- The Supply of Oxen at the IMF
Some years ago I penned a paper with the title “The Supply of Oxen at the Fed”. I am indebted to Alan Greenspan for a great line in one of his speeches, entitled The History of Money, from where I borrowed my title. He wrote: “If fiat money falters, we may have to go back to oxen as our medium of exchange. In that event, I trust, the Federal Reserve will have an adequate inventory of oxen.” My article was designed to reassure Mr. Greenspan that the supply of oxen at the Fed was very secure indeed, in no small measure due to his stewardship.
- Has Barrick Been Barricked by the U.S.?
According to an announcement dated September 8, 2009, Barrick is going to throw into the dustbin its long-standing hedge policy, and pay for buying back its hedge-book by diluting the value of its common stocks through issuing more than 81 million new shares, or about 10 percent of the outstanding. The so-called hedges of Barrick have been thoroughly discredited and will soon be history. So-called, because the long-term forward sales contracts in question that the parvenu gold miner has invented and flaunted are not proper hedges and never have been. They are a fraud. They are naked short positions pretending to be balanced by gold ore reserves in the moon (or on this earth which, for hedging purposes, is practically the same thing). Part of the newsworthy story, of course, is the fact that the hedge book of Barrick has been increasingly under water for some nine years now, threatening the unfriendly giant with drowning.
Wednesday, September 30, 2009
Latest From Prof. Fekete
High Gold Price Curtails Indian Imports
India’s Gold Imports Drop for Fifth Month, Traders’ Group SaysSept. 30 (Bloomberg) -- Gold imports by India, the world’s biggest buyer, probably fell for the fifth month in September as rising prices deterred jewelry buyers, a traders’ group said.
Overseas purchases may total 50 metric tons, compared with 54 tons a year ago, said Harmesh Arora, vice president of the Bombay Bullion Association Ltd., citing preliminary data.
“The overall imports will still be less than last year as prices are still too high,” Arora said...
...India’s gold purchases have fallen every month since April and imports last month were 21.8 tons compared with 98 tons a year earlier, according to the association.
"US secretly tried to make deal with Goldman Sachs in wake of financial crisis"
NEW YORK, N.Y.—The government secretly tried to orchestrate a deal involving Goldman Sachs in the week following Lehman Brothers’ collapse and considered using the Federal Reserve to help support such a transaction, Andrew Ross Sorkin reports in the new issue of Vanity Fair.
In an excerpt from his forthcoming book, Too Big To Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves, Sorkin reports that the deal, which was nearly consummated, would have merged Goldman Sachs and Wachovia. Henry M. Paulson, the Treasury secretary and former C.E.O. of Goldman, was deeply involved in the process, contacting both Lloyd Blankfein, Goldman’s current C.E.O., and a Wachovia board member, and strongly urged both to consider it. Wachovia’s C.E.O., Robert Steel, was a former vice-chairman at Goldman Sachs and Paulson’s former number two at the Treasury Department.
Some parts of this story don't totally make sense, but interesting nonetheless.
Global Governance (by the few, for the many)
Morgan Stanley's Mack Proposes Single Global Bank Regulator
Sept. 30 (Bloomberg) -- Morgan Stanley Chief Executive Officer John Mack, who struggled to return the bank to profitability amid the financial crisis, said a single regulator should oversee financial institutions worldwide.
“A better system would be one uber-regulator,” Mack said in an interview in New York for Bloomberg Television’s “Conversations with Judy Woodruff,” parts of which will air today. “We do need an overall systemic-risk management that everyone buys into. It’s not a U.S. systemic boundary -- it’s a global systemic risk manager.”
But, but, but... I thought regulation was anathema to these greedy capitalist pigs - not to mention "uber-regulation" on a global scale. Sorry, but the real world isn't as simple as a Micheal Moore movie. Why do big firms push for regulation? To drive up costs to competitors, capture friendly regulators, placate populist indignation, create barriers to entry, incrementally build a global system that can circumvent economic nationalism and set up oligopolies in new markets like carbon credit trading, just to name a few...
Large banks have always been international in nature and have sought regulation to protect their government subsidized monopolies...
