Sunday, August 31, 2008
Saturday, August 30, 2008
Gulf of Mexico oil infrastructure
Current NOAA Track for Gustav
Hurricane Gustav May Reach Cat 5, "Every Bit As Bad As Feared"
Hurricane Gustav is a strong Category 4 storm and has continued to gain strength throughout the afternoon. As of 2 p.m. EDT, Gustav was centered about 155 miles east of the western tip of Cuba, or very near the Isle of Youth, and moving northwest at 14 mph.
According to reports, wind speeds have increased to 150 mph by 5:00 p.m. EDT.
The hurricane is expected to continue strengthening into an even more dangerous hurricane as it slams west Cuba this afternoon.
According to forecasters, the storm is expected to be as bad as everyone feared, the worse case scenario.
Gustav is moving northwest, away from the Cayman Islands, and hurricane warnings for the island nation have been discontinued.
The forecast track continues to indicate that Gustav will make its way into the southeastern Gulf of Mexico tonight and then track northwestward reaching the central Gulf Coast by late Monday.
The outer rainbands of Gustav will begin impacting coastal areas of Louisiana, Mississippi, Alabama and the Florida Panhandle as early as late Sunday with scattered downpours and thunderstorms.
Gustav will slow down as it moves inland, and will likely unleash excessive rainfall and devastating flooding.
The heavy rain and winds from Gustav will test levees breached during Hurricane Katrina. But all that depends on the exact track of the storm.
The nationwide economic downturn, when combined with extremely high fuel prices, more expensive airfare and the reduced wealth effect brought about by collapsing home values, job insecurities and the complete shut-down of the American housing ATM machine, has signifiantly hampered consumer discretionary spending, and the consequences have been felt doubly hard here in Las Vegas.
Taxable sales down considerably - 13 of last 15 months
Massive Construction Projects have shut down
Gaming Revenue has Cratered
Housing market worst in the Nation
Back in the days of cheap/easy credit and rising home values, the Las Vegas experience was considered "a must" for many and high occupancy rates allowed a thriving hotel industry to command very high prices for providing this "experience". Consumers, living for the here and now, didn't flinch and were more than happy to part with their cash - all in the name of having a good time.
With a contracting economy however things have changed... Millions of homes across the nation have now lost value, consumer credit has dried up, interest rates have risen, gas & travel have become more expensive, and the American consumer, who no longer has the discretionary money to gamble away in Vegas, is finally starting to peter out.
Las Vegas hotel/casinos, with battered stocks and falling revenues, are now desperately seeking ways to keep their rooms filled...
LV Review Journal: Take our rooms, please
LV hotels, eager to keep rooms filled in down economy, offer reduced-rate stays.
Desperate times call for desperate measures. And when it comes to Las Vegas casino owners, desperation is spelled D-I-S-C-O-U-N-T.
Room rates in Sin City are down by double-digit percentages for the upcoming holiday weekend. It's a sign the rocky economy and high gasoline prices are forcing Las Vegas resorts to work harder to keep hotel rooms full and casino floors bustling.
At best, room rates are holding steady compared with last year during Labor Day weekend. But in many cases hoteliers are cutting rates as much as 50 percent.
"A lot of people still want to go to Las Vegas, but they don't want to pay as much as they did before," said Chris McGinnis, editor of Expedia Travel Trendwatch, an offshoot of the online vacation-booking Web site Expedia.com.
McGinnis said Las Vegas was the top summer destination on the site, but the average room rate was down 12 percent.
The Expedia numbers jibe with local indicators that suggest reduced room rates may help keep tourist volume close to what it was last year at this time, even if the visitors aren't spending as much.
In a recent interview, Robert Ashcroft, vice president of planning for Las Vegas-based Allegiant Air, said hotels are basically absorbing customers' higher travel costs through discounts on room rates.
"In other words, the cost of higher fuel prices will, in the end, probably come out of the pockets of the Vegas casinos," Ashcroft said.
Michael Zaletel, chief executive officer of the hotel-booking Web site i4Vegas.com, said the 12 percent decline in room rates reported by Expedia may be misleading because discounting is much deeper at the individual property level.
That's because lots of people are spending the same amount of money for a room as before, but they are moving up to nicer hotels. Also, he suspects hotels may be giving gamblers big discounts and charging the difference to the casino or marketing departments, which would have the effect of keeping room rates high even if the customer isn't paying.
"We know that room rates are down significantly at properties that are saying they are not down," Zaletel said.
The discounts are dramatic at some of the most recognized hotels on the Strip.
At The Venetian, rooms that fetched $273 during Labor Day weekend 2007 are available for $228, a 17 percent discount. Rooms at the Riviera were $82 on the site last year and are available for $50 this weekend, a 39 percent decline.
"Last year at this time if you were looking for the weekend there wasn't much available and what was available was really expensive," he said. "It is creating a buyers' market."
This may work to keep occupancy rates up for some time but, over the longer haul - as the US economic condition deteriorates, this situation is likely to get much worse.
I still believe we're going to see significant casino layoffs before the end of this year.
Again, for those of you who don't regularly follow this blog: Since 1970, there has only been ONE OTHER time (since this recent economic downturn) where gambling revenues actually fell -- in the aftermath of the Sept. 11 terror attacks. During that timeframe (2001-2002) gaming revenue fell 1 percent.
Current gaming revenue declines are far worse than those, while casino debt levels are much higher - yet (to date) we've failed to see any significant layoff activity. Guess only time will tell...
For more information on the LV economic downturn, scroll down the right side of my blog page and look for the "Las Vegas Downturn" header.
Friday, August 29, 2008
Note: The failure of just one large institution (i.e. Wamu) could wipe them out.
