A few days ago Jim Rogers prudently warned that silver had entered parabolic mode and the the only case which would not lead to a collapse in silver prices (once silver hit $100 that is) is if the Federal Reserve note, or the liability to all those uber-valuable Fed assets known as Treasury Bonds (and of course Agencies, thank you QE1) became "confetti." Well, confetti is what we have. As of tonight, the dollar has just taken out the 2009 lows, and only the extreme carry trade which sustained the overall market into the biggest market crash ever, back in 2008 is now a lower point in the DXY index. In other words only a complete market wipe out, or an exogenous external event such as war, now that the market does not even blink at such black swans as civil wars, bankrupt European countries, nuclear catastrophes, and record earthquakes, can lead to some restoration in the purchasing power of the US currency. Incidentally, as the long term DXYchart below shows, the current dollar cash is by now means the most pronounced one. A far bigger one occurred in the mid 80s, when the dollar was cut in half from over 160 to 80, in a move that, as everyone who was alive back then and not merely some derivative of gaseous gallium metal and arsenic trichloride, recalls culminated with Black Friday. Oh yes, gold just hit another record high.
25% Of Scotia Mocatta's Silver Transferred From "Registered" To "Eligible" Status: A 45% Reduction In "Physical"Submitted by Tyler Durden on 04/20/2011 - 20:14
Something interesting appeared in the daily NYMEX report of its silver warehouse stockpile data: Canada's largest bullion depository (and one of five total) reclassified a whopping 5.2 million ounces of silver from Registered to Eligible status. In order to get a sense of how big this amount is, which amounts to just under $238 million at today's fixing price, it represents just over 25% of the total silver stored at Scotia Mocatta, and about 5% of the total silver held across all depositories. The reason for this substantial shift is given as follows: "due to a reporting reclassification, 5,287,142 t oz was moved from Registered to Eligible." That's a pretty substantial reporting reclassification. Of course it could well be nothing but that, although one would imagine that a fat finger is somewhat unlikely when it comes to such a material amount. On the other hand, as those who follow the NYMEX data know too well, registered silver is actual physical Comex silver. Eligible on the other hand is sometimes called "someone else's silver" as it does not go through assays on exit/selling events. In other words, this is silver that can not be used to make delivery under a futures contract. As a result of this reclass, total registered silver dropped by 13% from 41.0 million ounces to 35.8 million. Assuming one does not have full faith in the simple error story, does this mean that deliverable silver just dropped by 13% overnight (this event occurred yesterday, but was reported as usual with a 24 hour delay). And if so, is this effective transformation of physical to semi-paper silver indicative of what we may expect from other depositories in the next few days as the delivery notices start coming in?
It took less than 48 hours for the market to completely shrug off S&P's warning about America's credit rating, even as the dollar: that prima facie indicator of US stability and viability, has just hit a fresh 16 month low. And while nothing anyone says has much of a chance to impact the market, which continues to move with a negative 1 correlation to the now default carry funding currency, the following is the press release that S&P should issue if it wants to truly bring attention to the US debt crisis.
One of the more interesting "war zones" that most have never heard of is not in North Africe, nor in the Middle East, but in Greece. Meet Keratea, a small city of 15,000 people located close to Athens, where after over 100 days of struggle between authorities and the broder population, the riot police has officially decided to abdicate the city to its fate in what is the first popular mini-revolution in the developed world. From the Independent: "As explosions boom, the town's loudspeakers blare: "Attention! Attention! We are under attack!" Air-raid sirens wail through the streets, mingling with the frantic clanging of church bells. Clouds of tear gas waft between houses as helmeted riot police move in to push back the rebels. This isn't a war zone, but a small town just outside Athens. And while its fight is about a rubbish dump, it captures Greece's angry mood over its devastated economy. As unemployment rises and austerity bites ever harder, tempers seem to fray faster in Greece, with citizens of all stripes thumbing their noses at authority. Some refuse to pay increased highway tolls and public transport tickets. There has been a rise in politicians being heckled and even assaulted. Yesterday, in Thessalonika, scores of activists were arrested after violent clashes with police." Meet the new and improved face of austerity: now in a small town in Greece, which is about to default all over again, and soon in many other places in the increasingly more insolvent European periphery.
