Futures market

A push by the ECB for the euro zone to stand behind banks suffering from bank runs is slowly gaining traction but the bloc has yet to build backstops to prevent, or cope with, a sudden collapse of confidence in banks and mass deposit withdrawals. Last week, European leaders discussed pan European means of supporting banks, measures the ECB hopes will include a bank resolution fund to deal with the fallout from the wind up or restructuring of a failing bank. But a wave of withdrawals by depositors - either for fear that their government is too weak to stand behind its banks or that their country will exit the euro and forcibly convert their savings into a vastly devalued national currency - would represent a crisis of completely new proportions. Greece’s exit and reversion to their national currency, the drachma, could precipitate electronic bank runs in other periphery nations. The risk is that even savers who may trust their bank as being safe, come to the conclusion that there is a risk that their euro deposits may, in the event of a sovereign crisis, be forcibly converted to drachmas, pesetas, liras, punts and escudos.

This week we bring back Alasdair Macleod, publisher of Finance and economics.org, because, as he puts it "every horror that we discussed last time we spoke is coming about". Especially scary since our previous conversation with him was less than three weeks ago... Today's interview continues building on his excellent synopsis from last month that detailed the origins of the Eurozone crisis. The fundamental shortcomings warned of at the Euro's creation in 1997, combined with the excessive sovereign debts run up since then, have finally expressed themselves at a scale too large to be contained any longer. Today, Alasdair details in-depth the huge and serious challenges facing Greece and the major Eurozone countries, and the likely impacts of the fast-dwindling options left remaining.  He sees no happy ending to this story, no outcome in which serious pain and permanent behavior change can be avoided. And for those looking for shelter from the unfolding economic storm, he sees few options besides the precious metals (which he believes are severely under priced at the moment):

All you need to know.

Explaining why and how the global monetary system is failing, why it is too late to stop, what will come next, and why the crisis is only financial – not commercial.

Goldman maintains “constructive” 6-month forecast, says case for higher prices remains in place. Goldman stands by its forecast for a rally in gold this year, saying that the precious metal will advance to $1,840/oz over six months as the U.S. central bank embarks on a third round of stimulus in June. The precious metal remains the “currency of last resort,” according to analysts led by Jeffrey Currie in a report released yesterday. Goldman’s gold forecast implies a 15% return in 6 months. “In early 2009, we suggested that gold had become the currency of last resort, overtaking the U.S. dollar’s status due the rising risk of sovereign default and debasement concerns,” Currie wrote in the report. Even as the U.S. currency advanced and gold fell on the European crisis in recent months, “it is too early for the dollar to reclaim this status,” they wrote. “The case for higher gold prices remains in place,” the analysts wrote. “U.S. economic and employment data has now disappointed for several weeks, European election results point to further stress in the euro area, while anecdotal data suggests that physical gold demand remains resilient.”

Will central bankers be able to save the day again?

The time has come to raise the 'noise' level for global markets to Defcon 3 as Clive Hale, of View from the Bridge, discusses his four largest stressors currently. Instead of going 'hmmm' as Grant Williams regularly does, Hale is screaming 'aaargh' as he sees Japanese radioactivity uncertainty, market manipulation, the main-stream media's anaesthetising propaganda, and finally the euro (that last lingering but fatally flawed bastion of european union) plethora problems all increasingly weighing on global macro concerns.

The Apple trade, it works very well... util it doesn't. What happens when ALL of those funds change course???

Butler on Blythe

For all those who have long been curious what the precious metals "queen" thinks about allegations involving her and her fimr in gold and silver manipulation, how JPMorgan is positioned in the precious metals market, and how she views the fringe elements of media, as well as JPMorgan's ethical limitations to engaging in 'wrong' behavior, the answers are all here.