So what's going on in the US Banking system?
From Mike Larson, Money and Markets: Latest FDIC Report Reads Like a Horror Novel
Bank income PLUNGED 86.5%! Insured commercial banks and savings institutions reported net income of $5.0 billion for the second quarter of 2008 — down a whopping 86.5% from a year earlier.
Loan loss provisions QUADRUPLED! Loss provisions totaled $50.2 billion, more than four times the $11.4 billion quarterly total of a year ago. Second-quarter provisions absorbed nearly one-third of the industry’s net operating revenue — the highest proportion in 19 years.
Actual loan losses nearly TRIPLED! Bad loan losses soared to $26.4 billion in the second quarter. That’s almost triple the $8.9 billion that was charged off in the second quarter of 2007 and the highest quarterly charge-off rate in 17 years.
Credit card losses rose 47% ... commercial and industrial loan losses more than doubled, increasing 128% ... home equity loan losses jumped 633% ...
Plus, loan defaults on residential mortgage loans soared 822%.
And get this: Bad construction and land development loans skyrocketed a staggering 1,227%!
Surging loan delinquencies signaled MUCH more pain to come! The number of past-due loans and leases rose for a ninth consecutive quarter, posting the second-largest quarterly increase in the nine-quarter streak — a dead give-away that bank losses will continue to surge for the foreseeable future.
List of Problem Banks Grow:
Guardian.UK: FDIC sees 117 problem banks; most since 2003 (Remember, INDYMAC wasn't even on the list)
The number of troubled U.S. banks rose 30 percent to 117 in the second quarter, the highest level in five years, and a top regulator warned that conditions will worsen as the housing slump and credit crisis continues to pound profitability.
Nine U.S. banks have failed so far this year, including mortgage IndyMac Bancorp Inc, which has drained the FDIC's Deposit Insurance Fund used to repay insured deposits at failed banks.
The FDIC said the sector's earnings fell 86 percent from a year earlier to $5 billion in the second quarter, mainly due to a fourfold rise in provisions for bad loans to $50.2 billion. With the exception of the fourth quarter of 2007, industry profits were the lowest since the fourth quarter of 1991.
Delinquent loans -- those more than 90 days past due -- jumped by almost 20 percent during the quarter to $162.9 billion, the FDIC said.
"The numbers are alarming, but we are coming off of an incredibly low base of problem institutions and failures," said Mike Stevens, senior vice president for regulatory policy at the Conference of State Bank Supervisors.
Federal Deposit Insurance Corp (FDIC) might have to borrow money from the Treasury Department to see it through an expected wave of bank failures, the Wall Street Journal reported.
The borrowing could be needed to cover short-term cash-flow pressures caused by reimbursing depositors immediately after the failure of a bank, the paper said.The last time the FDIC had borrowed funds from the Treasury was at nearly the tail end of the savings-and-loan crisis in the early 1990s after thousands of banks were shuttered.
The fact that the agency is considering the option again, after the collapse of just nine banks this year, illustrates the concern among Washington regulators about the weakness of the U.S. banking system in the wake of the credit crisis, the Journal said.
FDIC Getting Ready for Bigger Problems:
The Federal Deposit Insurance Corp. is preparing to sign a five-year lease to add five floors of space at its Dallas regional office as the agency prepares to increase scrutiny of failing and troubled U.S. banks.
The federal agency, which insures deposits and disposes of failed banks and their assets, will add 125,000 square feet to the 185,000 square feet it rented last year at 1601 Bryan St., a 49- story tower in downtown Dallas. That agency will add about 300 staff at the building, including some of the 69 retirees it is bringing back to help handle the increased workload, said spokesman Andrew Gray.
``Already you've seen nine failures of institutions this year,'' said Gray. ``While historically this isn't a large number, it does represent an increase over the past two years. We anticipate additional failures and thus we would anticipate additional workload.''
The staff additions would bring the total number employees at that location to about 850.
We're currently dealing with a self-perpetuating, downward, nearly out-of-control spiral:
Debt ladened US Consumers are strapped, defaults are increasing across the spectrum, and the housing, commercial real estate and construction markets are getting worse. These issues are increasing writedowns/losses, impairing already severely deteriorated banking system capital ratios and hampering future credit creation/banking system earnings - all exacerbating the perpetual feed-back loop.
So, is there light at the end of the tunnel?
Unless the real estate markets and credit conditions improve soon (highly unlikely) I don't expect to see light at the end of the tunnel for quite some time. As a matter of fact, the odds are probably higher for a tunnel collapse than for catching a glimmer of emergent light.
Wednesday, August 27, 2008
The borrowing could be needed to cover short-term cash-flow pressures caused by reimbursing depositors immediately after the failure of a bank.
Bottom line: After the recent Indymac failure, only $45 Billion of FDIC capital remain - to back over $4 TRILLION in insured banking deposits. Just the failure of ONE LARGE institution (i.e. Washington Mutual, etc) could wipe out the FDIC... We're so screwed!
Tuesday, August 26, 2008
The first obvious thing many of you will notice is historical precedence. Looking all the way back to the 20's, recent borrowing activity from the Fed has far surpassed anything in history.
One of my readers asked: " please explain that chart. Is "depository institutions" another name for banks? "
Answer: Depository institutions are financial institutions who obtain funds mainly through deposits from the public. This typically includes commercial banks, savings and loan associations, savings banks and credit unions. However, as of of 2008-03-20, this data also includes the primary dealer credit facility, and other credit extensions that were (also unprecedented in history) instituted by the fed to shore up the credit markets.
