Wednesday, 26 January 2011

Fed Day.

Baltic Dry Index. 1292 -53

LIR Gold Target by 2019: $30,000. Revised due to QE.

"For more than two thousand years gold's natural qualities made it man's universal medium of exchange. In contrast to political money, gold is honest money that survived the ages and will live on long after the political fiats of today have gone the way of all paper."

Hans F. Sennholz

Later today, the wisdom of Bernoccio’s gang at the Fed. Will they dare raise interest rates in the face of rising inflation? No way. According to them there’s no inflation in the USA. Will they abandon QE2 in the face of a recovering US economy? No way. They know that most of the recovery statistics are being rigged by the NY Fed. We open today with the understatement of the post war era. The Fed’s serial bubble, fraud based “financial crisis” was entirely avoidable according to the inquiry set up to investigate it. What part of banksterism and massive derivatives gambling couldn’t they see in advance?

Financial Crisis Was Avoidable, Inquiry Finds

By SEWELL CHAN Published: January 25, 2011

WASHINGTON — The 2008 financial crisis was an “avoidable” disaster caused by widespread failures in government regulation, corporate mismanagement and heedless risk-taking by Wall Street, according to the conclusions of a federal inquiry.

The commission that investigated the crisis casts a wide net of blame, faulting two administrations, the Federal Reserve and other regulators for permitting a calamitous concoction: shoddy mortgage lending, the excessive packaging and sale of loans to investors and risky bets on securities backed by the loans.

“The greatest tragedy would be to accept the refrain that no one could have seen this coming and thus nothing could have been done,” the panel wrote in the report’s conclusions, which were read by The New York Times. “If we accept this notion, it will happen again.”

While the panel, the Financial Crisis Inquiry Commission, accuses several financial institutions of greed, ineptitude or both, some of its gravest conclusions concern government failings, with embarrassing implications for both parties. But the panel was itself divided along partisan lines, which could blunt the impact of its findings.

Many of the conclusions have been widely described, but the synthesis of interviews, documents and testimony, along with its government imprimatur, give the report — to be released on Thursday as a 576-page book — a conclusive sweep and authority.


Staying with the Fed, the Fed is forced to deny that there’s any inflation in the system, because it’s run out of tools to fight it. Below Seeking Alpha covers the Fed’s dilemma. Stay long gold and silver. The whole article is a must read article.

The Fed Won't Be Able to Combat Inflation by Raising Fed Funds Rate

January 23, 2011

There are any number of ways to say it, but it all comes down to the same thing. The Federal Reserve has reached the rock and a hard place position when it comes to the Federal Reserve Rate.

----Chairman Bernanke has said that the Fed will raise rates to trim any inflation that exceeds their target rate of 2%. According to the Federal Government, inflation has not been a factor, just look at the rise in COLA for the senior citizens on Social Security.

My contention is that the Federal Reserve will not be able to deal with inflation through raising the Federal Funds rate. As it sits now, the 0.25 rate can only be lowered to 0.1 or taken to zero. Moving it in the other direction would increase the already substantial weight of interest on the national economy.

President Obama’s Budget anticipated a revenue stream of 2.5 trillion dollars in 2011. Anticipated to 14.8 trillion and at 3%, would cost the US 444 billion dollars in interest, a 31 billion increase. 444 billion dollars is 17.8% of the anticipated revenue stream, just to service the interest costs on the debt.

----According to the Government, there is no inflation, or very mild inflation, because the Government is calculating the inflation rate to minimize what every shopper who goes to the store to buy their own groceries already knows. Inflation is running over 4% (according to John Williams over at which if the Federal Reserve was to raise the rate to combat this (by about 2%); the effect on the budget would be staggering. A 5% effective rate on the debt would cost the US 740 billion dollars or 29.6% of anticipated revenues. At that point, 30 cents of every dollar taken in by the Government would be devoured by the interest on the national debt.


Next, more bad news for the Fed and the bankrupt US banking system. US home prices are still falling no matter what desperate measures the Fed makes to stabilize it. Right now the whole market is propped up by the GSEs, who in turn sell on their paper to the Fed. It doesn’t take genius to see where this leads. The next crisis destroys the whole rotten corrupt system. Stay long physical precious metals. We are headed to eventual revulsion of fiat currency.

Price Drop Points to Likely Double Dip in Housing Market

Published: Tuesday, 25 Jan 2011 | 10:55 AM ET

U.S. single-family home prices fell for a fifth straight month in November and could plumb new lows soon, a closely watched survey showed on Tuesday.

The Standard & Poor's/Case-Shiller composite index of 20 metropolitan areas declined 0.5 percent in November from October on a seasonally adjusted basis, though it was not as sharp as the 0.8 percent fall expected by economists.

Prices have fallen 1.6 percent in the past year, sharper than the 1.4 percent predicted by economists polled by Reuters.

"Everything in this report is unfortunately still sagging and still pointing downward," David Blitzer, S&P 500 Index Committee chairman, said in a CNBC interview just after the report was released. "The recent news across the board on housing except for existing home sales has been very, very disappointing. We still seem to be at best scraping along the bottom."

Sixteen of the 20 cities showed annual price declines in November, while 19 of 20 cities showed monthly price drops.


