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Fast Market = Fast Update

259
Thu, Oct 27, 2011 - 10:39am

No time for dillydallying today. Things are rolling so let's get right to it.

Let's start with our two base commodities as the PMs are definitely drawing some strength from them. As I type, Dec11 crude is up $2.41 at $92.61. DrC is charging higher again, too.

paper_10-27amcrude.jpgpaper_10-27amcop.jpg

These two have given a boost to silver which is finally trading back above $34.

paper_10-27amsilv.jpg

Gold is lagging just a bit but the chart suggests that it won't be lagging much longer.

paper_10-27amgold.jpg

That's all for now. I'll have a more detailed update after the close. TF

1:10 pm EDT UPDATE:

As this epic drop in the POSX continues, look for even more downside tomorrow. As noted in the post from later yesterday, once 76 gave way, The Pig looked to fall into the abyss. As you can see on the chart below, 74 looks likely as a short-term bottom.

paper_10-27ampig.jpg

Dropping to 74 tomorrow or next week would likely be the impetus for gold at 1780 and silver at 37. TF

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  259 Comments

ewc58 · Oct 27, 2011 - 6:48pm

THE MYSTERIOUS CAFRS:
HOW STAGNANT POOLS OF GOVERNMENT MONEY COULD HELP SAVE THE ECONOMY

For over a decade, accountant Walter Burien has been trying to rouse the public over what he contends is a massive conspiracy and cover-up, involving trillions of dollars squirreled away in funds maintained at every level of government. His numbers may be disputed, but these funds definitely exist, as evidenced by the Comprehensive Annual Financial Reports (CAFRs) required of every government agency. If they don’t represent a concerted government conspiracy, what are they for? And how can they be harnessed more efficiently to help allay the financial crises of state and local governments?

The Elusive CAFR Money

Burien is a former commodity trading adviser who has spent many years peering into government books. He notes that the government is composed of 54,000 different state, county, and local government entities, including school districts, public authorities, and the like; and that these entities all keep their financial assets in liquid investment funds, bond financing accounts and corporate stock portfolios. The only income that must be reported in government budgets is that from taxes, fines and fees; but the investments of government entities can be found in official annual reports (CAFRs), which must be filed with the federal government by local, county and state governments. These annual reports show that virtually every U.S. city, county, and state has vast amounts of money stashed away in surplus funds. Burien maintains that these slush funds have been kept concealed from taxpayers, even as taxes are being raised and citizens are being told to expect fewer government services.

It is hard to envision how all the municipal governments hording their excess money in separate funds could be complicit in a massive government conspiracy, but if that is not what is going on, why such an inefficient use of public monies? Read more

¤ · Oct 27, 2011 - 6:53pm

China Managing Euro Similar to Dollar Peg

By Allison Bennett and Tom Keene - Oct 27, 2011 6:01 PM ET

Chinese officials are seeking to avoid a decline in the euro in a manner similar to how they manage the relationship between the yuan and the U.S. dollar, according to Bank of America Corp.’s David Woo.

“Ultimately, China is managing two currency pegs, not just one,” said Woo, global head of rates and currencies at Bank of America, at FX11, a foreign-exchange conference hosted by Bloomberg LP in New York yesterday. “Reserve managers remain the single most important driver of the euro through reserve diversification.”

The People Bank’s of China sets a daily reference rate for the dollar after scrapping a two-year peg June 19 after holding the currency stable during the financial crisis to aid exporters. The yuan is permitted to fluctuate 0.5 percent on either side of the daily fixing. The yuan was valued at 6.3477 per dollar and 8.8239 per euro yesterday.

“Of the three time zones, the euro consistently appreciates in Asia,” Woo said.

China, the world’s largest reserve holder, doesn’t give breakdowns of its holdings. China’s State Administration of Foreign Exchange, which manages the country’s $3.2 trillion of foreign currencies, said July 20 that it will continue to diversify.

Sarkozy, Jintao

French President Nicolas Sarkozy spoke yesterday with Chinese President Hu Jintao to seek support from the country with the world’s largest currency reserves to help contains the euro-zone debt crisis...

https://www.bloomberg.com/news/2011-10-27/woo-china-managing-euro-simila...

daveyboy · Oct 27, 2011 - 6:54pm

Bingo, thankyou

Bay of Pigs · Oct 27, 2011 - 6:58pm

Welcome to Turdville. 

¤ · Oct 27, 2011 - 7:02pm

Welcome aboard!

Bay of Pigs · Oct 27, 2011 - 7:05pm

Maniere lifted a good portion (word for word) on one of TF's posts awhile back. Sorry, but I can't remember which one it was. Yes, it looked really bad.

backseatdriver · Oct 27, 2011 - 7:05pm

Welcome friend!

Dr G · Oct 27, 2011 - 7:19pm

I think that many of us are married to the same woman.

I just know to put my tail between my legs and crawl away with my UPS/FedEx/USPS package when I come home from work. I already know the look that she will give me.