Another Question: "Why are they borrowing all this Money":
Answer: Because many of them are actually insolvent and need to shore up capital requirements... A bank or financial institution's capital, also known as equity, is the margin by which creditors are covered if their assets were liquidated. A measure of their financial health is its capital/asset ratio, which is required to be above a prescribed minimum...
Well, due to the mortgage crisis, falling home values, foreclosures and the like - and all the bad securitized paper that was sold to investors and held by banks/institutions - many of these financial institutions have had to come to grips with huge writedowns - writedowns that have impaired capital requirements - driving them below prescribed minimums.
Now, the only way to restore capital requirements above the minimums is to raise cash, which many times leads to borrowing. The problem is: No one is lending anymore and the Federal Reserve window has become one of the only cash spigots available!!!
Next question: "Where did the money go":
Answer: The Fed was hoping these banks/financial institutions would use this new money to generate new loan activity, but these institutions were much worse off than believed and the money was actually used to shore up balance sheets, improve capital ratios and prevent (slow down) insolvencies which could set off a cascade of dominoes -- financial implosions like Bear Stearns which HAD to be rescued - else risking financial Armageddon.
Next Question: "Are they supposed to pay that money back"
Answer: Yes, it's supposed to be paid back, but many of these institutions put up the required collateral - risking their toxic waste Commercial Paper that couldn't be offloaded elsewhere - in the event they can't pay it back (oh the poor souls!)
The "Hail Mary" hope for the Fed and all the players in this game of charades was: By temporarily providing all the necessary liquidity, confidence will be restored and the Securitization market (which is completely frozen) will somehow ease up - allowing this paper to once again sell at near par value.
As we've seen of late, with the credit contagion spreading, it has become apparent that this "Hail Mary" didn't work and the Fed is now growing worried -- worried that they too will be stuck with all this toxic garbage.
If you look at the next (weekly) chart, which narrows the span of time, yet stretches out to Aug 20, 2008, you will notice that the Fed is attempting to QUICKLY slow down the monetary Fed Window spigot. Maybe they have come to the realization their con game won't work?
Total Borrowings of Depository Institutions (Weekly)
Bottom Line: With no alternative lenders available, when the Fed finally Cuts off new credit (which they are starting to do) the game of charades is over... Therefore, I expect a cascade of financial implosion grenades to be set off quite soon...
National prices fell 15.4% in past 12 months. Las Vegas was the worst-hit city, while Denver and Boston saw the biggest price increases.
NEW YORK (CNNMoney.com) -- National U.S. home prices fell a record 15.4% in the second quarter compared with last year, according to a report released Tuesday.
The latest S&P/Case-Shiller national home price index is down 18.2% from its peak in the second quarter of 2006, and there are no signs that the pace of home-price declines is easing. The second-quarter loss was even larger than the record 14.2% drop posted in the first three months of 2008.
Both the Case-Shiller 10-city index (down 17%) and 20-city index (down 15.9%) also posted record year-over-year losses in the second quarter.
The worst performing city in the index was Las Vegas, where prices plunged 28.6% year-over-year, followed by Miami, down 28.3%, and Phoenix, down 27.9%.
A small piece of good news: In June the pace of monthly declines slowed ever so slightly compared with May. Prices for the 10-city index declined 16.9% year-over-year and the 20-city index was down 15.8%.
Too much inventory
"While there is no national turnaround in residential real estate prices, it is possible that we are seeing some regions struggling to come back, which has resulted in some moderation in price declines at the national level," said David Blitzer, chairman of the Index Committee at Standard & Poor's, in a statement.
Still, all 20 cities covered by Case-Shiller are in negative territory for the past 12 months, said Mike Larson, a real estate analyst with Weiss Research. "[The moderation] is not good news," he said. "It's just a little less bad."
And with mortgage loans difficult for many home buyers to obtain and foreclosure rates still rising, inventories of homes for sale continue to expand, depressing home prices. There is now an 11.2 month supply of existing homes on the market.
"The inventory problem has not been solved," said Larson.
Peter Schiff, president and chief global strategist at Euro Pacific Capital, said the market is only about halfway to its bottom. In 2005, he predicted the then-coming bust would cut 30% off national home prices.
Losses will continue because there has been no fundamental change in markets, he said. Despite abundant foreclosure sales, inventories are still growing and lending availability is still shrinking.
And, people are not inclined to buy in a falling market. They wait for it to hit bottom. "If prices fall another 20%, that's the time to buy," said Schiff.
Monday, August 25, 2008
hmmm... could this be the real reason behind the crushing received by oil and commodities of late -- knowing that prices will soar if/when a new middle east campaign is initiated? It certainly makes sense - causing one to ponder the bigger overall picture of actions v.s. consequences...
Sunday, August 24, 2008
Looking at a chart of the DOW below, notice how it has spiked above its 50 Day Moving Average (50 DMA--blue line) ? Well, I think it'll fall below it once again -- starting a new leg down - once all the new economic news is digested.
Monday 10:00 Existing Home Sales
Tuesday 10:00 Consumer Confidence
Tuesday 10:00 New Home Sales
Tuesday 14:00 FOMC Minutes
Wednesday 08:30 Durable Orders
Wednesday 10:35 Crude Inventories
Thursday 08:30 Chain Deflator-Prel.
Thursday 08:30 GDP-Prel.
Thursday 08:30 Initial Claims
Friday 08:30 Personal Income
Friday 08:30 Personal Spending
Friday 09:45 Chicago PMI
Friday 10:00 Mich Sentiment-Rev.
Additionally, many analysts/investors feel the dollar's rally has been overdone and now expect Gold to start rebounding:
Bloomberg: Gold May Extend Rebound on Demand for Alternative to the Dollar
Gold may rise for a second straight week on speculation the dollar's rally against the euro will stall, boosting the precious metal's appeal as an alternative investment.
