Jesse's Café Américain Thu 2009-12-17 10:11 EST

Is the Price of World Silver the Result of Legitimate Market Discovery?

Jesse

Ted Butler: ...the concentrated short position in COMEX silver futures is so extreme, that it is hard to imagine how it can be resolved in an orderly manner. The most recent data from the CFTC indicate that one US bank, JPMorgan, now holds 200 million ounces net short in COMEX silver futures, fully 40% of the entire net short position on the COMEX (minus spreads). As I have previously written, JPMorgan accounted for 100% of all new short selling in COMEX silver futures for September and October, some 50 million additional ounces...So extreme is JPMorgan's silver short position that it cannot be closed out in an orderly fashion...As extreme as JPMorgan's position is, there is a total true net short position of 500 million ounces (100,000 contracts) in COMEX silver futures. Try to put that 500 million ounce short position in perspective. It equals 75% of world annual mine production, much higher than seen in any other commodity.

Jesse's Café Américain; Legitimate Market Discovery; Price; resulting; World Silver.

naked capitalism Wed 2009-11-25 10:14 EST

Ivy Zelman: ``Home prices are going back down''

Edward Harrison of Credit Writedowns

This is a post I wrote overnight about rising delinquencies and shadow housing inventory. I am not convinced house prices in the U.S. are headed higher permanently...The Mortgage Bankers Association is reporting that nearly one in ten households with mortgages are at least one payment behind. That is a record, my friends...Look, the fake recovery is now in full swing. But I expect the recovery to hit a brick wall by 2011, if not earlier. While the proximate cause of my concern is the likelihood of increased taxes and/or reduced spending by the Obama Administration, it is jobs that concern me. See Calculated Risk's post showing the correlation between unemployment and mortgage delinquency and you see the connection. The fact is we have a record number of foreclosures and that is a direct result of rising unemployment. Unemployed people don't have any money, so they don't pay mortgages.

Go; home prices; Ivy Zelman; naked capitalism.

zero hedge Thu 2009-11-19 10:38 EST

An Overview Of The Fed's Intervention In Equity Markets Via The Primary Dealer Credit Facility

the Federal Reserve established and refined a program that permitted banks to pledge virtually any security as collateral, including not just investment grade bonds and higher ranked securities, but also stocks of companies, the riskiest investment possible, and a guaranteed way for taxpayer capital to evaporate in the context of a disintegrating financial system, all with the purpose of bailing out Wall Street's major institutions. On two occasions last year: on March 16, 2008, and subsequently on September 14, 2008, the Federal Reserve first established what is known as the Primary Dealer Credit Facility (PDCF), and subsequently amended it, so that the Fed, in becoming the lender of last resort, would allow any collateral, up to and including stocks, to be funded by the Federal Reserve's credit facility, in order to prevent the $4.5 trillion repo financing system from imploding. By doing so, the Federal Reserve effectively gave a Carte Blanche to primary dealers to purchase any and all equities they so desired, with such purchases immediately being funded by the US taxpayer, via the PDCF. In essence, this was equivalent to the Fed purchasing equities by itself through a Primary Dealer agent.

equity markets; Fed's interventions; overview; Primary Dealers Credit Facility; Zero Hedge.

Mish's Global Economic Trend Analysis Tue 2009-11-03 20:30 EST

Is Debt-Deflation Just Beginning?

Michael Shedlock

You should not be afraid of deflation. You should be afraid of policies attempting to fight it. Deflation (rather price deflation) is actually the natural state of affairs. As productivity increases, more goods and services are produced relative to the population and prices would therefore be expected to drop. It is the Fed, along with misguided Keynesian and Monetarist economists who think falling prices are a bad thing. Who amongst us does not like falling prices (except of course on things we own like houses, but even then who is not sick of higher property taxes that result)? The reality is inflation benefits those with first access to money. Guess who that is? The answer is easy: banks, government, and the already wealthy. Inflation is actually a tax on the middle class and the poor who get access to money last. During the housing bubble, by the time the poor could get access to to money easily, it was far too late to buy. Given that inflation benefits those with first access to money, any targeted inflation at all is morally wrong.

