The WGC has released its complete Third Quarter gold market outlook. To summarize: major demand is seen out of China and India, whose surging populations will buy ever more PM due to "rising income levels, high savings rates and strong economic growth." Demand is seen coming from the jewelry sector, as well as from institutions, including central banks, and a jump in industrial demand "on the back of renewed growth in the electronics industry, due to the majority of semi-conductors being wired by gold." Nonetheless, even as demand continues growing, supply is rising as well: "On the supply side, we reiterate our projection that total mine supply is likely to trend higher. This is due to mine project expansions, a ramping up of production to meet the recovery in gold demand and the diminishing scope for producer de-hedging in 2010. Higher supply is also expected to come from China, Australia and US, although this may be partially offset by lower output from countries such as South Africa and Peru due to declining ore grades and rising costs." Ultimately, the only important question is whether QE will ever end. Anything less than a Yes answer, means there is virtually no upside limit to gold, absent an occasional correction.
As we reported earlier, today's $10 billion (lack of) Revenue Anticipation Notes to be issued by California has been delayed. It turns out there is more than meets the eye: namely a lawsuit, which has been disclosed only post-facto. From Dow Jones: "Lockyer issued a notice for the deal's preliminary official statement on Wednesday that said a taxpayer lawsuit was filed in state court on Tuesday seeking to block the sale of 11 state building. If the sale is not completed by June 30, fiscal year 2011 state revenue would be reduced by $1.2 billion, the notice said." In other words, there will be much less revenue to be "anticipated." As for the actual auction, unlike GM which according to Government Motors star employee of the millennium Phil Lebeau is oversubscribed so many times one needs an abacus to figure it out, only 59% of the Cali RAN was presold. In the meantime, the muni mauling continues with extra vigor and finding bid pockets has become tougher than discovering an honest banker.
Possibly the most incendiary moment of yesterday's fraudclosure hearing in which Bank of America and JP Morgan representatives saw no evil and heard no evil, even as Chris Dodd wanted it over so he can buy no evil with the years of accumulated lobby booty from said banks after his long overdue reign of corruption finally ends, was when the CEO of the Neighborhood Assistance Corporation of America, Bruce Marks, realized he has had enough of the endless lies and goes postal at the appropriately named JPM henchman David Lowman, CEO of Chase Home Lending. After Lowman says that "Chase strongly prefers to work with borrowers to reach a solution that lets them keep their homes" Lowman flips out. Watch the hilarious results here. This video is merely a harbinger of what happens when pent up anger at banker lies overflows. Luckily, this time everything ended peacefully, and to the banks' credit, the voice was promptly silenced. Next time, it won't be so easy...
Another day, another POMO. Today Brian Sack bought up $8.2 billion in various CUSIPs maturing between 2018 and 2020, with the issue accepted the most ($2.3 billion) being 10Y LJ7, issued last September. As all of the recently auctioned off 10 Years are now trading at lower prices than where auctioned, not surprisingly neither the NT3 nor the ND8 had any buyback submissions as PDs would be underwater on the buyback. The total submitted to accepted ratio was 3.7x, lower than median and generally indicative of spare dry powder at the primary dealers. And so the PDs make another few hundred million courtesy of commissions and par-market differentials. Aside from that, nothing else to see. Market focused on closing tick to see if POMO has now become a curse instead of a blessing.
Over the past day, some have gotten concerned that the reappearance of HR3808 on the floor of the House may be another shadow attempt to override the president's veto which could, if passed, ameliorate the fraudclosure situation (yet which if Diana Olick's report about an imminent settlement is correct, may be moot as is). Courtesy of a highly ranked political advisor, we present an alternative view, stating that HR3808 is not about enforcing banker interests, but more about delineating the separation of powers between the president and congress. Either way, the bill's attempted passage can be watched live here.
Chris Martenson And James Howard Kunstler Explain How "The World is Going to Get Rounder and Bigger Again"Submitted by Tyler Durden on 11/17/2010 - 10:45
In this week's Straight Talk with Chris Martenson, contributor is James Howard Kunstler, author and social critic. His better-known works include The Long Emergency, in which he argues that declining oil production will result in the decline of modern industrialized society and compel Americans to return to smaller-scale, localized, semi-agrarian communities; World Made By Hand and its sequel, The Witch of Hebron, all published by The Atlantic Monthly Press. He writes a weekly blog is also a leading proponent of the movement known as "New Urbanism."
California Delays Issuance Of $10 Billion In RANs, Reason Unknown (However, Insolvency May Have Something To Do With It)Submitted by Tyler Durden on 11/17/2010 - 10:27
It appears the market still is unable to fully grasp that QE3 - the Municipal edition, is just around the corner. From Dow Jones: "Institutional pricing of California's $10 billion of revenue anticipation notes, which had been scheduled for Wednesday, has been delayed until Thursday, a market source said on Wednesday. The reason for the delay was unclear and there was no immediate comment from J.P. Morgan, the deal's senior manager. Retail investors snapped up $5.89 billion or nearly 59 percent of the offering during a two-day presale period on Monday and Tuesday, according to the state treasurer's office." Here's the reason: all the free capital out there has been sequestered in what will be not only the world's biggest IPO tomorrow, but more importantly, the world's biggest flop soon thereafter.