Twenty-two of 28 traders, investors and analysts surveyed from Mumbai to Chicago on Aug. 21 and Aug. 22 advised buying gold, which rose 5.2 percent last week to $833.50 an ounce in New York, the first gain in a month.
In addition to the above, physical demand from India and Middle East countries is expected to rise in the coming months - potentially causing supply/demand issues and driving a sharp rise in prices. For the short-term however, gold will need to get/stay above $850 for a while before the next leg up.
Thursday, August 21, 2008
From APMX: News Alert - US Mint suspended sales of the 1 oz Gold American Eagles
We just received word, the US Mint has suspended sales of the 1 oz Gold American Eagles until further notice and are not accepting new orders from precious metals dealers. This is in addition to the shortage of 1 oz Silver American Eagles.
This comes at a time when many investors around the nation are scrambling to locate silver bullion and US gold coins while prices are attractively low. These low prices seem to be one of the driving factors in this recent shortage, as investor demand has dramatically increased.
From Reuters UK: Mint suspends red-hot Eagle gold coins
NEW YORK (Reuters) - A shortage of American Eagle bullion coins due to soaring demand following a recent sharp retreat in gold prices has forced the U.S. Mint to temporarily suspend sales of the popular coins.
"Due to the unprecedented demand for American Eagle gold one-ounce bullion coins, our inventories have been depleted. We are therefore temporarily suspending all sales of these coins," the U.S. Mint told authorized coin dealers in a memorandum dated on Friday.
Michael White, a U.S. Mint spokesman, said that only the one-ounce 22-karat American Eagle coins are sold out, but the half-ounce, quarter-ounce, and 1-10th ounce coins as well as the less popular 24-karat American Buffalo coins are still available.
"We are working diligently to build up our inventory and hope to resume sales shortly," the Mint said.
Coin dealers from the United States to Canada reported a surge in buying of bullion coins and other gold products since prices plummeted from highs last month. The buying spree contributed to supply fears and helped boost gold prices sharply on Thursday.
Rand LeShay, senior vice president of Los Angeles-based A-Mark Precious Metals, an authorized purchaser for the U.S. Mint, said that there was a big spike in demand for gold and silver coins and ingots after a recent price tumble.
He said that A-Mark currently has no one-ounce American Eagle gold coins for its customers.
"Until the U.S. Mint can supply us with more coins, we won't be able to supply any to our customers," LeShay said.
The move by the U.S. Mint to halt sales caught market participants by surprise as it came at a time when the metal was sharply falling, rather than rising.
In contrast, the Mint needed to allocate its Silver Eagle coins to dealers due to overwhelming demand as the price of silver soared earlier this year.
Produced from gold mined in the United States, the American Eagles have been novel items among collectors and investors since their introduction in 1986. Each coin has a face value of $50 but it is sold by authorized dealers at a premium to the price of gold.
COIN DEMAND SPIKES
Blanchard and Co., one of the largest U.S. retail dealers of rare coins and precious metals, said the American Eagle and American Buffalo one-ounce gold coins are sold out.
"Nobody has the Eagles or the Buffaloes right now. We bought 2,000 ounces late last week, and those were the last 2,000 ounces that we can find in the marketplace," said David Beahm, vice president of New Orleans-based Blanchard.
"If we don't have them, nobody has them," Beahm said. He added that he has been recommending customers to buy the one-ounce Canadian Gold Maple Leaf gold coin instead.
Jon Nadler, senior analyst at top Canadian dealer Kitco, said that the shortage of the Eagle coins could be due to a combination of high demand and a temporary lack of supply in coin blank, which is a flat metal disk used to mint coins.
On Thursday, spot gold surged as much as 3 percent to $839 an ounce, while U.S. gold futures for December delivery scaled a one-week high at $845 an ounce. Gold hit a five-month peak of $987.75 on July 15, and it set an all-time record of $1,030.80 on March 17
In hindsight, A-Mark's LeShay said that neither the U.S. Mint nor the coin dealers could anticipate the coin shortage.
"This kind of spike in demand is something no one can foresee, and no business runs itself waiting for this to happen," LeShay said.
Shifting gears a bit for a closing comment:
This is certainly a supply/demand driven situation as people rush for real money and an inflation hedge (at a good price).
Just think for a moment about the problems we're going to see when the US runs out of dollars...
What - come again? With a total US money supply of $14T and growing, how in the world can we ever run out of dollars? What an idiot!
Ok, I agree, but allow me to explain my point...
Currently, the FDIC is backing over $4 TRILLION of insured electronic deposits (of ~ $6T total electronic deposits) w/~$38 BILLION in insurance money. When we finally see the inevitable major banking system failures, followed by a nationwide run on banks (which WILL follow), people will quickly find out that there is only ~ $400B in COLD HARD CASH circulating in the US (the rest are ones and zeros on computer hard drives) and the majority who try to "get theirs" will soon find themselves completely out of luck.
Bottom Line: You may want to get some cash on hand too - while you can... Before it too runs out of stock.
Wednesday, August 20, 2008
- Fannie Mae & Freddie Mac shares plunged to lowest in 18 years
- Barclays would consider U.S. Weath-Management
Tuesday, August 19, 2008
Big Kudos to James Conrad!
The Disconnect Between Supply and Demand in Gold & Silver Markets
Many more Zillow created Charts and Graphs found here
Las Vegas Sun: Vegas home prices at 2003 levels
Owners of more than half of all homes sold in the Las Vegas area in the past five years have negative equity in their homes, according to a new report.
