The Fed's Gold Is Being Audited... By The US Treasury

When we started reading the LA Times article reporting that "the federal government has quietly been completing an audit of U.S. gold stored at the New York Fed" we couldn't help but wonder when the gotcha moment would appear. It was about 15 paragraphs in that we stumbled upon what we were waiting for: "The process involved about half a dozen employees of the Mint, the Treasury inspector general's office and the New York Fed. It was monitored by employees of the Government Accountability Office, Congress' investigative arm." In other words the Fed's gold is being audited... by the Treasury. Now our history may be a little rusty, but as far as we can remember, the last time the Fed was actually independent of the Treasury then-president Harry Truman fired not one but two Fed Chairmen including both Thomas McCabe as well as the man after whom the Fed's current residence is named: Marriner Eccles, culminating with the Fed-Treasury "Accord" of March 3, 1951 which effectively fused the two entities into one - a quasi independent branch of the US government, which would do the bidding of its "political", who in turn has always been merely a proxy for wherever the money came from (historically, and primarily, from Wall Street), which can pretend it is a "private bank" yet which is entirely subjugated to the crony interests funding US politicians (more on that below). But in a nutshell, the irony of the Treasury auditing the fed is like asking Libor Trade A to confirm that Libor Trader B was not only "fixing" the Libor rate correctly and accurately, but that there is no champagne involved for anyone who could misrepresent it the best within the cabal of manipulation in which the Nash Equilibrium was for everyone to commit fraud.

Guest Post: Rail May Hold Its Own Against Pipelines

The Association of American Railroads reports the number of rail tankers carrying crude oil and petroleum products in the United States increased more than 35 percent during the first six months of the year when compared with 2011. Each rail tanker carries around 700 barrels of oil, meaning June deliveries translated to nearly 1 million barrels per day. When completed, the entire Keystone oil pipeline network could carry about 1.1 million bpd compared with the same approximate total for the entire United States for rail. BP this week said it was considering a rail project to bring Bakken crude to its 225,000-bpd refinery in Washington. Though in terms of volume, pipeline transportation has proved its merit, the move by BP in the Bakken formation suggests rail transit remains a viable option for the industry.

Of Beggars, Choosers, Unemployment, And Bailouts In Europe

"The problems of a group of 17 different economies that are growing further apart - all functioning under the same currency - will not be solved by any actions taken by the ECB" is how Stratfor's Adriano Bosoni describes the can-kicking that has once again become the euro-zone this summer. From the systemically rising and drastically desperate unemployment rates around the Southern nations, which are not benefiting from the typical seasonal advantages of the Summer tourist trade (since both recessionary contraction of spending and fear of violence are keeping northern Europeans at home); to the Madrid-to-Rome 'demands' in the face of Berlin's clear message, Bosoni notes the ironic fact that 'aid' is there (as Draghi pointed out today) if it is asked for (and an MoU is signed) but both Spain and Italy know full well that the mere act of signing that Memorandum signals the market that a full sovereign bailout is closer at hand and will further steepen yield curves and shrink market access (which in our view is now gone for anything but short-duration issuance in Spain). A succinct 'status update' on where Europe stands.

The ECB does nothing and punts back to the FED/Spanish yields rise above 7% again/Spanish Ibex falls 5.16%

Harvey Organ at Harvey Organ's - The Daily Gold and Silver Report - 5 hours ago

Good evening Ladies and Gentlemen: Gold closed down today. to the tune of $15.00 to $1588.40.  Silver fell by 54 cents to $26.98 as the risk off trade was in full bloom.  As I reported to you yesterday, the Fed punted the ball off the ECB and we had to wait and see what our ECB boys were going to do. Throughout the night, we had considerable editorials on both sides of the coin, with the German

 

 

Until Prices Go High Enough, We Are Not Going To Have Any Farmers

Admin at Jim Rogers Blog - 5 hours ago

Until the prices go high enough and stay high enough long enough, we’re not going to have any farmers. - *in Huffington Post * *Jim Rogers is an author, financial commentator and successful international investor. He has been frequently featured in Time, The New York Times, Barron’s, Forbes, Fortune, The Wall Street Journal, The Financial Times and is a regular guest on Bloomberg and CNBC.* 

 

 