GOFO, Libor, UST & Mortgage Rates
Duration / GOFO / LIBOR / UST
1 month / .30333 / .2456 / .01
3 month / .35833/ .2869 / .12
6 month / .47167/ .6288/ .18
1 year / .68333 / 1.2638/ .39
(as of today)
Best Mortgage Rates
30yr FRM /4.9
15yr FRM / 4.52
5/1yr ARM / 3.88
(as of yesterday)
Other
10 Year Note 3.30
10 Year Muni 2.95
10 Year TIPs 1.54
1 month / .30333 / .2456 / .01
3 month / .35833/ .2869 / .12
6 month / .47167/ .6288/ .18
1 year / .68333 / 1.2638/ .39
(as of today)
Best Mortgage Rates
30yr FRM /4.9
15yr FRM / 4.52
5/1yr ARM / 3.88
(as of yesterday)
Other
10 Year Note 3.30
10 Year Muni 2.95
10 Year TIPs 1.54
Why There's A Cartel:
"Insured" Commercial Banks:
Total Tangible Assets = $11,385,309,000,000
Total Liabilities = $10,525,879,000,000
Adjusted Equity = $859,000,000,000
12.25 to 1
MBS held = $1,157,041,000,000
scary...
p.s. I'm beginning to embrace the extended 13 digit notation so as to help us appreciate how far we've come. I figure if the banks/fed (ultimately debtors) go through all that trouble to add 'em I should, at the very least, show due reverence and display them in all their magnificence.
Tuesday, September 29, 2009
Shadow Inventory Of Unsold Homes A Real Problem
This, along with this, should trouble those predicting a strong recovery for the mortgage/housing market in 2010 and/or 2011.
From the Bloomberg article on shadow foreclosure inventory:
...Legal snarls, bureaucracy and well-meaning efforts to keep families in their homes are slowing the flow of properties headed toward foreclosure sales, even when borrowers are in deep distress. While that buys time for families to work out their problems, some analysts believe the delays are prolonging the mortgage crisis and creating a growing "shadow" inventory of pent-up supply that will eventually hit the market...
...As of July, mortgage companies hadn't begun the foreclosure process on 1.2 million loans that were at least 90 days past due, according to estimates prepared for The Wall Street Journal by LPS Applied Analytics, which collects and analyzes mortgage data. An additional 1.5 million seriously delinquent loans were somewhere in the foreclosure process, though the lender hadn't yet acquired the property. The figures don't include home-equity loans and other second mortgages.
Moreover, there were 217,000 loans in July where the borrower hadn't made a payment in at least a year but the lender hadn't begun the foreclosure process. In other words, 17% of home mortgages that are at least 12 months overdue aren't in foreclosure, up from 8% a year earlier...
...According to Collateral Analytics, a housing research firm, homes that have been foreclosed on typically sell at a 10% to 50% discount...
..But the number of foreclosures is expected to increase in the fourth quarter as mortgage-servicing companies determine who is eligible for a loan modification and who isn't. "We are going to see a spike from now to the end of the year in foreclosures as we take people out of the running" for a loan modification or other alternatives, says a Bank of America Corp. spokeswoman. Foreclosure sales had dropped to "abnormally low" levels in response to government efforts to stem foreclosures, she adds...
Some day - eons from now - the human species will evolve (assuming we don't destroy ourselves first) and finally accept this simple truism: when you try to reflate a debt deflation brought on by the collapse of an asset bubble all you do is prolong the contraction without a compensatory drop in severity(at the onset). (Although, the drop can be cushioned in the short-term with counter-cyclical fiscal and easy monetary policy; and we all know that in the world of political-economy there is no long-term.)
Remember: bubble = problem; deflation = solution. Crazy, I know.
August Price Statistics (Cleveland Fed)
The CPI jumped up 5.5 percent (annualized rate) in August, almost entirely on a spike in gasoline prices (the BLS says roughly 80 percent of the increase in the overall index was due to the increase in gas prices). Still, the 12-month growth rate in the series is down 1.5 percent. The core CPI (excluding food and energy prices) rose 0.8 percent in August, pushing its 12-month trend down 0.1 percentage point to 1.4 percent.
There were a couple rather curious price moves during the month. First, the price for new vehicles fell 14.7 percent in August, its largest monthly price decrease since the early 1970s. This is in part due to how the BLS calculated the effect of the CARS rebate on the price of new vehicles. Also, used car and truck prices jumped up 25 percent in August (their largest increase since 2004)... Elsewhere, OER (owners’ equivalent rent), which comprises roughly 25 percent of the overall CPI market basket, rose 1.0 percent in August after a virtually flat reading in July...
...The underlying price change distribution showed less softness in August, as roughly 30 percent of the index (by expenditure weight) exhibited outright price decreases, compared to nearly one-half of the index in July. Still, just 26 percent of the consumer market basket rose at rates exceeding 3.0 percent in August, compared to an average of 35 percent so far this year...
...Both one-year ahead and longer-term (5 to10 years ahead) average inflation expectations from the University of Michigan’s Survey of Consumers ticked up in early September. One-year-ahead expectations rose 0.1 percentage point to 3.1 percent, while longer-term expectations increased from 3.1 percent in August to 3.3 percent. While short-term expectations have bounced around over the past year (likely following food and energy prices), it is not clear that longer-term expectations have shifted in any meaningful way recently, as the series has remained close to its five-year average of 3.4 percent.