Debt-Deflation Just Beginning; Mish's Global Economic Trend Analysis.

zero hedge Fri 2009-10-23 09:05 EDT

Fitch Expects CMBS Loss Severity To Rise Markedly Next Year

As anyone who has spent even a day looking at securitization tranching or CDS trading will tell you, there are two critical components to any investment that involves risky fixed income: cumulative loss probability and loss severity...artificial delays in bringing the CRE market to fair value in terms of delinquencies and REOs going to foreclosures will simply result in much lower eventual recoveries...the temporary reprieves granted to many leveraged securities will come back to bite investors when defaults eventually pick up again, however with the result being loss rates which will be much higher than default expectations.

Fitch Expects CMBS Loss Severity; Rise Markedly; years; Zero Hedge.

Credit Writedowns Wed 2009-10-14 12:12 EDT

Currencies pegged to the dollar under pressure to drop peg

...as the dollar continues to weaken, those countries with pegs will be under pressure to drop their peg or to revalue their pegs higher. The Bloomberg video linked below explains. The dichotomy whereby the adjustment process is done only through free-floating currencies is inherently unstable -- and invites a nationalistic response. A busted peg in any major U.S. trading partner's currency is likely to have a very negative psychological impact on currency markets and severe knock-on effects... [dollar losing reserve status]

credit writedowns; currency pegs; Dollar; drop peg; pressures.

The Big Picture Wed 2009-10-14 11:36 EDT

Andy Xie: Here We Go Again

Former Morgan Stanley Analyst Andy Xie explains why China is a potential bubble: [Consider] the US Savings and Loans crisis of the late 1980s and early 1990s. The US Federal Reserve kept monetary policy loose to help the banking system. The dollar went into a prolonged bear market. During the descent, Asian economies that pegged their currencies to the dollar could increase money supply and lending without worrying about devaluation, but the money couldn't leave home due to the dollar's poor outlook, so it went into asset markets. When the dollar began to rebound in 1996, Asian economies came under tightening pressure that burst their asset bubbles. The collapsing asset prices triggered capital outflows that reinforced asset deflation. Asset deflation destroyed their banking systems. In short, the US banking crisis created the environment for a credit boom in Asia. When US banks recovered, Asian banks collapsed. Is China heading down the same path? There are many anecdotes to support the comparison. Property prices in Southeast Asia became higher than those in the US, but ``experts'' and government officials had stories to explain it, even though their per capita income was one-tenth that of the US. Their banks also commanded huge market capitalizations, as financial markets extended their growth ad infinitum. The same thing is happening in China today. When something seems too good to be true, it is. World trade -- the engine of global growth -- has collapsed. Employment is still contracting throughout the world. There are no realistic scenarios for the global economy to regain high and sustainable growth. China is an export-driven economy. Bank lending can support the economy for a short time, however, stocks are as expensive as during the heydays of the last bubble. Like all previous bubbles, this one, too, will burst.

Andy Xie; Big Picture; Go.

TraderFeed Sat 2009-10-10 13:48 EDT

Quick Look at TIPS and Beyond

Brett Steenbarger, Ph.D.

U.S. Treasury Inflation-Protected Securities (TIP; above) are making multi-month highs, amidst the weak dollar and strong gold. I've noticed a tick up in inflation talk among traders as well. With unemployment--not inflation--making the headlines, the Fed hardly has the political cover to begin serious talk of rate increases. With the Reserve Bank of Australia hiking rates, however, there are concerns that we are just a bit closer to the long-awaited exit from monetary ease. Meanwhile, higher Aussie rates only fuel the carry trade that has traders selling U.S. dollars and finding higher yielding alternatives elsewhere.

quick look; tip; TraderFeed.

Jesse's Café Américain Sun 2009-09-20 11:07 EDT

Stock Market Rally: Shenanigans Abounding

Jesse

...The US markets in general have every mark of a maturing Ponzi scheme...Bonds, stocks, metals, sugar, cocoa, and oil are all moving higher, while the dollar sinks. Is the dollar funding a new carry trade?...We remain guardedly 'optimistic' on the markets for next year ONLY because of the Fed's and Treasury's willingness to continue to debase the dollar to cover the massive unrealized losses in the banks' portfolios, even as they return to manipulating markets in business as usual. Inflation is good for financial assets, and we think another bubble is in the cards, at least for now given Obama's unwillingness to reform, unless some exogenous event or actor intervenes...

Jesse's Café Américain; Shenanigans Abounding; stock market rally.

