Archive - Apr 4, 2011

Today was a quiet day in the market (even quieter than Bernie Madoff's trading floor on a triple witching Friday or...

Courtesy of the Village Whisperer, we are happy to present BMO's latest comprehensive report on silver titled "A new paradigm for silver." While we suggest readers skip the part about price expectations for gold, silver and other metals, which at this point nobody save for the Chairsatan has any clue where these will go (and Bernanke's mind is made up for him by Jan Hatzius, so as always pay attention to Goldman buy/sell signals on PMs), the report does have a very extensive section on the key supply and demand drivers, which for anyone new to the metal, is a must read. Additionally, the report covers virtually all the key silver miners of note (incidentally for those wondering, the San Critsobal strike was lifted earlier today).

The manipulation of data in order to spin the economic situation in this country in the best light possible has become so blatant that only the most ignorant could possibly believe it. The corporate mainstream media dutifully reports the propaganda, without ever critically assessing what is being distributed by the government. The percentage of the American working population in the workforce consistently ranged between 66% and 67% from 1998 through 2008. Then, suddenly in 2008, after the economy went in the tank, a couple million Americans found better things to do with their spare time and left the workforce. Anyone with an ounce of brains knows these people gave up and are really unemployed. The percentage of people in the labor force should be 66.5%. Using this 20 year average would add 5.5 million people to the civilian labor force and the unemployment rolls. This exercise in reality gives a real unemployment rate of 12%. The true picture of the American economy is that in 2007 there were 146 million Americans employed, or 63% of the working age population. Today, there are 139.9 million Americans employed, or 58.5% of the working age population. Over this time frame, an additional 7.1 million Americans entered the working age population. In 2007 there were 26.3 million Americans on food stamps, or 8.6% of the US population. Today there are 44.2 million Americans on food stamps, or 14.3% of the US population. To call the current economic disaster a recovery is to practice the art of the Big Lie.

It turns out that public and private US corporations aren't the only ones cooking their books, and that PricewaterhouseCoopers' consent can be easily purchased. Here is an excerpt from the Fed's 1999 minutes confirming that the books at America's central bank have been "fudged" on at least one occasion: "The Board’s staff and our accounting function at the New York Fed have worked out an accounting treatment to correct for both the $5 million and the $26.6 million errors. That involves reducing the accrued interest asset account by the entire $31.6 million, with an offsetting reduction in interest income on foreign currency investments. We will make that adjustment before the end of the year and spread it among all the Reserve Banks. Of course, for all of us with responsibilities for SOMA this is an embarrassing, indeed humbling, event. As a technical matter, though, I understand that PricewaterhouseCoopers is comfortable with the conclusion of both our accounting and audit function and the Board staff that this is not a material event for purposes of disclosure for any Reserve Bank." Perhaps PwC can come out, unsolicited for now, and disclose just how many other such borderline disclosable events it may have encountered while helping the Fed cooks it books in the past several decades?

A few days ago Transocean stunned every sapient creature (with a memory just a little longer than that of momos chasing every up and downtick of Travelzoo stock) in the world after it announced it had achieved an "exemplary" safety record last year as measured by its total recordable incident rate and total potential severity rate, which in turn justified executives' safety bonuses. For those who may have forgotten last year's unprecedented Gulf oil spill, this is comparable to TEPCO announcing next year that management will receive record bonuses due to the company's unprecedented ability to avoid hazard, not to mention nuclear power plant meltdown and recriticality. Luckily, it only took a few days for the firm's PR division to realize someone may get very angry with the company's spin of events, and as Reuters reports, the company has "acknowledged that its description of 2010 as its "best year in safety" despite a blowout that sank one of its rigs, killing 11 workers and causing a huge oil spill, might be insensitive."

The Oil market right now looks more like a Vegas style casino, but this April WTI rollover cycle would test the long standing argument that markets are never run-over by speculators.