GOFO, Libor, UST & Mortgage Rates
Duration / GOFO / LIBOR / UST
1 month / .33000 / .2463 / .01
3 month / .39600/ .2897 / .10
6 month / .48000 / .6313/ .18
1 year / .67600 / 1.2538/ .39
(as of today)
Best Mortgage Rates
30yr FRM /4.97
15yr FRM / 4.59
5/1yr ARM / 3.91
(as of yesterday)
Other
10 Year Note 3.32
10 Year Muni 2.95
10 Year TIPs 1.56
Econ Data; Fed & Treasury Info
- ICSC Goldman Store Sales
- Redbook
- S&P Case-Shiller HPI
- Consumer Confidence
- State Street Investor Confidence Index
- Farm Prices
Fed:
- Richard Fisher Speaks (9:50 am)
- Charles Plosser Speaks (7:00 pm)
- Commercial Paper
- Texas Manufacturing Outlook Survey
- August Price Statistics
- Supplemental Financing Program
Monday, September 28, 2009
A Cold Winter = Some Unexpected Cost-Push Price Inflation (at the margin at least)
U.S. Northeast May Have Coldest Winter in DecadeSept. 28 (Bloomberg) -- The U.S. Northeast may have the coldest winter in a decade because of a weak El Nino, a warming current in the Pacific Ocean, according to Matt Rogers, a forecaster at Commodity Weather Group.
“Weak El Ninos are notorious for cold and snowy weather on the Eastern seaboard,” Rogers said in a Bloomberg Television interview from Washington. “About 70 percent to 75 percent of the time a weak El Nino will deliver the goods in terms of above-normal heating demand and cold weather. It’s pretty good odds.”...
...U.S. inventories of distillate fuels, which include heating oil, are at their highest since January 1983, the U.S. Energy Department said Sept. 23. Stockpiles of 170.8 million barrels in the week ended Sept. 18 are 28 percent above the five-year average.
Almanac predicts bitterly cold winter for parts of U.S. (Sep 2)
...The longtime periodical, published since 1818 and famous for its long-range weather predictions, is out with its annual winter forecast, which says Old Man Winter is really going to hammer folks in the Midwest and upper Great Lakes region with very cold and very snowy conditions...
...But don't let your guard down if you live along the East or West coasts.
Farmer's Almanac managing editor Sandi Duncan says no one will be immune to the rough weather this winter...
Could increased demand from colder weather mitigate demand destruction from economic contraction and a build-up in inventories? The market seems to have already digested inventory and demand trends so a surprisingly cold winter could push oil/fuel prices up which -alongside monetary/fiscal reflation and a weakening dollar- could lead to increased cost-push, price inflation. This could have a double effect on consumption: 1) the obvious displacement of discretionary spending and, 2) a ripple effect of cost side pricing pressure throughout the producing/servicing sectors and the consequent loss of consumer purchasing power.
Cracks In The Financial Establishment?
World Bank Chief to Take Shots at the Fed...In a speech he’ll deliver at the Paul H. Nitze School of Advanced International Studies of the Johns Hopkins University Monday, Mr. Zoellick says central banks around the world fell down as regulators. He questions whether Congress should give the Fed any more power as it looks for ways to revamp financial sector oversight.
“Central banks failed to address risks building in the new economy,” Zoellick says...
Zoellick is a veteran U.S. economic-policy official who served at the U.S. Treasury from 1985 and 1993 where he was, among other posts, deputy assistant secretary for financial institutions policy under then Secretary James A. Baker III...
...“It will be difficult to vest the independent and powerful technocrats at the Federal Reserve with more authority. My reading of recent crisis management is that the Treasury Department needed greater authority to pull together a bevy of different regulators. Moreover, the Treasury is an Executive department, and therefore Congress and the public can more directly oversee how it uses any added authority...”
Yuan Bonds Issued in Hong Kong
Beijing sells 1st yuan bonds in Hong KongBEIJING (AP) - Beijing sold government bonds denominated in the mainland's yuan for the first time Monday in Hong Kong, adding to gradual moves to expand the international use of its tightly controlled currency.
Bonds from the 6 billion yuan ($875 million) issue were on sale to the public at Hong Kong banks. There was no immediate word on how well they were selling and how many were allocated to institutional investors...
...Monday's sale should increase the private sector use of the yuan, according to finance analysts."
Continue...
