Fed will print money soon, you better have been buying physical Silver and Gold...

Eric Sprott On The Real Banking Crisis: Global Depositor Bank Runs And Why Gold Is Going Much Higher As A Result

Eric Sprott writes: "We believe a growing number of European depositors are transferring their money out of EU banks, and many of them are reinvesting their capital into gold and silver for safety. It does not surprise us to see gold hitting all-time highs in euros and dollars. It’s worthwhile to acknowledge that those investors in Iceland and Ireland who had the foresight to convert their cash to gold before their countries’ respective bank runs have all fared extremely well in both nominal and real terms. We believe that gold and silver are the ultimate alternative for a chequing account in a vulnerable banking jurisdiction, and whether the ECB prints more euros or eventually defaults, both outcomes will continue to support a robust demand for precious metals as an alternative currency."

Is A Dollar Short Squeeze Imminent?

Goldman FX, whose core thesis over the past quarter has been an increase in USD weakness, and which has so far proven correct against most pairs (and certainly gold) except for the EUR, which is in the same boat as the dollar (and both are sinking fast after hitting an iceberg), looks at the risk of upside dangers to the USD, which would likely materialize in the event of a global Risk Off event, and finds that the currencies most exposed to a surge in the USD are the Yen, once upon a time the carry funding currency and now the opposite, the AUD and the NZD. That said, Goldman concludes "beyond the risk of a short squeeze near term, our expectation is for USD to continue weakening on a broad basis." Naturally, Goldman's thesis will be very facilitated should Bernanke go ahead and make QE3, in some form, a reality as soon as the end of August.... just like last year.

Spot Gold Passes $1640

Nobody could have foreseen the "tradition" being a safe haven escape to all the other "traditional" fiat-based garbage available to investors. Nobody. Next stop: $1950.

Fed will print money soon, you better have been buying physical Silver and Gold...

Federal Reserve policy makers may start weighing additional steps to prop up the recovery after growth fell below 1 percent in the first half of this year and economists began cutting second-half growth forecasts.

“At a minimum, the FOMC will have a serious debate about the policy options -- what they should do, and what they expect to get from it,” said Roberto Perli, a former associate director in the Fed’s Division of Monetary Affairs, referring to the Federal Open Market Committee. “Growth in the first half was dangerously close to zero,” said Perli, director of policy research at International Strategy & Investment Group.

The FOMC will meet Aug. 9 in Washington after the government marked down its measure of economic growth to annual rates of 0.4 percent in the first quarter and 1.3 percent in the second, casting doubt on the Fed’s June outlook of 2.7 percent to 2.9 percent growth for this year. A gauge of U.S. manufacturing, a main engine for the expansion, slumped last month to the lowest level in two years.

Chairman Ben S. Bernanke said in congressional testimony in July that the Fed may take new action if the economy stalls, including beginning a third round of bond purchases. The central bank could also cut the interest rate it pays banks on excess reserves and pledge to hold its assets at a record high and interest rates at record lows for a longer period, he said.

Any effort by Bernanke to expand the Fed’s $2.87 trillion balance sheet would probably meet resistance from district Fed presidents, including Philadelphia’s Charles Plosser, who have said bond purchases and low borrowing costs have already pushed up long-term inflation risks too high.

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Bill Gross' Latest: Here Is How The "Debt Man Walking", aka Uncle Sam, Plans To Steal From You

In his latest letter, Kings of the Wild Frontier, crushes the optimism of all those, roughly 4 altogether in the entire world whose combined IQ barely breaks into triple digit territory, who believe that the debt ceiling "compromise" does anything at all for US spending patterns, weather it is for total marketable debt, or the $66 trillion in NPV of future liabilities. Gross, however, does show us the 5 ways (well, 4 plus default) that the "debt man walking", aka Uncle Sam and his tens of trillions of future liabilities, plans to rob from you: dear taxpayer, in order to minimize the present value of these unmanageable future liabilities. To wit:

1. Balance the budget and/or grow out of it
2. Unexpected inflation
3. Currency depreciation
4. Financial repression via low/negative real interest rates

All of these guarantee that investor pocketbooks will be dramatically affected... Adversely. Let's dig in...






What Happens When the US Banks Take a Hit On Their Senior-most Assets? Pt 2

Posted by : Phoenix Capital...

Post date: 08/02/2011 - 09:54

Make no mistake, something big is afoot behind the rhetoric and political talking points being thrown around by the White House and the GOP. That something will be some means of letting the banks get... 

 

 

 

 

 

The SEC's Co-Chief Counsel On Derivatives (Such As Abacus), Worked As Outside Counsel For Paulson & Co, And Signed Off... On Abacus