The report from Zillow.com, which tracks real estate values across the country, indicates that home prices in the Las Vegas area have fallen to levels not seen since 2003, and homes sold for a loss in the second quarter of this year made up 69 percent of all home sales.
According to Zillow, the average home in the region -- including single-family homes and condos -- is valued at $205,500, which is down more than 27 percent from a year ago, and down more than 34 percent from the market's peak of $313,275 in the first quarter of 2006.
The report indicates that 99.4 percent of homes lost value in the past year.
Among the report's other findings:
- More than 48 percent of homes sold in the Las Vegas area in the second quarter of 2008 were foreclosures.
- About 70 percent of homeowners who purchased their homes in 2005, 2006 or 2007 have negative equity in their home. For example, about 73 percent of homes purchased in 2006 have negative equity, with homeowners having median equity of minus $52,444.
This negative equity situation was caused by excessive speculation and Subprime use - and was exacerbated by the current credit crisis.
The problem however is likely to get much worse: with a massive (>28,000 home) inventory overhang, Alt-A (Exploding ARMs/Liars loans, etc) starting to reset, significantly falling gaming revenue (Las Vegas: Gaming Revenue down > 16%) and an economy reeling from recession (Las Vegas Economic Recession is here) home prices have nowhere to go but down -- much further down.
From a report I read today: Liar Loans Stir More Defaults
~ 40 percent of loans made in California and Nevada in 2005 and 2006 were either interest-only or option ARMs -- "It was pretty evident that the only thing that was supporting these loans was higher home prices"
So, will the headline this time next year be: Vegas home prices have fallen to 2000 levels and 60% of those who purchased in the last 8 years are upside down?
Guess only time will tell...
Monday, August 18, 2008
Part 2 Link
Part 3 Link
Part 4 Link
Part 5 Link
None of the group of 19 stocks fell during the ban. But since it lapsed, Lehman Brothers stock is getting creamed while Fannie and Freddie are near death. So, did the moratorium actually help anything or merely delay the inevitable?
Bailout Rumors Slam Fannie, Freddie
Bailout rumors have Fannie and Freddie shareholders worried that those stocks are in a race to zero.
On Monday, Fannie Mae and Freddie Mac plunged off a weekend report that posited that the government will indeed need to rescue the cash-starved firms and that equity holders will end up losing their shirts.
Fannie fell 17.8%, or $1.41, to $6.50 and Freddie lost 16.6%, or 97 cents, to $4.88. Investors don't have much left to lose; both companies have lost more than 90.0% of their market value in the last year.
Uncle Sam's paternal posturing in recent months had initially calmed investor anxieties. However, as the likelihood has lessened that the two will be able to raise enough capital to stay afloat on their own, Wall Street has begun to view the U.S. government as a dangerous rescuer instead of a benevolent savior.
The shareholders who own about $9.2 billion of stock in the two government-sponsored mortgage enterprises just don’t match up against the holders of $1.8 trillion in bonds issued by the less-than-dynamic duo or the owners of $5.3 trillion of mortgage-backed securities that they guarantee.
In response to the Barron's article that sparked the morning sell-off, the U.S. Treasury reiterated Monday that it will not serve as a "backstop" for the two firms, but investors weren't buying it. In July, Treasury Secretary Hank Paulson responded to a sharp fall-off in Fannie's and Freddie's stock price by saying that the government would explicitly guarantee their debt, lend them money or buy equity in them in order to to ensure that they wouldn't fail.
The government may also enjoy a perverse benefit in nationalizing Fannie and Freddie: Nervous investors will likely buy up U.S. Treasuries as they flee from GSE paper. This would lower the T-bond's yield and save the government a bundle in interest.
Lehman May Put a Prized Unit on the Block
Lehman Brothers, the troubled investment bank, is considering the sale of all or part of its prized money management division to private equity firms to raise billions of dollars of capital and ease the pressure caused by losses related to real estate.
Lehman now faces the capital-raising problem that haunted Merrill Lynch last month. As the third quarter draws to a close, it is looking more likely that Lehman will have to write down the value of its mortgage and other investments to a degree that could wipe out all of the investment bank’s earnings.
Like Merrill, Lehman has run out of easy options to raise money. That forces Lehman to consider selling some of its more valuable assets. Aside from the potential sale of its investment management unit, Lehman is looking to offload assets, including a portfolio of up to $40 billion worth of troubled commercial real estate assets, according to investors involved in that sale.
Housing Starts and Producer Price Index data is released tomorrow. Based on anaylst expecations, starts will likely register a very low reading -- the lowest in 17+ years while "Core" PPI will likely ease slightly.
Ought to be another interesting day in our free market economy
Sunday, August 17, 2008
Friday, August 15, 2008
But before doing so, I'd like you to take a look at the available gold and Silver inventory over at California Numismatic Investments (my favorite dealer): Price/Inventory link
Once you click on the link above, scroll down the page and note the "Our Sell Prices" for the following:
- Gold Eagles = NA (out of stock)
- Gold Buffalo = NA (out of sock)
- Gold Australian Kangaroo = NA (out of stock)
- Gold African Krugerrand = NA (out of stock)
- 1 Oz Pamp Suisse Bar w/Cert = NA (out of stock)
- 100 Gram Gold Bar-Pamp Suisse = NA (out of stock)
- 10 Oz Pamp Suisse With Cert = NA (out of stock)
- Kilo Gold Bullion Bar = NA (out of stock)
- Austrian/Hungarian 100 Corona = NA (out of stock)
- Mexican Gold 50 Peso = NA (out of stock)
- 100 Oz Johnson Matthey/Engelhard Silver Bars = NA (out of stock)
- 1 Oz Generic Silver Rounds (.999 Fine)= NA (out of stock)
- US Silver Eagles = NA (out of stock)
- Canadian Silver Maples = NA (out of stock)
Here's another link (thanks Dave) discussing physical silver shortages across the country: What the Silver Shortages Mean
Bottom line: No physical is available even if you wanted to buy! Something just ain't right...