A couple of times she even told me "your silver came today, but I didn't answer the door, so you'll have to call them and go to the UPS center to pick it up". I think she likes it when I have to do that.

Someday she'll thank me. That's what I keep telling myself. :)

Monedas dabrini · Oct 27, 2011 - 7:20pm

Why nickle calls and not palladium ? Is Pd no longer used in cold fusion ? Is Pd a by product of nickle mining ? Thanks ! Monedas 2011 Comedy Jihad Cold Fusion Tour

theskier Dr G · Oct 27, 2011 - 7:56pm

It must be a gender trait. We don't catch the postman coming to the door, but I always get the mail, and I don't want to even bother with the negative reaction from her even seeing the package note.

¤ · Oct 27, 2011 - 8:00pm

Pretty funny. At least your honest about it like some of the others guys said earlier.

I remember those days when I was married but it had nothing to do with silver.

 Now the Au and Ag is all mine, mine, mine...

Bugs Bunny and Daffy Duck the Happy Miser Ali Baba Bunny
Shill · Oct 27, 2011 - 8:08pm

The only package my wife likes to see is this:

https://www.youtube.com/watch?v=EYlDbv7MqE8

.

.

.

After a good trading week.

¤ · Oct 27, 2011 - 8:11pm
Goldmanite Quant Derman Slams Wall Street’s Hypocrisies: Books By James Pressley - Oct 27, 2011 7:00 PM ETThu Oct 27 23:00:00 GMT 2011

Disturbed, disillusioned and ashamed: Those aren’t emotions you expect a Wall Street quant to express when asked why taxpayers were obliged to bail out wealthy bankers.

"Models Behaving Badly"

"Models Behaving Badly"

Unless, of course, the quant is Emanuel Derman, a particle physicist and former head of quantitative finance at Goldman Sachs Group Inc. (GS)

“I am ashamed at the hypocrisies of the system,” Derman writes in “Models.Behaving.Badly,” an erudite yet pleasantly readable exploration of why financial models failed during the U.S. mortgage meltdown and why modelers must learn to use them more wisely.

“We were told not to expect reward without risk, gain without the possibility of loss,” he says in disgust. “Now we have been forced to accept crony capitalism, private profits and socialized losses, and corporate welfare.”

Unlike many quants, Derman says he wasn’t surprised that models failed in 2007, as events predicted to happen “once in 10,000 years happened every day for three days,” as one strategist at Lehman Brothers Holdings Inc. (LEHMQ) put it. The breakdown, Derman argues, flows from a misunderstanding of the difference between models and theories.

Theories are attempts to uncover the hidden principles underpinning the world around us, as Albert Einstein did with his theory of relativity. Models, says Derman, are metaphors --analogies that describe one thing relative to another. You can’t have a grand unified theory of securities, he says, because...

https://www.bloomberg.com/news/2011-10-27/goldmanite-quant-derman-slams-...

UncleFester Green Lantern · Oct 27, 2011 - 8:13pm

One minor point..."They do not force people to accept money. " Actually they do, its called legal tender laws.

IFester

¤ · Oct 27, 2011 - 8:15pm

Black Swan author Nassim Taleb encounters a quant and sets about educating him. https://www.quantapology.com/

Nassim Taleb educates a quant
Santa's Elf · Oct 27, 2011 - 8:18pm

Stopped by my regular dealer (yes, I find I need regular hits to keep me smiling). Anyway, first time ever he's been out of rounds. Two tubes of Silver Eagles left and no one is selling. I wonder why (sarc on). On the other hand, he's had plenty of gold sellers and his gold inventory is bulging. I can't get myself to buy at 50:1 ratios though. As of Nov 1, he's upping round premiums .50, as Sunshine Mint just upped their wholesaler prices. 

I recognize this is only one dealer and would love to know if it's indicative of a trend experienced by the rest of the forum. 

cpnscarlet · Oct 27, 2011 - 8:20pm

I must be the Neanderthal here. When the PMs come in the mail, one of my wives will sometimes sign for it and hand it to me with her usual greeting - "Here is more gold and silver for the treasury of your kingdom, my lord and master."

I take it that doesn't happen with some of you guys. Oh yeah, and when there's no one else around to answer the door, one of the concubines gets it. Of course, they don't say anything since they're not allowed to speak to me directly - they can only send messages through one of the wives. Maybe you guys should let one of yours do that.

¤ · Oct 27, 2011 - 8:23pm

 European mythical figures

Pitch European mythical figures

Jean Gouders

Have the european leaders created a new myth?

dabrini Monedas · Oct 27, 2011 - 8:24pm

@Monedas,

this particular version of energy generation uses nickel and hydrogen gas. The actual amount of nickel needed is trivial (some nickel is converted into copper), so this really should not have an effect of nickel prices, other than the fact that some people who don't really know the details might think that this should be positive for nickel. Maybe providers of hydrogen gas might be impacted. But I think the main story would be a marked lessening for the need for oil in the not too distant future.