First city of Hamtramck filing bankruptcy, now this... From Moody's: "The downgrade to A2 reflects continued weakness of the city's finances, which had improved from 2005 to 2007, but deteriorated in fiscal 2008 and 2009, and improved in 2010, but continue to face challenges in the coming few years. Although fiscal 2010 results are favorable, General Fund balance remains negative, both on a budgetary and GAAP basis, and we believe the city has little budgetary margin over its five-year plan which includes significant repayment of deferred pension contributions in 2013 and 2014. In response to the significant financial stresses that began in fiscal 2008, city officials created a fiscal recovery plan that included a temporary sales tax increase and the pension deferral in fiscal 2010 and 2011; the plan gained the required approval from the Commonwealth of Pennsylvania legislature at the end of September 2009, allowing for the sales tax increase to begin at the beginning of October. Additional revenue and expenditure reductions in fiscal 2010 resulted in surplus operations, although these were diminished from previous forecasts due to a late state aid payment of approximately $70 million; much of that revenue has since been received."
The world has too much debt. In the book of Leviticus (Old Testament), a Jubilee year is mentioned to occur every fifty years, in which laves and prisoners would be freed, debts would be forgiven. Today there is no Jubilee. - Hinde Capital
Some more on the second biggest piece of Euro-news from yesterday. After Austria surprisingly announced it would delay its contribution to the Greece bailout fund until such time as Greece actually stopped lying and did what it had promised (i.e., never), it seems that more of the Eurozone is starting to get cold feet over how to proceed with this classical defection from a game theory set up. As a result, the entire EU has delayed the December tranche of the Greek payment until January. Presumably this is to teach Greece a lesson, although it is unclear what it will actually end up achieving. As Greece can not fund itself outside of the ECB framework, as its banks are insolvent, and as it does not have the capital to exist in isolation, this action is comparable to the EU pointing a gun at its head and telling itself it has to stop lying or else. Yet with the entire continent subsisting on nothing but lies, this is nothing but a pure exercise in surreal tragicomedy - yesterday's question to Ollie Rehn during the EU press conference by a WSJ reporter about how the Stress Tests confirmed all is good with Austrian banks, and how he would comment on this, which was followed by an awkward silence, captures it perfectly.
Confirming once again that the clueless government would rather risk a populist backlash than actually cutting costs (recall that federal worker compensation has surged in the past 5 years), it appears that the long-stirring debate over a value added tax may be about to materialize into something tangible. Per Bloomberg, "Alice Rivlin, a member of President Barack Obama’s deficit-reduction commission (and former Fed vice chairwoman), is trying to stir a debate over imposing a national sales tax to reduce the deficit. Rivlin, as part of a separate 19-member group sponsored by the Bipartisan Policy Center in Washington, offered a plan for a 6.5 percent national debt-reduction sales tax. Her recommendation comes as the president’s panel prepares a Dec. 1 report of options for Congress to trim the national debt." Coming from a former Fed member, this is not all that surprising - after all, there is nothing to stir inflation expectations like a sudden 6.5% hike in all prices.
The country which has languished in 6th position in the world, with combined gold holdings of 1,054 tonnes (just behind the GLD ETF), may have finally awoken that it needs to buy about 7,000 tonnes of gold to catch up with the US, and its 8,133 tonnes (or even France with 2,435). China daily 21st Century Business Herald has just reported that: "China is considering raising its gold reserves, a move which would push
up gold prices in the future, a person providing consulting services to
the Chinese government said." Conveniently, China can now buy gold notably cheaper courtesy of a $100 dip in gold price as recorded over the past week, precipitated by... China inflation concerns. When next month the politburo reports below consensus inflation (as the number is imaginary to begin with), look for gold to surge, but not before China manages to load up at depressed prices.
The October Consumer Price Index came at 0.2%, on expectations of a 0.3% rise, compared to a previous read of 0.1%. The CPI ex-Food and Energy was unchanged, also below expectations of a 0.1% rise. And somehow, despite what is obviously a massive campaign for "value deflation", the BLS once again saw a barely notable increase in food prices (and an outright decline in some): "The food index rose 0.1 percent in October after a 0.3 percent increase in September. The index for food away from home rose 0.1 percent while the food at home index was unchanged.... The fruits and vegetables group posted the largest decline, falling 0.7 percent, while the index for nonalcoholic beverages fell 0.5 percent. " Elsewhere housing starts and building permits both missed expectations by a wide margin, coming in at 519 (vs exp of 598K), and 550K (vs exp of 568). Starts plunged from a revised 588K the month prior. One wonders how this contraction for the builders will be spun.
- The horrible truth starts to dawn on Europe's leaders (Telegraph)
- Fed May Hesitate on More Easing After Critics Question Mandate (Bloomberg)
- UN warns of rising food prices (FT)
- China Targets Liquidity to Cool Inflation (China Daily)
- Anger at Germany boils over (FT)
- BofA CEO: Settling foreclosure probe best solution (Reuters)
- China Buys Treasurys for Third Month (WSJ)
- Bond Vigilantes Ride Again (Barrons)
Nothing quite like the billionaire whose entire fortune is invested in the successful perpetuation of the ponzi, thanking the administration for taking trillions of dollars out of the taxpayers' pocket and preserving the broken system for a few more years, just so said billionaire can wax holier than thou on the pages of the administration's newspaper and thank the administration for allowing him to swim in his nickel pool through expiration. If one tries hard enough, one can almost spot a ridiculously hypocritical vicious loop in there somewhere...