Asia Times Online Sun 2009-09-13 10:25 EDT

THE BEAR'S LAIR : Possible October surprises

Martin Hutchinson

The inflation that might be expected in the United States from unprecedented expansionary monetary policies has failed to appear, while huge budget deficits have yet to produce higher interest rates. Far from being signs of a new economic paradigm, this merely means new bubbles are forming...Commodities and gold therefore are the destination of this year's hot money and are forming the new bubble...a fair-sized bubble has developed in the T-bond market...however...a modest resurgence in US inflation or difficulty in a long dated T-bond auction could cause confidence to flee the Treasury bond market and yields to leap uncontrollably upwards...the long-term costs of excessively cheap money are beginning to be seen in the US economy itself. By allowing money to remain so cheap for so long, and by running incessant payments deficits, the United States has surrendered the advantage of its superior long-established capital base, narrowing its capital cost advantage over emerging markets and exporting that capital to countries with less profligate approaches. Huge budget deficits, themselves worsening the trade deficit, merely export yet more US capital to the surplus nations. That makes it inevitable that the years ahead, in which the United States will no longer enjoy a capital advantage over its lower-wage competitors, will see highly unpleasant declines in US living standards.

Asia Times Online; BEAR'S LAIR; Possible October surprises.

Mish's Global Economic Trend Analysis Sun 2009-08-30 12:03 EDT

Greater Than One in Four FDIC Insured Institutions are Unprofitable; Bank Problem List at 15 Year High

Michael Shedlock

The second quarter 2009 Quarterly Banking Profile has some interesting charts and facts that inquiring minds will be interested in.Insured Institution Performance Higher Loss Provisions Lead to a $3.7 Billion Net LossMore Than One in Four Institutions Are UnprofitableCharge-Offs and Noncurrent Loans Continue to RiseNet Interest Margins Show Modest ImprovementIndustry Assets Decline by $238 BillionThe Industry Posts a Net Loss for the Quarter The Industry Posts a Net Loss for the Quarter Burdened by costs associated with rising levels of troubled loans and falling asset values, FDIC-insured commercial banks and savings institutions reported an aggregate net loss of $3.7 billion in the second quarter of 2009. Increased expenses for bad loans were chiefly responsible for the industry's loss. Insured institutions added $66.9 billion in loan-loss provisions to their reserves... ``Conventional wisdom regarding money supply suggests there is massive pent up inflation in the works as a result of the buildup of excess reserves...The reality is excessive debt and falling asset prices have rendered the best efforts of the Fed impotent. Banks are not well capitalized, they are insolvent, unwilling and unable to lend.''

15-year high; Bank problem listings; FDIC insured institutions; greater; Mish's Global Economic Trend Analysis; unprofitable.

Fri 2009-07-24 00:00 EDT

naked capitalism: Guest Post: Is Inflation Inevitable?

Van R. Hoisington and Lacy H. Hunt ``betting on inflation as a portfolio strategy will be as bad a bet in the next decade as it has been over the disinflationary period of the past twenty years when Treasury bonds produced a higher total return than common stocks''

Guest Post; inflation inevitably; naked capitalism.

Tue 2009-06-16 00:00 EDT

naked capitalism: Guest Post: FDIC's Insurance Commitments 34% Higher Than Reported

FDIC's Insurance Commitments 34; Guest Post; higher; naked capitalism; report.

Fri 2008-12-12 00:00 EST

Calculated Risk: Roubini: Policies will lead to "much higher real interest rates on public debt"

Calculated Risk; higher real interest rates; lead; policies; public debt; Roubini.

Thu 2008-06-19 00:00 EDT

Ron Paul and Dwight D. Eisenhower -- True Patriots by Jim Quinn

Ron Paul and Dwight D. Eisenhower - True Patriots by Jim Quinn; If as a country we continue to allow our politicians and their military industrial complex corporate sponsors to spend $700+ billion per year on weapons, to the detriment of higher education, alternative energy projects, and national infrastructure needs...as deficits accumulate, the dollar plummets, and inflation rears its ugly head, our great country will decline as other empires who overstepped their bounds declined"

Dwight D. Eisenhower; Jim Quinn; Ron Paul; true patriot.

Wed 2008-05-14 00:00 EDT

Jesse's Café Américain: Bank of America Sees Higher Losses; Banks Have "Enormous Unrecognized Losses"

Jesse's Café Américain: Bank of America Sees Higher Losses; Banks Have "Enormous Unrecognized Losses"

America Sees Higher Losses; bank; Enormous Unrecognized Losses; Jesse's Café Américain.