It's a good thing that unlike the silver market, which continues to be in backwardation (see chart), the gold market is fully supplied. Otherwise the just released news from Sprott Asset Management that his Physical Gold Trust (PHYS) is pursuing a $300 million follow on would finally send gold breaking out to $2,000, where it will be sooner or later anyway. Amusingly, contrary to various other blogs' expectations that Sprott is top ticking the market with selling shareholder shelf statements, Sprott is doing just the opposite: "certain funds managed by Sprott Asset Management LP, have agreed to purchase no less than $115 million of Units in this Offering." So yeah, no top tick here. Still, the news that Sprott is about to mop up another $300 million in physical gold from the market will likely send gold quite higher. It appears to have already had an impact on silver, which jumped by $20 cents to another 31 year high on the news, as the market now likely expects a follow on offering in PSLV as well imminently.

Less than a month ago, Zero Hedge thoroughly debunked an article written by Bloomberg's Susanne Walker and Wes Goodman, titled "China Adding to $1 Trillion of U.S. Debt Caps Rise in Rates" which had one purpose only: to eliminate public panic arising from the imminent removal of the Fed as a buyer of first and last resort, and attempt to convince naive readers that China is in fact adding to its holdings. To wit: "China, the largest investor in U.S. government debt after the Fed,
increased longer-term notes and bonds by 39 percent to $1.145 trillion
in December from a year earlier." As we showed previously this statement was based on a completely unfactual apples to oranges comparison of pre and post-revision TIC data, further showing that if the authors had conducted their analysis properly it would have actually shown a decline in China's Treasury holdings in a 12 month period. Then in a development so ironic it would even make Alanis Morisette blush, we disclosed the very next day that Bill Gross dumped all of his Treasury holdings, pending an answer to the question of "who will buy US Treasurys once the Fed stops monetizing", immediately refuting Bloomberg's "all is rosy on the foreign front" argument, reinforcing our thesis that with the Fed gone, foreigners will promptly cease to co-bid alongside the bidder of biggest resort, and in essence ending any artificial attempts to make the US paper demand picture any better. Yet today, less than a month later, Bloomberg's Daniel Kruger, in an article titled "Fed Exit Means No Pain for Obama as Foreigners Buy 60% of Notes at Auction" repeats precisely the same mistakes as his colleagues which we have since corrected, cheery picks some other data, and goes on to present a goalseeked argument to a conclusion that once again appears to have come from "above." Frankly, we are stunned by this persistence to refute Bill Gross' (not to mention Zero Hedge's) factually based view that foreign demand is declining materially for US bonds, and without QE3, it is very possible that it may disappear entirely. So allow us to debunk Bloomberg's second attempt (which we again hope is merely a function of misunderstanding of the subject material) at outright factless spin.

“By doing this we will send a resounding message that government officials are no longer going to stand by and continue to allow MERS and their joint venture banking partners to profit at the expense of the very same people that they are abusing."

The official story is that Bergman's position was eliminated in a reshuffling at the Chicago Fed, though that excuse feels just as fishy as the Argentina one.

And the EPA is planning on raising them ...

Somewhat ironically, up until the Texas Instruments news hit, NYSE market volume today was 3.2 billion shares. This is on par with the lowest non-holiday market volume since just before the market crash in September 2008. It seems not even algos and robots care to trade this market anymore. Any banks that may have been hoping to make some commission-based profits on a mythical jump in trading this uear will have to shelve such plans and continue to rely on the only proven money-making model: massively leveraged prop trading.

And so the biggest scam organization's dirty laundry get exposed by even the porn-addicted regulator.

• BOFA LOAN POLICY MAY HAVE BEEN INCONSISTENT WITH INDUSTRY
• SEC RELEASES 2010 LETTER TO BOFA ON N0NPERFORMING LOANS
• BOFA WAS PRESSED BY SEC ON DISCLOSURE OF NONPERFORMING LOANS

Oh, so they were lying? No....

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 04/04/11

Yet another notable deal, with an 80% premium, to be funded by cash and debt. Mostly debt. Very cheap debt.