For every semi-positive data point the bulls have emphasized since the market rally began, there's a counter-point that makes us question what all the fuss is about. The bulls will cite expanding US GDP in late 2011, while the bears can cite US food stamp participation reaching an all-time record of 46,514,238 in December 2011, up 227,922 participantsfrom the month before, and up 6% year-over-year. The bulls can praise February's 15.7% year-over-year increase in US auto sales, while the bears can cite Europe's 9.7% year-over-year decrease in auto sales, led by a 20.2% slump in France. The bulls can exclaim somewhat firmer housing starts in February (as if the US needs more new houses), while the bears can cite the unexpected 100bp drop in the March consumer confidence index five consecutive months of manufacturing contraction in China, and more recently, a 0.9% drop in US February existing home sales. Give us a half-baked bullish indicator and we can provide at least two bearish indicators of equal or greater significance. It has become fairly evident over the past several months that most new jobs created in the US tend to be low-paying, while the jobs lost are generally higher-paying. This seems to be confirmed by the monthly US Treasury Tax Receipts, which are lower so far this year despite the seeming improvement in unemployment. Take February 2012, for example, where the Treasury reported $103.4 billion in tax receipts, versus $110.6 billion in February 2011. BLS had unemployment running at 9% in February 2011, versus 8.3% in February 2012. Barring some major tax break we've missed, the only way these numbers balance out is if the new jobs created produce less income to tax, because they're lower paying, OR, if the unemployment numbers are wrong. The bulls won't dwell on these details, but they cannot be ignored.

Freeh accused of taking $ from Iranian terrorists and taking an MF insurance policy away from customers to pay Corzine's legal defense

Back in May of last year, just after the now historic silver slamdown of "Silver Sunday" on May 1, 2011, when the metal imploded by nearly 20% in the span of seconds, a move that some considered 'normal', primarily the CFTC, we presented the extended biopic of the infamous "Silverfinger": Bunker Hunt, who attempted to corner the silver market, and succeeded, if only briefly (and they say Playboy has no good articles). Today, courtesy of Grant Williams, we have dredged up the following clip from the archives, which is a 10 minute overview of just how there is really nothing new ever in the silver market, bringing up memories of Silver Thursday, March 27, 1980, and raising questions whether last year the move in precious metals was not due to the same attempt to corner the silver and gold markets as happened 30 years prior. A far more important question perhaps is how was it that tried a redux of the Hunt brothers (and Warren Buffett of course), and when will someone take their place next?

Today, the metals space is abuzz with a CFTC "comment letter" posted on its website by an alleged "current JPM employee." There is only one problem - this letter is either a complete fraud or simply a total mockery, as it provides absolutely nothing new, and merely regurgitates existing manipulation claims already out in the public domain, and backed by precisely zero evidence. How about attaching a signed trade confirm, or a daily internal P&L report, or even a blotter entry? No? Because they don't exist? Needless to say, anyone can submit such an alleged insider letter, and since there is no name associated to it, we would advise everyone to merely enjoy this a prank attempt. Unfortunately, what more such repeated faux "whistleblower letters", which are likely forthcoming, from other "current JPM employees" will do is simply dilute the effect of any real such disclosure that may come in the future. For that purpose, we strongly caution anyone who considers submitting such disinformation attempts from doing so as it will merely impair and discourage any just intent of validated and justified whistleblowing, either at JPM or elsewhere.

In a previous report, Headwinds for Housing, I examined structural reasons why the much-anticipated recovery in housing valuations and sales has failed to materialize. In Searching for the Bottom in Home Prices, I addressed the Washington and Federal Reserve policies that have attempted to boost the housing market. In this third series, let’s explore this question: is housing now an attractive investment?  At least some people think so, as investors are accounting for around 25% of recent home sales. Superficially, housing looks potentially attractive as an investment. Mortgage rates are at historic lows, prices have declined about one-third from the bubble top (and even more in some markets), and alternative investments, such as Treasury bonds, are paying such low returns that when inflation is factored in, they're essentially negative. On the “not so fast” side of the ledger, there is a bulge of distressed inventory still working its way through the “hose” of the marketplace, as owners are withholding foreclosed and underwater homes from the market in hopes of higher prices ahead. The uncertainties of the MERS/robosigning Foreclosuregate mortgage issues offer a very real impediment to the market discovering price and risk. And massive Federal intervention to prop up demand with cheap mortgages and low down payments has introduced another uncertainty: What happens to prices if this unprecedented intervention ever declines? Last, the obvious correlation between housing and the economy remains an open question: Is the economy recovering robustly enough to boost demand for housing, or is it still wallowing in a low-growth environment that isn’t particularly positive for housing?