It's All About The Layers

Eric De Groot at Eric De Groot - 5 hours ago

While the investing world focuses intently on the BLS's best and generally useless "guess" about current labor conditions, they ignore the obvious risks defined as the layers between them and their gold, silver, stocks, commodities, as well as numerous other assets. Companies from AIG to IMF global have gone poof, literally at the speed of light, when funds reach for the escape hatch in... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

 

 

Video: Interview In Singapore (in Portuguese)

Admin at Jim Rogers Blog - 10 hours ago

A recent video interview given to a Brazilian TV channel. "Only invest in what you really know a lot about." - Jim Rogers *Jim Rogers is an author, financial commentator and successful international investor. He has been frequently featured in Time, The New York Times, Barron’s, Forbes, Fortune, The Wall Street Journal, The Financial Times and is a regular guest on Bloomberg and CNBC.* 

 

 

We The Sheeplez... is intended to reflect excellence in effort and content. Donations will help maintain this goal and defray the operational costs. Paypal, a leading provider of secure online money transfers, will handle the donations. Thank you for your contribution.

I'm PayPal Verified

 

 

Inflation Versus Deflation

Admin at Marc Faber Blog - 10 hours ago

Well, in a way, the credit markets, say the US Treasury Bond yields...with the 10 years below 1.50 percent and so forth, they suggest deflation, whereas equity markets and some commodity markets like gold suggest rather inflation. - *excerpt from an interview to The Money And Wealth Show* * * Related: SPDR Gold Trust ETF (GLD), SPDR S&P 500 Index ETF (SPY) , iShares Lehman 7-10 Year Treasury Bond (ETF) (IEF) *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.* 

 

 

Central Bank Monkey Business

Dave in Denver at The Golden Truth - 10 hours ago

*The thing about the Fed non-action is that every meeting they don't do something increases the likelihood they'll HAVE to do something at a subsequent meeting.* - Dave in Denver We wouldn't have the extreme volatility in the markets that surrounds Central Bank policy-decision meetings if analysts and traders bothered to think through the process of what happens if the Fed, ECB and Bank of England do not start the printing presses back up in a major way. I don't know of anyone, who if asked point blank how the western world solves its debt problem without extreme currency devalu... more » 

 

 

 

Why Mega Banks Are The Modern Cocaine Cowboys

In today's episode of blast from the past, Bloomberg's Jonathan Weil takes us on a time journey, which presents the Too Big To Fail bank problem from a different perspective: that of the Cocaine Cowboy roaming the streets of Miami in the late 1970s and early 1980s. Just like today's big banks they were untouchable; just like today's banks they were collaborating and existing in perfect symbiosis with the Federal Reserve; just like today the Cocaine Cowboys existed in an untouchable vacuum courtesy of endless bribes to the local law enforcement and judicial officials, and just like today, the TBTF institution du jour isn't "merely an economic problem. It is a great moral failing of our society that poisons our democracy." Back then, Ronald Reagan stepped in just when Miami (whose real estate market had soared in 1979-1981 courtesy of rampant crime and money laundering: hint hint NAR anti money-laundering exemptions) was about to be overrun, forming a task force that in the nick of time restored law and order. Today we are not that lucky, as there is not a single politican willing to risk it all just to eradicate the modern version of a classic scourge: only this time they don't hand out 8 balls; they give away 0% introductory APR cards and 3 Year NINJA Adjustable Rate Mortgages. Both however get you hooked for life: either on drugs or on debt. Will someone step up this time and form a task force to eliminate the second coming of the Cocaine Cowboy? Sadly, we don't think so. At least not until the next great crash happens.

Lacy Hunt On The Unintended Consequences Of Well-Intended Policies

In addition to the compelling evidence that more active monetary and fiscal policy involvement did not produce beneficial results over the short run, three recent academic studies, though they differ in purpose and scope, all reach the conclusion that extremely high levels of governmental indebtedness diminish economic growth. In other words, deficit spending should not be called "stimulus" as is the overwhelming tendency by the media and many economic writers. Whereas government spending may have been linked to the concept of economic stimulus in distant periods, these studies demonstrate that such an assertion is unwarranted, and blatantly wrong in present circumstances. While officials argue that governmental action is required for political reasons and public anxiety, governments would be better off to admit that traditional tools only serve to compound existing problems.

