's Bureau of Labor Statistics fireworks, Goldman's Andrew Tilton explains why GS has a prediction of +125,000 for tomorrow's NFP number (and sees the unemployment rate declining to 9.0%), and provides a short perspective on why the market is still bearish on the employment picture. Probably a more fitting question is why the market is not far more bearish on jobs: 13 weeks of 400K+ claims, offset merely by one 0.1 increase in the service ISM employment component (from 54.0 to 54.1). Ah yes, the ADP number. The same ADP number which "surged" in January leading Barclays to come up with the insane NFP prediction of +580,000 (and a 95% confidence in a 450,000 print) only for the final number to be a gross disappointment. But who cares about headfakes: the market is back in its mania phase when good news are doubly accentuated, and bad news are immediately ignored. So anyway, here is Goldman and David Rosenberg. As to what happens tomorrow, only the Obama administration, Congress, Larry Meyer, and virtually every single NFP bank, know what is coming tomorrow.

Democrats Stunned Social Security May Be Cut Following CPI Definition Adjustment 

It appears that the AARP does have a powerful lobby. Not even an hour after we posted the AARP's stern displeasure with the revelation that the appropriately named Chained-CPI adjustment would cut into Social Security, and Nancy Pelosi is already making waves with her shock that this proposal was in fact among the options being discussed: "Before Thursday's White House meeting on the budget, congressional Democrats said they planned to remind President Obama not to leave his party and base behind. The Democrats' testiness followed reports that the White House was proposing to alter Social Security and Medicare as part of a potential debt-ceiling deal with Republicans. Senate Majority Leader Harry Reid, D-Nev., planned in the meeting to “express his feeling that we haven’t been kept in the loop,” according to a senior Democratic aide who asked not to be identified so he could speak candidly about the friction between the president and Democratic congressional leaders. That feeling is shared by many Democrats, irked not just by the potential cuts, but by the White House’s failure to float it to Democratic lawmakers before they learned of the proposal through media. “Good politics starts with good communication, and I think they should have come and talked to us about the direction, particularly when it’s the social contract and we feel so strongly about it,” said Sen. Barbara Mikulski, D-Md." That's interesting: so despite our observation well over two weeks ago that the CPI adjustment would have a major adverse impact on entitlement NPV and that it has been discussed for quite a while now, somehow nobody bothered to explain to the Democrats on the Hill that the immediate consequence of this action would have been a massive change in Social Security dues? Just how clueless and mathematically challenged is everyone over in Congress? As for the Democrats' claim that these discussions "only now" appeared on the scene, we leave that to those far more gullible than us to swallow.

Is Bank Of America Preparing For Another "Non-Settlement" Settlement? 

When we first discussed Bank of America's "non-settlement" settlement, which has achieved nothing to remove the legal liability overhang from the firm, and merely makes it far more vulnerable to future litigation, we said: "BAC is largely underreserved for a settlement of this size which means its Tier 1 capital ratio will likely be impacted due to a major outflow of cash." Obviously the implication was that a capital raise is imminent. And while we were not exactly expecting the bank to access the equity capital markets (immediately), we knew cash would have to come from somewhere. Sure enough, Bank of America just issued $2.5 billion in 5 year bonds. So just when does the equity raise come? Two questions: is this funding simply to replenish the cash to have a decent Tier 1 ratio, or is the bank merely preparing for a waterfall of litigation now that the seal has been broken?

Guest Post: China's Ticking Debt Bomb 

Confused about what recent revelations of massive holdings of debt at the local Chinese government level mean for the economy? Even more confused by why Moody's decided to warn about this in a formal ratings announcement? Is there more here than meets the eye, and is the market, as usual, underestimating the impact of this discovery? The Diplomat's Minxin Pei explains why this is nothing short of a ticking timebomb that requires a wholesale reevaluation of China's viability: "Several interesting questions are raised by the revelation of local government debt in China.  First and foremost, it has shown that public finance in China is in much worse shape than previously thought.  On paper, China’s debt to GDP ratio is under 20 percent, making Beijing a paragon of fiscal virtue compared with profligate Western governments.  However, if we factor in various government obligations that are typically counted as public debt, the picture doesn’t look pretty for China. Once local government debts, costs of re-capitalizing state-owned banks, bonds issued by state-owned banks, and railway bonds are included, China’s total debt amounts to 70 to 80 percent of GDP, roughly the level of public debt in the United States and the United Kingdom. Since most of China’s debt has been borrowed in the last decade, China is on an unsustainable trajectory at the current rate of debt accumulation, particularly when economic growth slows down, as it’s expected to do in the coming decade."

Manufacturing Growth Is An Illusion Of Monetary Stimulus

Posted by: Econophile

Post date: 07/07/2011 - 18:23

Manufacturing is stagnating because of a lack of "real" investment. Which means manufacturing growth is not so organic as it is export related, which is entirely based on the "advantage" of a cheap dollar. This would help explain why industrial production is declining.

No, It's Not The Nat Gas "Fractal" Algo: Nanex Discloses The Very Ominous Implications Of Today's Berserk Crude Algo 

After we reported about the aberrant Crude Oil Futures algo earlier, we asked out friends at Nanex to take a closer look. What they discovered is something far more disturbing than merely another iteration of the confused "fractal" algo seen previously trading Natural Gas.

Buy me a cup of coffee

I'm PayPal Verified