The surprises of SEC's infinite revolving door conflicts of interest never cease to amaze (or, for that matter end). Andrew Ross Sorkin has taken some time from his busy media whirlwind tour schedule and conducted some actual investigative reporting for a change, discovering that the SEC's co-chief counsel in charge of helping write derivative rules, Adam Glass, who previously testified about Goldman's Abacus, the culprit for the biggest SEC settlement in history against a Wall Street firm, had some very specific inside knowledge vis-a-vis Abacus. He signed off on it. Writes Sorkin: "Before working on the financial crisis cleanup, he helped create the opaque securities that contributed to the mess...For many years, Mr. Glass served as the outside counsel to Paulson & Company...And yes, Mr. Glass, in that role, signed off on Abacus, which was created specifically for the hedge fund to short subprime mortgages. Mr. Paulson handpicked some of the underlying investments in the derivative...The government, in its complaint, claimed that Goldman had "misstated and omitted key facts regarding" Abacus, including disclosing Mr. Paulson's role in its creation. The firm paid $550 million to settle the case, without admitting or denying guilt...his role once again raises questions about the revolving door between Washington and Wall Street at a time when public distrust about the agency and its lack of enforcement action against the culprits of the crisis is running high..."If he was involved in Abacus, how is he supposed to police it?" We are not sure if we are more confused by the fact that Sorkin has actually done some actual research or that yet another SEC crony is exposed to be in the pocket of Wall Street's rich and powerful. Actually, the former. Certainly the former.

Income And Spending Both Miss, Savings Rate Jumps To Highest Since February, Major Historical Downward Revisions To Income

And another ugly economic data point. June personal income was just released at 0.1%, on expectations of 0.2%, and down from a revised 0.2% (previously 0.3%). Personal spending was far worse than expected, coming at -0.2%, down from a revised 0.1%, and missing expectations of 0.0%. PCE Core was the last metric missing, coming at 0.1%, down from 0.2%, down from a downwardly revised 0.2%. Just as importantly, as in the case of GDP, there were major downward historical revisions: "Personal income was revised up $69.1 billion, or 0.6 percent, for 2008; was revised down $244.7 billion, or 2.0 percent, for 2009; and was revised down $167.5 billion, or 1.3 percent, for 2010. .. For 2009, downward revisions to personal interest income, to personal dividend income, and to nonfarm proprietors’ income were partly offset by upward revisions to rental income of persons and to farm proprietors’ income.  For 2010, downward revisions to personal   interest income, to nonfarm proprietors’ income, to supplements to wages and salaries, and to personal current transfer receipts were partly offset by upward revisions to rental income of persons, to wages and salaries, and to farm proprietors’ income." In other words, the "rental income" that offset downward income revisions came exclusively from the $50-100 billion squatters' rent annually "generated" from homeowners not paying their mortgages. End result: a surge in the savings rate to 5.4% from 5.0%, the highest since March 2011, as consumers retrench across the board.

Gold Is Back To Being Third Point's Top Holding

The last time we checked on the top 5 portfolio holdings of Mr. Pink's Third Point, we noticed that gold had surprisingly dropped to third position, behind Delphi and El Paso. Less surprising is that the fund, which has outperformed the S&P in July, returning 0.3%, and which increased in AUM by a whopping $800 million or well over 10%, has followed gold's surge to fresh all time highs, by once again making gold its top position. So in addition to the Bank of Korea, it appears that one of the key members of the hedge fund "think tank" is once again back and buying. If all of the $800 million in new capital went into gold, it tells you all you need to know about the ability to generate stock alpha in this market. Incidentally, how long before China, and its paltry gold reserves, finally gets the memo?

Sharp Increase In Central Bank Gold Reserves – South Korea Up 17 Fold & Thailand 15.5% In 2 Months

Further confirmation in the continuing stealth accumulation of bullion by central banks came overnight with confirmation that South Korea's central bank bought 25 tonnes of gold over the past two months. The gold is worth $1.24 billion and resulted in a 17 fold increase in their gold reserves. Thailand’s gold reserves rose by 15.5% in the two months and rose to about 4.07 million ounces in June, from about 3.523 million ounces in May, according to figures on the Bank of Thailand’s website accessed by Bloomberg this morning. South Korea is the world’s seventh-biggest foreign-exchange reserve holder and 64% of its reserves are in U.S. dollars. The bank said that it also holds euros and other assets and the move was about achieving diversification. The BOK’s reserves, stored in London in the vaults of the Bank of England, increased 25 tonnes to 39.4 tonnes (from 14.4 tonnes) but remain meager when compared to the size of their foreign exchange reserves. BOK's gold holdings, at today’s market prices, account for 0.7% of its reserves, up from 0.2% prior to the purchase. The BOK reserves were at a record high of $311.03 billion at the end of July which puts this $1.25 billion gold purchase in perspective. Their gold reserves and those of other Asian central banks, particularly the People’s Bank of China, remain meager when compared to those of western central banks and the U.S.

Sentiment Crumbles On Relentless Euro Crisis, French, Italian And Spanish CDS Hit Records

Despite Congress passing the debt ceiling hike, the market's reaction has been swift, brutal and vicious as ever more attention is being paid to Italy and the unforgiving European crisis. As both Spanish and Italian spreads hit new all time records, while CDS are at all time wides for the two countries plus France, the vigilantes are once again preparing to attack and test the ECB's resolve to keep the Euro alive: at this point it is obviously a losing game although expanding the EFSFS to $2 trillion is inevitable (at which point the reaction to German spreads will be swift). In the meantime the scramble for safety is at 2011 highs, with gold on the verge of another record, while the 10 Year US Treasury touching a low of 2.685%, and UK Gilts touching record lows: remember - this is all to make QE3 more palatable when it does begin. Lastly, Bloomberg's TJ Marta summarizes all the market indicators of a day in which sentiment has truly crumbled and in which we expect Italian bank stocks to be halted at least 3 times before market close.