Apple beats top and bottom line, but not all is good in Borg land - Apple fails to meet the top and bottom line outlook.
- APPLE 2Q REVENUE $24.67B, EST. $23.38B
- APPLE SEES 3Q EPS ABOUT $5.03, EST. $5.25
- APPLE 2Q SOLD 9.02 MILLION IPODS, DOWN 17%
- SOLD 3.76 MM MACS IN Q2, UP 28%
- SOLD 18.65 MM IPHONES IN Q2, UP 113%
- APPLE SEES 3Q EPS ABOUT $5.03, EST. $5.25
Once again the key variable is the outlook: In Q3 Apple sees revenue of $23 billion to $23.83 billion, and
EPS of $5.03 to $5.25. Consensus has revenue at $23.83
billion, and $5.25 in EPS.
Goldman's just released look at what the end of QE2 would mean should certainly be taken with a grain of salt: after all lately (and in general), the firm's sellside recommendations traditionally are a gateway for its own prop traders to take the other side of what its clients are doing (observe recent performance in WTI). That said, probably the most insightful piece of data is that we now know what the upcoming Greece bankruptcy will be called in polite circles: wait for it - a "liability management exercise." As for the overall impact on rates, Goldman is not surprisingly bearish on rates, and sees the bulk of the upcoming weakness as focused on the 5 Year point. Franceso Garzarelli summarizes his view as follows: "together with our forecast of above-trend growth in coming quarters
and the idea that the compression of bond premium will decay as the
Fed’s balance sheet (organically or voluntarily) shrinks, we think that
short positions in 5-yr Treasuries remain attractive." In other words, Goldman is expecting some flattening in the short end. Does that mean a steepening is inevitable. As for the broader perspective on the curve, Goldman says: "assuming the Fed’s bond holdings passively run off as securities mature, the bond premium should gradually rise. And our macro forecasts are consistent with higher real rates in coming quarters." In other words, another extremely non-committal report from a firm that is rapidly losing its Master of the Universe status. Key highlights below.
Standard & Poor's Ratings Services said today that it revised its outlooks on the debt issues of Fannie Mae, Freddie Mac, the Federal Home Loan Bank System, and the Farm Credit System Banks to negative from stable while affirming our respective debt issue ratings.
University Of Texas Fund CEO Shares His Views On Gold, Explains Why He Took Delivery Of $1 Billion In The Precious MetalSubmitted by Tyler Durden on 04/20/2011 - 15:11
Over the weekend, University of Texas made headlines after disclosing it was the first major institution to take delivery of $1 billion in gold, although still keeping it in the Comex system. Today, the CEO of the management company Bruce Zimmerman was on Strategy Session providing the rationale for his action to David Faber. First some prehistory: "We began buying gold in September of '09 at about $950 an ounce. Our average price is at about $1,150. We've invested around $750 million in gold over that twelve months and it now has a value around $1 billion." On what Texas thinks of gold (no surprise here): "The role gold plays in our portfolio is as a hedge against currencies. The concern is that we have excess monetary and fiscal stimulus. I noted
a couple of days ago, i think there was a story out about Bernanke
mentioning that while they may not increase quantitative easing, they
may not necessarily reduce their exposure either. So i think that may be
a signal that will continue to have a good deal of monetary stimulus.
We read every day what's going on in DC and across the states. We'll see
what fiscal policies look like. It remains a concern for us." As to the specific reason for demanding delivery: "We had gotten to a size and our thought was that we probably will
have our position for a longer as opposed to shorter term, although we
could sell at any time. But rather than continuously roll the futures
contracts, it became easier and more economical for us to take
possession of the bullion." So how long before many if not all other public fund managers decide the same logic should apply to them as well?
For all who have been awaiting the release of a video of China's Chengdu J-20 stealth fighter jet, which made its first flight on January 11 of this year, Youku has you covered. In a recently released clip, we can see the J-20 performing high speed taxiing tests at Huang Tian Ba airport, Chengdu. A quick summary of the characteristics of the J-20 can be found here. Of note is the rather loud exhaust noise coming from the "stealth" fighter. One would expect this to be modestly muffled in the final version...