Moving on to Commentary:
Gold Seeker Weekly Wrap-Up: Gold and Silver Fall Over 8% and 16% on the Week
“After breaking through some key technical supports in the mid-$800s, gold’s pullback deepened as funds continue to liquidate positions and add to the short-term negative momentum. This has made a move back up towards the mid $800’s difficult with many traders now waiting for a period of consolidation to ensue before seeing gold return back up to the mid to upper $800s. The fundamental drivers remain in place for gold and I would view this as an excellent opportunity to buy the dip of this long-term secular bull market. There is strong physical demand emerging which will help place a floor in the gold market around the $800 level.
The short-covering rally in the dollar is a prime driver for the pullback in gold prices and that was aided by free market intervention by Central Banks. All this has done is provided additional time before the serious nature of the financial crises has to be once again confronted. There are major banks and financial institutions which remain highly undercapitalized. I would expect some major news in the coming months which will again bring to the forefront the gravity of the situation. The ingredients are in place for a significantly higher gold price and this short-term anomaly only means that gold can still be accumulated sub $1,000 an ounce. The rapid rate at which dollars are being created (according to shadow stats the no longer published M3 is expanding at double digit rates) remains the primary driving force in the gold market, this cheap monetary policy will continue to debase the value, integrity and confidence in the faith-backed Dollar. Competitive paper money devaluations will enhance gold’s luster going forward as hundreds of billions of fictitiously created paper currency is used to continue these monstrous bailouts with government deficits rapidly growing.
I do believe we could easily see record gold prices as we close out 2008 and enter 2009. These are desperate times and desperate times call for desperate actions. The pullback is the result of free market manipulation by the powerful central banks.”- Peter Spina, http://www.goldforecaster.com/
“Gold continued to drop on the back of COMEX and speculative selling as the $ climbed to almost 10% better than the low of its recent $1.60 low against the Euro. The market believes that the strength of the $ is being engineered by the G-7 central banks, because the interest rate differentials favor the Euro as well as the oil price ensuring still that the Trade deficit continues to bleed the U.S Balance of Payments. This almost straight line move by speculators exacerbates the volatility of the market in precious metals and now in the $. It seems too good to be true and in the past, when such intervention is seen, it almost always ended badly, so we expect considerable volatility in the currency markets as well as the precious metals and it could well be both ways.”- Julian D.W. Phillips, http://www.goldforecaster.com/
You are witnessing violence in the gold market that is but a starter lesson. This violence has as its basis the first major coordinated currency intervention in the euro. The dollar as a mirror image of the euro rose with absolutely no economic basis. Gold fell as it is an inverse currency of the US dollar. Certain hedge funds went broke on other items. They were holding gold and the last of that was thrown into the market to sell after cash gold broke $800. Margined gold holders went in mass into negative cash positions which resulted in them being sold out last US evening as every commodity house now operates in the 24 hour market with computer margin real time valuations. All the gold and commodity bears are being dragged out for media exposure because it fits the agenda of the moment.
“December Gold finished down 22.4 at 792.1, 12.9 off the high and 8.1 up from the low.
September Silver closed down 1.415 at 12.815. This was 0.095 up from the low and 0.445 off the high.
The gold market suffered a rather significant downward washout on Friday and in the process prices fell to the lowest level since the late fall of 2007. Clearly the ever present strength in the Dollar provided the gold market with a large measure of the selling or liquidation pressure, but with oil prices also falling sharply the selling pressure could have come from a number of angles. In fact, the Dollar was showing signs of extending its gains in the wake of fresh inflationary warnings from a US Fed speech in the afternoon action. Given the massive declines on the charts it is likely that technical stop loss selling and out right technical selling pressure was adding into the slide in prices on Friday.
The silver market seemed to come under intense and somewhat historical liquidation pressure on Friday. While the US scheduled economic numbers didn't paint a negative picture on the economy Friday and the US stock market didn't seem to be factoring in a recession, one gets the sense from the magnitude of the slide in silver prices that some type of deflationary selling wave was being carried out. However, with the copper market actually managing to turn positive on the trade it was clear that not all physical metals markets were being viewed in the same bearish light on Friday.”- The Hightower Report, Futures Analysis and Forecasting
This is the prime example (as I told you a thousand times!) any margin in gold anything is a financial death wish.
As gold hit its lows last evening over $40 off I am told the Chinese entered the cash market to take the layoff in cash gold off the bankrupt hedge funds and negative value sellouts in the paper market. You have seen massive involuntary liquidation last US evening. That type of a situation is common to lows. The bull market in gold will not be broken because fundamentally the problems will not obey and go away.”- Jim Sinclair, JSMineset.com
WAG THE DOG: HOW TO CONCEAL MASSIVE ECONOMIC COLLAPSE--Ellen Brown, August 14th, 2008
Last week, Fannie Mae and Freddie Mac had just announced record losses, and so had most reporting corporations. Unemployment was mounting, the foreclosure crisis was deepening, state budgets were in shambles, and massive bailouts were everywhere. Investors had every reason to expect the dollar and the stock market to plummet, and gold and oil to shoot up. Strangely, the Dow Jones Industrial Average gained 300 points, the dollar strengthened, and gold and oil were crushed. What happened?