GOFO, Libor, UST & Mortgage Rates
Duration / GOFO / LIBOR / UST
1 month / ..34600 / .2463 / .01
3 month / .44167 / .2825 / .09
6 month / .49667 / .6388/ .19
1 year / .66333 / 1.2550/ .40
(as of today)
Best Mortgage Rates
30yr FRM /4.98
15yr FRM / 4.57
5/1yr ARM / 3.94
(as of yesterday)
Other
10 Year Note 3.31
10 Year Muni 2.96
10 Year TIPs 1.54
1 month / ..34600 / .2463 / .01
3 month / .44167 / .2825 / .09
6 month / .49667 / .6388/ .19
1 year / .66333 / 1.2550/ .40
(as of today)
Best Mortgage Rates
30yr FRM /4.98
15yr FRM / 4.57
5/1yr ARM / 3.94
(as of yesterday)
Other
10 Year Note 3.31
10 Year Muni 2.96
10 Year TIPs 1.54
Econ Data; Fed & Treasury Info
Treasury:
Fed:
Fed:
- Commercial Paper
- Select Interest Rates
- International Summary Statistics
- Foreign Securities Holdings and Transactions
- U.S. Bank Statistics
- U.S. Non-Bank Statistics
- New Security Issues: State and Local Governments
- New Corporate Securities Issues
- Insured Commercial Bank Assets and Liabilities
- Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks
- Agricultural Financial Databook
- Mortgage Debt Outstanding
- Is The Worst Over? Economic Indexes and the Course of Recession in New York and New Jersey
- Chicago Fed - National Activity Index
- Chicago Fed Letter
- 8th District Burgundy Book
- Philly Fed Aug Housing Permits
Sunday, September 27, 2009
The State, The Masses, and Perpetual War
"In later times... growth [of governmental authority] has continued at an accelerated pace, and its extension has brought a corresponding extension of war. And now we no longer understand the process, we no longer protest, we no longer react. This quiescence of ours is a new thing, for which Power has to thank the smoke-screen in which it has wrapped itself. Formerly it could be seen, manifest in the person of the king, who did not disclaim being the master he was, and in whom human passions were discernible. Now, masked in anonymity, it claims to have no existence of its own, and to be but the impersonal and passionless instrument of the general will.
But that is clearly a fiction." - On Power, Bertrand De Jouvenal
I thought that quote was appropriate as the drumbeat for a new conflict in the Middle East intensifies:
- Netanyahu to U.S.: Time is now for action on Iran nukes
- UN chief, Europeans chide Iran's new Atom plant
- Iran must show its 'peaceful intentions': Obama
- The Iran Attack Plan
- There are Only Two Choices Left On Iran
"We are ending where the savages began. We have found again the lost arts of starving non-combatants, burning hovels, and leading away the vanquished into slavery. Barbarian invasions would be superfluous: we are our own Huns" - ibid
UPDATE: According to MI6 the venal, ruling oligarchy of Saudi Arabia gives the nod to Israeli flyovers
Weekly Gold COT Update (Sep 22)
Total COT Positions as of Sep 22 vs. Gold price (weekly, a.m. fix)
[grey: non-reporting; blue: commercial(hedging?); red: non-commercial, reporting speculative; black: spreading]
Concentrated Positions vs. Commercial Shorts vs. Open Interest
Friday, September 25, 2009
Where's John McClane When You Need Him?
Robbers fly in by helicopter to raid Swedish cash depot
Masked gunmen used a stolen helicopter and explosives to engineer a spectacular raid on a cash depot in Stockholm yesterday, breaking into the building through the roof and flying off with bags of cash, police said.
The daring pre-dawn heist stunned police, who could not deploy their own helicopters to the scene because explosives had been placed at their hangar.
Investigators believe at least 10 professional criminals were involved...
Continue...
At least these criminals don't pretend they're working for the "collective good" as they rob us blind. I'll take a good ole' fashioned, creative heist over a bank bailout any day.
Fed Adds $3 Bil in SDRs to Balance Sheet
Not sure if this is significant or not but the fed has increased its holdings of SDRs (Special Drawing Rights) from $2.2 Bil to $5.2 Bil during the last week. Will keep an eye on this...
GOFO, Libor, UST & Mortgage Rates
Duration / GOFO / LIBOR / UST
1 month / .40800 / .2463 / .01
3 month / .41833 / .2825 / .09
6 month / .48167 / .6363/ .19
1 year / .65000 / 1.2375/ .39
(as of today)
Best Mortgage Rates
30yr FRM /4.98
15yr FRM / 4.57
5/1yr ARM / 3.94
(as of yesterday)
Other
10 Year Note 3.37
10 Year Muni 3.01
10 Year TIPs 1.60
Econ Data; Fed & Treasury Info
Fed:
- Ben Bernanke Speaks (9:00)
- Kevin Warsh Speaks (1:15)
- Commercial Paper
- Selected Interest Rates
- Assets/Liabilities of Commercial Banks
- Revised TALF Forms
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