Lot's of debate about this being a scam or real, but the most recent test, done earlier this month, seemed to be positive. Supposedly the test tomorrow is going to be done under the guidance of a potential customer for the technology.

¤ · Oct 27, 2011 - 8:25pm

The Wilting €uro Garden

The Wilting €uro Garden

Jean Gouders

More and more countries are heading towards the "danger zone

¤ · Oct 27, 2011 - 8:34pm
UncleFester · Oct 27, 2011 - 8:34pm

Legal tender laws pertain to the type of money that you are required by law to use. Legal tender laws have no bearing on whether or not you accept government stimulus money.

Shill · Oct 27, 2011 - 8:35pm

Lol CPN...I knew we were in the presents of Royalty. :)

ewc58 · Oct 27, 2011 - 8:35pm

Is MF effed?

Tyler Durden's picture

MF Global Taps Credit Facility, Burns Through $2 Billion In Quarter

Submitted by Tyler Durden on 10/27/2011 - 19:25 AIG American International Group CDS Evercore Fitch Jamie Dimon MF Global Morgan Stanley ratings Sovereign Debt Sovereign Risk Sovereign Risk

Update: and the hits just keep on coming, first Fitch and now... MF GLOBAL CUT TO JUNK BY MOODY'S... "At the end of the second quarter, MF Global's $6.3 billion sovereign risk exposure represented 5 times the company's tangible common equity. Moody's said the downgrade reflects our view that MF Global's weak core profitability contributed to it taking on substantial risk in the form of its exposure to European sovereign debt in peripheral countries." But other major US banks have no exposure whatsover right? Oh wait...They're hedged... Through "CDS".

Bloomberg has just broken that MF Global has likely just entered a terminal deathwatch after not only tapping its credit facility, but aslo exhausting it. From Bloomberg: "MF Global Holdings Ltd., the futures broker run by Jon Corzine, drew down its revolving credit lines this week as the firm reported its biggest quarterly loss and had its credit ratings cut, said three people with knowledge of the matter. The New York-based company exhausted its revolving lines, the people said, speaking on condition of anonymity because the move wasn’t disclosed. MF said in an Oct. 25 investor presentation that it had $1.3 billion in unused revolving credit facilities, without giving a date for the tally." This development means that instead of an M&A assignment as many were attributing the retention of Evercore bankers to (despite the dreary presence of David Ying in their midst), Jon Corzine's firm was far more likely focused on salvaging anything of value. However, now that traditional M&A is out of the picture (nobody in their right mind will pay anything close to market value for a company without cash), it is quite likely that the firm's bondholders, who most likely also have collateral exposure with MF global, whose plight started following the disclosure of extensive European exposure and which was downgraded to junk today by Fitch, will pull all liquidity and instead opt for a debt for equity conversion either in court or as a prepack. What is probably the biggest take home here is just how much of a capital drain European exposure (and we are confident MF was "hedged".... just like Morgan Stanley) can become, and how quickly a firm can become completely insolvent. As a reminder, the firm reported $710 million in cash as of June 30. Obviously all of that cash must have been burned through if the firm also not only tapped but exhausted its $1.3 billion in revolvers in the past quarter (which have rating associated rate step ups, which don't take too kindly to a junk rating). Net result: $2 billion in cash (or about 9 times its makret cap) burned in 4 months primarily due to "hedged" European exposure.

stoneeh · Oct 27, 2011 - 8:37pm

GSR still around 50. Should rather be 5 based on supply and demand. Props to the manipulators, they know how to do their job.

¤ · Oct 27, 2011 - 8:37pm

An Apocryphal Apology

Merkel Denies Saying Sorry to Berlusconi

An Apocryphal Apology: Merkel Denies Saying Sorry to Berlusconi

Angela Merkel's spokesman is denying Prime Minister Silvio Berlusconi's claim that the chancellor apologized to him in Brussels on Wednesday. That, though, may not be the worst news of the day for the Italian leader. He also faces significant domestic opposition to the reforms he has promised to undertake. more...

¤ · Oct 27, 2011 - 8:38pm

Underwater Lava: Eruptions Could Create New Island in the Canaries

Underwater Lava

Eruptions Could Create New Island in the Canaries

What would the island be called? And who would own it? Spewing magma and growing in height, an underwater volcano off the Canary Island of El Hierro has captured the imagination of locals in recent weeks. It could eventually rise from the sea to create a new part of the archipelago. By Axel Bojanowski more...

UncleFester · Oct 27, 2011 - 8:46pm

Yes, I see...but, government stimulus money and the money you are required by law are the same, no?

IFester

· Oct 27, 2011 - 8:48pm

I listened all the way through - well worth it.

https://www.zerohedge.com/news/and-now-some-semblance-sanity-here-one-ho...

backseatdriver · Oct 27, 2011 - 8:49pm

US Gov has already laid claim to the newly formed islands. Soon enough via Google Earth you will be able to spot Gadaffi and Bin Laden sipping mai tais, while sporting their 99 virgins. 

BSD

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