It hardly took psychic powers to see that the Plunge Protection Team had come to the rescue. Formally known as the President’s Working Group on Financial Markets, the PPT was once concealed and its very existence denied as if it were a matter of strict national security. But the PPT has now come out of the closet. What was once a legally questionable “manipulator” of markets has become a sanctioned stabilizer and protector of markets. The new tone was set in January 2008, when global markets took their worst tumble since September 11, 2001. Senator Hillary Clinton said in a statement reported by the State News Service:
“I think it’s imperative that the following step be taken. The President should have already and should do so very quickly, convene the President’s Working Group on Financial Markets. That’s something that he can ask the Secretary of the Treasury to do. . . . This has to be coordinated across markets with the regulators here and obviously with regulators and central banks around the world.”
The mystery over what was going on with the dollar the first week in August was solved by James Turk, founder of GoldMoney, who wrote on August 7:
“The banking problems in the United States continue to mount, while the federal government’s deficit continues to soar out of control. . . . So what happened to cause the dollar to rally over the past three weeks? In a word, intervention. Central banks have propped up the dollar, and here’s the proof.
“When central banks intervene in the currency markets, they exchange their currency for dollars. Central banks then use the dollars they acquire to buy US government debt instruments so that they can earn interest on their money. The debt instruments central banks acquire are held in custody for them at the Federal Reserve, which reports this amount weekly.
“On July 16, 2008 . . . , the Federal Reserve reported holding $2,349 billion of US government paper in custody for central banks. In its report released today, this amount had grown over the past three weeks to $2,401 billion, a 38.4% annual rate of growth. . . . So central banks were accumulating dollars over the past three weeks at a rate far above what one would expect as a result of the US trade deficit. The logical conclusion is that they were intervening in currency markets. They were buying dollars for the purpose of propping it up, to keep the dollar from falling off the edge of the cliff and doing so ignited a short covering rally, which is not too difficult to do given the leverage employed in the markets these days by hedge funds and others.”
Just as central banks manipulate currencies in concert, so gold can be manipulated by massive selling of central bank reserves. Oil and any other market can be manipulated as well. But markets can be manipulated by only so much and for only so long without fixing the underlying problem. There is more bad news coming down the pike, news of such magnitude that no amount of ordinary manipulation is liable to conceal it.
For one thing, roughly $400 billion in ARMs (adjustable rate mortgages) have or will reset between March and October of this year. Assuming 3 to 6 months for strapped debtors to actually hit the wall with their payments, a huge wave of defaults is about to strike, continuing through March 2009 – just in time for the next huge wave of resets, in option ARMs.3 Option ARMs are loans with the option to pay even less than just the interest on the loan monthly, increasing the loan balance until the loan reaches a certain amount (typically 110% to 125% of the original loan balance), when it resets. The $800 billion credit line recently opened to Fannie Mae and Freddie Mac may be not only tapped but tapped out, at taxpayer expense. The underlying problem is little discussed but impossible to repair – a one quadrillion dollar derivatives scheme that is now imploding. Banks everywhere are facing massive writeoffs, putting the whole banking system on the brink of collapse. Only public bailouts will save it, but they could bankrupt the nation.
What to do? War and threats of war have been used historically to distract the population and deflect public scrutiny from economic calamity. As the scheme was summed up in the trailer to the 1997 movie “Wag the Dog” --
“There’s a crisis in the White House, and to save the election, they’d have to fake a war.”
Perhaps that explains the sudden breakout of war in the Eurasian country of Georgia on August 8, just 3 months before the November elections. August 8 was the day the Olympic Games began in Beijing, a distraction that may have been timed to keep China from intervening on Russia’s behalf. The mainstream media version of events is that Russia, the bully on the block, invaded its tiny neighbor Georgia; but not all commentators agree. Mikhail Gorbachev, writing in The Washington Post on August 12, observed:
“What happened on the night of Aug. 7 is beyond comprehension. The Georgian military attacked the South Ossetian capital of Tskhinvali with multiple rocket launchers designed to devastate large areas. Russia had to respond. To accuse it of aggression against ‘small, defenseless Georgia’ is not just hypocritical but shows a lack of humanity. . . . The Georgian leadership could do this only with the perceived support and encouragement of a much more powerful force.”
Bruce Gagnon, coordinator of the Global Network against Weapons and Nuclear Power, commented in OpEdNews on August 11:
“The U.S. has long been involved in supporting ‘freedom movements’ throughout this region that have been attempting to replace Russian influence with U.S. corporate control. The CIA, National Endowment for Democracy . . . , and Freedom House (includes Zbigniew Brzezinski, former CIA director James Woolsey, and Obama foreign policy adviser Anthony Lake) have been key funders and supporters of placing politicians in power throughout Central Asia that would play ball with ‘our side’. . . . None of this is about the good guys versus the bad guys. It is power bloc politics . . . . Big money is at stake . . . . [B]oth parties (Republican and Democrat) share a bi-partisan history and agenda of advancing corporate interests in this part of the world. Obama’s advisers, just like McCain’s (one of his top advisers was recently a lobbyist for the current government in Georgia) are thick in this stew.”
Brzezinski, who is now Obama’s adviser, was Jimmy Carter’s foreign policy adviser in the 1970s. He also served in the 1970s as director of the Trilateral Commission, which he co-founded with David Rockefeller Sr., considered by some to be the “master spider” of the Wall Street banking network.6 Brzezinski, who wrote a book called The Grand Chessboard, later boasted of drawing Russia into war with Afghanistan in 1979, “giving to the Soviet Union its Vietnam War.”7 Is the Georgia affair an attempted repeat of that coup? Mike Whitney, a popular Internet commentator, observed on August 11:
“Washington’s bloody fingerprints are all over the invasion of South Ossetia. Georgia President Mikhail Saakashvili would never dream of launching a massive military attack unless he got explicit orders from his bosses at 1600 Pennsylvania Ave. After all, Saakashvili owes his entire political career to American power-brokers and US intelligence agencies. If he disobeyed them, he’d be gone in a fortnight. Besides an operation like this takes months of planning and logistical support; especially if it’s perfectly timed to coincide with the beginning of the Olympic games. (another petty neocon touch) That means Pentagon planners must have been working hand in hand with Georgian generals for months in advance. Nothing was left to chance.”