Bank Of America Has Lost Money Trading On Only Three Days In 2012

From the just released Bank of America 10-Q: "During the three months ended June 30, 2012, positive trading-related revenue was recorded for 95 percent, or 60 of the 63 trading days of which 75 percent (47 days) were daily trading gains of over $25 million and the largest loss was $11 million. These results can be compared to the three months ended March 31, 2012, where positive trading-related revenue was recorded for 100 percent (62 days) of the trading days of which 95 percent (59 days) were daily trading gains of over $25 million. There were no daily trading losses recorded during the three months ended March 31, 2012." This vaguely reminds us of the JPM's trading performance. Just before they got busted for hiding a $350 billion hedge fund in the firm's "risk hedging" aka CIO/Treasury division that is. Also, if anyone else has problems believing that BofA's trading desk, with or without Merrill, both of which are better known as the C-grade (and that is being generous) of Wall Street traders, could generate profits on 122 of 125 trading days, please lift your hand.

Risk. Not. On.

After a brief spike higher (just to flush all those stops) in front of Draghi's 'dis-believe' press conference this morning, markets plunged. Some wanted more but algos tickled us up to VWAP into the close once again though we note that once there - volume and average trade size surged, allowing those bigger momo players a better exit than mere mortals. Equities and broad risk assets stayed in very close sync all day with cross asset class correlation surging systemically, VIX rose and fell on the day ending down 1.4 vols at 17.5%  (after touching 19.25% after the European close) - but notably VIX is now more back in line with equity/credit implied values. The USD ends today up 0.8% on the week, and implicitly commodities tumbled (copper and oil  down 3-3.5% on the week and gold/silver -2%). Treasury yields bounced higher as stocks nibbled back to VWAP into the close but ended down 2-4bps (long-end outperforming). All in all - no capitulation, but a broad based derisking that seemed to benefit from some pre-positioning in protection (and help from the VWAP algos twice). Wil tomorrow's NFP be good enough to be bad or bad enough to be good (high volume and low average trade size suggests few want to position for it too aggressively).

Knight Considering Bankruptcy, Looking At 363 Asset Sale

This may be it. Via Fox News:

• VIRTU OUT OF BIDDING FOR KNIGHT CAPITAL
• KNIGHT’S JOYCE CONSIDERING BANKRUPTCY REORGANIZATION
• KNIGHT LOOKING AT ‘363’ REORGANIZATION TO SELL ASSETS
• KNIGHT LOOKING TO EMERGE AS VIABLE COMPANY

363 Asset sale? This is what we said earlier when we reported on the rumors of a sale to Virtu: "Will it happen? Maybe. Although we doubt it - why pay for equity value when one can pick up the functioning assets in a Chapter 363 asset sale which also sticks the creditors with all the crappy assets?" Sure enough. Sadly, what this means for the company 1,500 employees is that about 80% them will be out of a job due to an algo gone wild. And to then we have been warning about the impact of HFT for the past 3 years.

US Export Orders Are Collapsing

Presented with little comment, courtesy of Diapason Commodities' Sean Corrigan, NAPM Export Orders have plunged over 3 sigma in the last 3 months and have only dropped more (in history) immediately after the Lehman debacle. Decoupling anyone?

Acumen Vs Academic: Gross Sends Siegel Back To 'Ivory Tower'

While Roach vs Meyer was an outstanding battle - played out face-to-face in the CNBC Squawk Box cage - the Academic vs Acumen drama playing out between Jeremy 'sluggish' Siegel and Bill 'the bond' Gross on Bloomberg TV is far more entertaining. The constant fall-back to age-old textbook definitions of mean-rerting reality and old normal 'expected' returns ran head first into the sage practitioner world of Gross's 'end of equities' call. While Siegel claims Gross 'totally misunderstands' the real-world citing his Dow 5000 call from 2002; Gross rips back with a swift kick to the credibilities with his: Siegel is "tilting at windmills and he belongs back in his Ivory Tower."

Will Penson Cash Vaporize Gentle Into That Good Knight?