China's Jasmine Revolution Is Back: Trucker Strike Hits Shanghai In Protest Over Surging Fuel Costs And Low WagesSubmitted by Tyler Durden on 04/20/2011 - 13:48
And now for the latest does of reality from China, which will no doubt be reported by precisely zero of the mainstream media outlets. According to Stratfor, there has been a trucker strike in the Waigaoqiao zone in Shanghai on the morning of April 20. As the attached video reports: "The protests the morning of April 20 were in one of Shanghai’s busiest container ports and they were the result of rising fuel prices and low wages. In 2008, we saw similar strikes over fuel prices as taxi drivers took to the streets across China, highlighting how inflation can easily translate into social issues. These protests come a week after residents gathered in the Sonjiang district in Shanghai on April 13 in protest of cheng guan officials, also known as urban management officials, were said to have beaten a pedestrian in a traffic dispute and Shanghai is also the area where we saw the largest gathering during the Jasmine Movement on February 27." So how much longer will China be able to pretend that its USD-pegged monetary policy, not to mention the Fed's inflation exporting efforts is contained? And how long until China's inability to contain its inflation results in a Tiananmen-lite (or not so lite) redux?
Now that TEPCO has finally procured some iRobots (with about a one month delay) with freaking webcams attached to their heads it has released the following stunning footage from inside Reactors 3 and 2, showing the situation in the only reactor which has plutonium as well as one of the reactors to have experienced an explosion. While we doubt the validity of the data, according to IDG the radioactivity level in Reactor 3 is 57 millisieverts/hour. In reactor 2 the radioactivity is disclosed as being too high for workers to enter.
All those who listened to Goldman and sold their oil exposure (to Goldman) may not be delighted to know that WTI is now trading at a higher price than where Goldman advised all their oh so precious clients to dump the black gold. As a reminder on April 12 Goldman released one of three bearish reports on oil expecting brent to drop to $105. In the meantime, cause a sell off in the energy complex. Seven trading days later, those who shorted on Goldman's advice, are now underwater. In the meantime we look forward to Goldman reporting another flawless trading quarter in their Q2 10Q some time in July. Of course by then Goldman's "transitory" deflation bias will be long over.
Remember Japan? From Kyodo: TEPCO Can Not Rule Out Meltdown At Fukushima Reactor. Surely this is bullish for lead, over and above the massive surge in demand for the metal from central banks.
And now for the latest news in the silver meltup: SLV just moved to Hard To Borrow status at Goldman Sachs. This pertains to institutionals who are Goldman Prime Broker clients. Soon coming to every prime broker near you. Comex margin hike imminent now that it is impossible to short the largest silver ETF in the world.
Copperfield Research Discloses Another Potential Stock Scam, This Time Fully Domestic: OCZ Technology GroupSubmitted by Tyler Durden on 04/20/2011 - 11:52
And now for a little variety from the now daily Chinese fraud exposes. Copperfield Research, in taking a break from the spate of unmasking of locally listed reverse merger frauds which how now locked up the Nasdaq halt list, has decided to focus on some potential home grown fraud, exposing what it believes is some local fraud in the form of Nasdaq-listed OCZ Technology Group. From the just released report: "OCZ has parlayed investor and market excitement for solid state drives (SSDs) into an amazing story. From a low of $1.79 last summer, OCZ's stock has steadily climbed more than 350% on a feel good tale told by its CEO. But there is a much darker and sinister side that has been well hidden. It is our opinion that OCZ has misrepresented its SSD growth and has financial irregularities that are nearly impossible to reconcile. We believe that some form of a restatement may be required and that the auditors tick and tie review has some substantial inconsistencies. As such, we have sent our findings to the Securities and Exchange Commission asking for clarification on the multiple sets of numbers that we have uncovered. We believe OCZ's Board has the fiduciary responsibility to form a special committee to examine these discrepancies." The bottom line for those curious where this short-seller sees the stock: "If OCZ trades in-line with the comp group, a generous assumption given OCZ's limited asset value, differentiation, and minimal profitability, a reasonable price target would be between $2.58 and $4.98 per share."