Part of that careful planning may have been the unprecedented propping up of the dollar and bombing of gold and oil the week before the curtain opened on the scene. Gold and oil had to be pushed down hard to give them room to rise before anyone shouted “hyperinflation!” As we watch the curtain rise on war in Eurasia, it is well to remember that things are not always as they seem. Markets are manipulated and wars are staged by Grand Chessmen behind the scenes.
Have a great evening!
Thursday, August 14, 2008
My most recent SilverState Post: SilverState Bank - FDIC Seizure in the works?
Hot off the Press Update (as of 6 hrs ago):
Silver State Bancorp. Restates Q2 Results; Reports Wider Loss
SilverState Bancorp restated its previously reported second quarter financial results for 2008, reporting a wider net loss than previously stated due to an increase in the company's provision for loan loss reserve.
The company reported a restated net loss for the second quarter of $73.2 million or $4.84 per share, compared to the previously disclosed net loss of $62.7 million or $4.15 per share.
The company attributed the wider net loss to an increase in the provision for loan loss reserve to $69.1 million from the previously reported $58.6 million.
The increased provision is due to the company receiving an updated appraisal on the collateral underlying one of the company's commercial land loans subsequent to issuing the initial earnings press release.
It's merely just a matter of time...
There is absolutely no logical or fundamental explanation I can think of for the massive dollar rally of late and the brutal crushing seen in both Gold and Silver prices.
Take today's news as an example:
- Much hotter than expected CPI reading - sharpest increase since 1991
- News that President Musharraf of Pakistan would step down
- No improvements to the Russian/Georgia situation - w/new fears of ethnic cleansing
- Housing situation getting worse - US foreclosure filings surged 55 percent
Each one of the issues above (on it's own) should have been a significant positive for precious metals, but no -- gold fell > $20 in the US market and another $10 thus far in Asian markets (Silver saw it much worse - as a percentage).
Call me a nut job, but this certainly doesn't pass the common sense test and reeks of massive intervention.
Highly respected James Turk felt the same way on his Aug 7th article: Mystery Solved
Same with Ned Schmidt and his Aug 12: Gold Thoughts
Wednesday, August 13, 2008
I mean: Have you ever wondered why it takes HUNDREDS OF MILLIONS to become a front-running presidential contender? It's absolutely insane! How can anyone without tremendous financial backing stand a chance? He can't and it's rigged that way for a reason! Those who do have the financial backing, regardless of any good intentions, are OWNED by their financial backers by the time they are "elected" to office and "we the people" don't stand a chance with presidential priorities - until a crisis emerges anyway.. but I digress.
Anyway, the Video below seeks to explain how our nation lost its Constitutional foundation and the God-given Rights that were secured by the Organic Laws of The United States of America.
We as a free people began to steadily loose our Liberty when this commercial corporate system (a so-called Democracy) replaced the Constitutional Republic that was given to us by the Founding Fathers.
America the "great experiment", was for some time the inspiration of many across the globe - Now however, she has become what she disdained and has fallen into the hands of the powerful international banking interests.
Have you ever wondered why we Americans are kept so ignorant regarding the creation of money and economics - or why we're programmed from birth to be such a good consumer? Think about it -- daily, our media outlets barrage us with consumer driven programming -- and it works... We Americans will now buy just about anything.
Lets keep them stupid, in debt and make them desire that which they don't need. Our economy (70% of it anyway) absolutely depends on it! It's your duty as an American Patriot to go spend that money that you don't have to support the corporation, ugh - I mean Country!
Friday, August 08, 2008
The Cosmopolitan, a $3.5 billion project comprised of two glass towers on an 8.5-acre site right on the Las Vegas Strip, was projected to have 1,000 hotel rooms, 2,000 condos, a casino and plenty of retail space - and was supposed to open in December 2009.
Deutsche Bank to Foreclose on $3.5 Billion Casino
Aug. 7 (Bloomberg) -- Deutsche Bank AG will foreclose on the $3.5 billion Cosmopolitan Resort & Casino in Las Vegas after developer Ian Bruce Eichner defaulted on a $760 million loan, two people briefed on the situation said.
Germany's biggest bank weighed selling the complex after Eichner's January default, said the people, who asked not to be named because the discussions are private. Deutsche Bank will take over the Cosmopolitan and is talking with companies including MGM Mirage and Hilton Hotels Corp. to help run its 80,000-square-foot casino, the people said.
Sagging commercial real estate prices, weighed down by record subprime defaults, forced banks to hold projects until prices rise or sell at a loss. The Frankfurt-based bank would oversee an 8.5-acre development with two high-rise towers, three wedding chapels, a sandy beach overlooking the Las Vegas Strip and a deck featuring ``European-style bathing.''
``Deutsche Bank wants to be engaged in banking, not running a casino,'' said Matthew Clark, a London-based analyst at Keefe, Bruyette & Woods. ``They've had to decide between selling the Cosmopolitan into a bad market or holding on for better times.''
Las Vegas, the heart of the U.S. gaming industry, is reeling from sluggish economic growth and soaring food and fuel costs. The city's casino revenue slid 16 percent in May, the fifth straight monthly decline, according to the Nevada Gaming Commission.
This was probably a very smart move on Deutsche Bank's part. Will CityCenter be next?