We end for the day with poor, hapless Great Britain. According to the Bank of England’s King, Britain’s serfs must “pay the inevitable price” for the failure of the corrupt bankster system. With Britain’s GDP going in reverse again, blamed on the bad winter weather in December, Britain’s serfs, of which sadly I am one, are facing the worst decline in living standards since the 1920s. Since no party ran on truth in the last election, none has a mandate to collapse further UK living standards. Once the better weather arrives for strikes, a period of social discontent seems likely, further weakening the Pound, which in turn will add to UK inflation and drop living standards. Oh what a tangled web we weave….

"With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people."

F.A. von Hayek

Bank of England chief Mervyn King: standard of living to plunge at fastest rate since 1920s

Households face the most dramatic squeeze in living standards since the 1920s, the Governor of the Bank of England warned, as he reacted to the shock disclosure that the economy was shrinking again
By Robert Winnett, Deputy Political Editor 9:41PM GMT 25 Jan 2011

Families will see their disposable income eaten up as they “pay the inevitable price” for the financial crisis, Mervyn King warned.

With wages failing to keep pace with rising inflation, workers’ take- home pay will end the year worth the same as in 2005 — the most prolonged fall in living standards for more than 80 years, he claimed.

Mr King issued the warning in a speech in Newcastle upon Tyne after official figures showed that gross domestic product fell by 0.5 per cent during the final three months last year. The Government blamed the unexpected reduction — the first since the third quarter of 2009 — on the freezing weather that paralysed much of the country last month.

But there were fears that the country was poised to slip back into recession, defined as two successive quarters of negative growth. Economists said the situation was “an absolute disaster”.


"The first requisite of a sound monetary system is that it put the least possible power over the quantity or quality of money in the hands of the politicians."

Henry Hazlitt

At the Comex silver depositories Tuesday, final figures were: Registered 44.44 Moz, Eligible 60.67 Moz, Total 105.11 Moz.


Crooks and Scoundrels Corner.

The bent, the seriously bent, and the totally doubled over.

Today, more on the rip-off Wall Street of the 90s and 00s. What wasn’t nailed down was fair game for the bankster’s avarice. When a Wall Street bankster calls, hang up. Still no banksters have gone to jail, in the nation that almost crashed the entire global financial system. Is anyone looking in today’s Babylon.

"FINANCE, n. The art or science of managing revenues and resources for the best advantage of the manager.”

Ambrose Bierce.

E-mails Suggest Bear Stearns Cheated Clients Out of Billions

Jan 25 2011, 1:01 AM ET

Lawsuit alleges the bank took extreme measures to defraud investors, and now JPMorgan may be on the hook

Former Bear Stearns mortgage executives who now run mortgage divisions of Goldman Sachs, Bank of America, and Ally Financial have been accused of cheating and defrauding investors through the mortgage securities they created and sold while at Bear. According to e-mails and internal audits, JPMorgan had known about this fraud since the spring of 2008, but hid it from the public eye through legal maneuvering. Last week a lawsuit filed in 2008 by mortgage insurer Ambac Assurance Corp against Bear Stearns and JPMorgan was unsealed. The lawsuit's supporting e-mails, going back as far as 2005, highlight Bear traders telling their superiors they were selling investors like Ambac a "sack of shit."

News of internal whistleblowers coming forward from Bear's mortgage servicing division, EMC, was first reported by The Atlantic in May of last year. Ex-EMC analysts admitted they were sometimes told to falsify loan-level performance data provided to the ratings agencies who blessed Bear's billion-dollar deals. But according to depositions and documents in the Ambac lawsuit, Bear's misdeeds went even deeper. They say senior traders under Tom Marano, who was a Senior Managing Director and Global Head of Mortgages for Bear and is now CEO of Ally's mortgage operations, were pocketing cash that should have gone to securities holders after Bear had already sold them bonds and moved the loans off its books.

Mike Nierenberg, who ran the adjustable-rate mortgage trading desk at Bear and is now the head of mortgages and securitization for Bank of America, was a key player ensuring the defaulting loans Bear was buying would move off their books right after they bought them, with little concern for the firm's due diligence standards. He was joined in this scheme by Jeff Verschleiser, his peer and Senior Managing Director on the mortgage and asset-backed securities trading desk and head of whole loan trading. He is now an executive in Goldman Sachs' mortgage division.

According to the lawsuit, the Bear traders would sell toxic mortgage securities to investors and then sell back the bad loans with early payment defaults to the banks that originated them at a discount. The traders would pocket the refund, and would not pass it on to the mortgage trust, which was where it should have gone to be distributed to the investors who owned the bonds. The Marano-led traders also cut the time allowed for early payment defaults, without telling the bond investors. That way, Bear could quickly securitize defective loans, without leaving enough time for investors to do their own due diligence after the bonds were sold and put-back any bad loans to Bear.


"Gold bears the confidence of the world's millions, who value it far above the promises of politicians, far above the unbacked paper issued by governments as money substitutes. It has been that way through all recorded history. There is no reason to believe it will lose the confidence of people in the future."

Oakley R. Bramble

The monthly Coppock Indicators finished December:

DJIA: +171 Down 7. NASDAQ: +238 Down 9. SP500: +165 Down 2.

The bull market (or bear market rally) that commenced on Nasdaq on 30/4/09 at 1717 has ended. (30/5/09 SP 500 at 919, 30/5/09 DJIA 8500.) While the indicators can flip flop at market turns, this action is rare on the slow monthly indicators. December is the seventh down month, but the downward momentum has virtually stopped. I would put on (purchased) synthetic double options here for a breakout in either direction. Professional traders would adopt much more risky granted option strategies.

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