First MFG; then PFG; and next KCG? A little over two months ago Knight Capital, the well-respected brokerage house, purchased a 'floundering' futures brokerage - Penson Financial Services. The de minimus $5mm that Knight paid on May 31st for the firms meant (implicitly) that the $411mm of customer funds became 'useful'. With various firms pulling lines and the math underlying Egan-Jones downgrade, it is natural that an investor would be anxious to ensure that all their hard-earned deposited segregated accounts are, well, still segregated. Have no fear though, as Bloomberg reports, CME, which regulates Knight's futures business, is "monitoring the situation". An advocacy lawyer for MFG/PFG clients noted: "Those at Penson should be a little worried;" and so while KCG "actively pursues its strategic financing alternatives to strengthen its capital base" - read D.I.P. plans - one can't help but wonder whether all that shiny customer cashola is burning a hole in their capital-deficient pockets. It would seem at $2.27 per share, a few others are wondering that also.

Uganda Ebola Outbreak Spreads To Local Prison

While world markets are transfixed by what central planners in various continents may do, but really just say, a tragedy in Africa continues to develop, as the recently reported Ebola outbreak in the infamous country of Uganda, which is not Spain, has now spread to a local prison, even as the number of infected cases has doubled in the last several days since we first reported on this most recent Outbreak which luckily has for now not spread outside of the country. CNN reports: "The hospital at the center of an Ebola outbreak in Uganda is now dealing with 30 suspected cases, including five from Kibaale prison, Dr. Dan Kyamanywa said Thursday. Three patients at Kagadi hospital have been confirmed as having the virus, said Kyamanywa, a district health officer. Doctors are now testing the suspected cases urgently so they can separate confirmed cases from those who do not have the disease, Doctors Without Borders said. Suspected cases are still trickling into the hospital, Kyamanywa said. At least 16 people have died in the current outbreak."

The Thin Blue Line Between Hopium And Reality

If there was one unique datapoint that confirms beyond a reasonable doubt the perpetual upside bias of "analysts" and other snake oil salesmen (after all, one is far more likely to buy the stuff another is selling if one has a smile on his face, a wink in the eye, and is optimistically inclined, even if that optimism is completely unfounded), it is the following chart from UBS which shows the progression of consensus bottom-up EPS growth estimates for Europe: "consensus estimates for 2012 EPS growth have fallen from double digits at the end of last year to 0.7% currently." Observe the straight thin blue line below: it begins in the land of Hopium, and ends in Reality.  

The Math Behind Egan-Jones' Downgrade Of Knight To Triple Hooks

Moments ago, Egan Jones downgraded Knight Capital again, having downgraded the firm yesterday, from B- to CCC. The reason: the math just does not work out (pretty much as is the case with Europe, and the entire Welfare state developed world paradigm, but that's a different story). Full logic below.

Stolper Alert: Goldman Says To Go Long EURUSD With 1.30 Target

For months everyone was confused, like lost lambs in a sea of noise and 500x leverage, not knowing how to navigate the stormy, choppy FX seas. Now we know. For that beacon of anti-precision, the man, the myth, the legend who bats 0.000 and thus is the most certain contrarian bet in history, Goldman's Tom Stolper has spoken: "We would now recommend going long EUR/$ at current levels with a one-day stop on a close below 1.18 for an initial target of 1.30." Start your selling.

Scary, Scary Knight: Prime Brokers Start Pulling Cash

Update 2: and spreads some more: Sterne Agee Not Routing Trades to Knight Capital
Update: it spreads: Fidelity Investments Not Routing Orders Through Knight: Reuters
Earlier, when interviewed by Bloomberg TV, Knight Capital CEO refused to say, prudently under advice of counsel, if any counterparties have cut off their lines to the fallen Knight. Well now we can confirm with 100% certainty that at least one Prime Broker has terminated all funding to and fro the firm which may not have much time left. We are certain it is not the only one. And now the scramble for a deal is on. If Lehman and MF Global are any indication, the odds are good to quite good. Inversely of course, just like Knight's berserk algo yesterday.

TeenBook: FB Drops Under $20 For First Time Ever

"Surely not" screams California's Comptroller. "Surely, Yes" sneers Knight Capital's self-aware destructo-capital algo. Faceberg just broke a monumental barrier, trading back into the teens for the first time - somewhere the Winkelvi are bathing in a salty pool of Schadenfreude.

We The Sheeplez... is intended to reflect excellence in effort and content. Donations will help maintain this goal and defray the operational costs. Paypal, a leading provider of secure online money transfers, will handle the donations. Thank you for your contribution.

I'm PayPal Verified