Saturday, November 14, 2009

International Forecaster November 2009 (#4) - Gold, Silver, Economy + More

nys unemployment insurance

The following are some snippets from the most recent issue of the International Forecaster. For the full 17 page issue, please see subscription information below.


One of the outcomes of Fed policy of near zero interest rates is that seniors cannot live on an income of 1-1/% and that pension funds, insurance companies and endowments cannot fulfill their commitments. As yields eventually rise, although the Fed has signaled that is at least a year away, and if Japan is any guideline, we could be 19 years away from solving the problem of fiduciaries. This is part of a so-called exit strategy, which may be far, far away. As we have cited in the past, the Fed is in a box and cannot get out. If they raise rates and curtail money and credit, deflation will take over and deflationary depression will begin. Europe hasn’t raised rates, except for big oil producer Norway, but they have cut back the issuance of money and credit over the last year from 12.8% to 5.7%. In this environment Europe is tempting fate.

If and or when interest rates rise the riskier assets will be under severe pressure as will borrowers such as hedge funds and brokerage firms and banks, which still average lending of 40 times assets and whose balance sheets look like a tornado hit them.

Instead of upsetting the economy it has been suggested that excess reserves be drained form the banking system so that business and the investors do not understand what is going on. A bit of slight of hand. Then perhaps the program of the Fed monetizing CDOs, Agencies and Treasuries be ended. Such a move would send the economy plummeting into oblivion. Borrowing by government would screech to a halt and again deflation would reign.

These programs are supposed to be over, or in the case of CDOs and MBS, they are supposed to end next March. This is why the Fed cannot face an audit. They have for some time been secretly buying or arranging to have been bought all of these debt obligations illegally. The CDO, MBS program cannot be stopped. Otherwise the big banks could never clear their balance sheets and the result would be bankruptcy. Thus, until those banks, brokerage houses and insurance companies are rid of their problem assets the program cannot end. If the program ends they all go under. The toxic assets being bought by the taxpayer via the Fed will have to be worked off over the next 30 years with grievous losses. The high sounding Supplementary Financing Program is a transference of debt from banks, Wall Street and insurance to the taxpayer. Even worse is the Fed’s ability to pay interest on the money banks have borrowed from them at a higher rate of course, allowing the taxpayer to give free money to the banks, which, of course, is insane.

Even if reserves were drained it would have to encompass at least a two-year period. They propose to remove trillions of dollars from the economy and even being left with trillions in the economy after the general withdrawal of funds. Unfortunately as this occurs more than 2,000 banks will have gone out of business. These are the small and medium-sized banks that are not too big to fail. This, of course, is part of a nationalization process to consolidate banking in order to bring about world banking under the IMF. The Fed may have taken an enormous amount of debt supply out of the market, but as that has occurred a new massive amount of debt has hit the market. These capital demands are going to put big upward pressure on real interest rates over the next two years. As you can see the Fed, the elitists have no way out.

In the midst of all this professionals worldwide are losing confidence concerning the strength of our so-called recovery. That is because these professionals believe an unwinding of stimulus, less money and credit and monetization will lead to less economic activity, that would lead to depression. They are correct. Making matters worse unemployment continues to deteriorate. It is our opinion quantitative easing will be with us for at least another two years.

The commercial mortgage crisis will demolish any illusion of recovery. The paid shills and liars will again be exposed for what they are.

The U.S. ambassador in Kabul sent two classified cables to Washington in the past week expressing deep concerns about sending more U.S. troops to Afghanistan until President Hamid Karzai's government demonstrates that it is willing to tackle the corruption and mismanagement that has fueled the Taliban's rise, senior U.S. officials said.

Karl W. Eikenberry's memos, sent as President Obama enters the final stages of his deliberations over a new Afghanistan strategy, illustrated both the difficulty of the decision and the deepening divisions within the administration's national security team. After a top-level meeting on the issue Wednesday afternoon -- Obama's eighth since early last month -- the White House issued a statement that appeared to reflect Eikenberry's concerns.

Manhattan apartment rents fell as much as 9 percent in October from a year earlier as unemployment cut demand and landlords lowered rates, according to Citi- Habitats Inc.

Average rents dropped for all apartment sizes and the vacancy rate rose 0.15 percentage point to 1.86 percent, the highest since November 2008, the New York-based property broker said today in a report.

“As soon as the economy shifted and people got laid off and got no bonuses, landlords had no choice but to reduce asking prices,” Gary Malin, president of Citi-Habitats, said in an interview. “We expect rents to decrease in the next few months and vacancy rates to creep upward.”

New York City’s jobless rate reached 10.3 percent in September and the number of private-sector jobs lost in the previous year totaled 111,700, according to data on the New York State Department of Labor’s Web site. Wall Street companies lost $42.6 billion last year and income tax receipts were down 24 percent through August, according to the state comptroller’s office.

Concessions such as a month’s free rent or landlords paying real estate brokers to find tenants have helped lure renters, Malin said. Citi-Habitats in on pace to break last year’s record of brokering more than 10,500 apartment leases, he said.

Manhattan studio rents declined 9 percent from October 2008 to an average monthly rate of $1,901, Citi-Habitats said. One- bedroom apartments fell 7 percent to $2,563. The cost of renting a two-bedroom decreased 8 percent to $3,605 and rents fell 6 percent to $4,774 for three-bedrooms.

On the Upper West Side, the average rent for studios fell 13 percent to $1,786 while one-bedrooms dropped 10 percent to $2,398. The cost of a two-bedroom fell 4 percent to $3,485, according to Citi-Habitats.

Downtown rents in the SoHo and TriBeCa neighborhoods declined 14 percent to $2,067 for studios; 13 percent to $3,187 for one-bedrooms and 4.5 percent to $4,998 for two-bedrooms.

SoHo/TriBeCa had the lowest vacancy among Manhattan neighborhoods at 0.95 percent while the Upper East Side was highest at 2.41 percent, Citi-Habitats said. The rate was 2.06 percent in the Battery Park City/Financial District, 1.93 percent on the Upper West Side and 1.3 percent in Chelsea.

Lou Dobbs, the longtime CNN anchor whose anti-immigration views have made him a TV lightning rod, said yesterday that he is leaving the cable news channel effective immediately.

“Some leaders in the media, politics, and business have been urging me to go beyond my role here at CNN and engage in constructive problem-solving,’’ Dobbs said just after 7 p.m., suggesting that he would remain involved in the civic discourse, but perhaps not on television.

Last night’s program was to be his last on CNN, one of his employees said earlier in the evening. Dobbs’s contract was not set to expire until the 2011. He told viewers CNN had agreed to release him from his contract early. Well known for his political positions, Dobbs is an outlier at CNN, which has sought to position itself as a middle ground in the fractious cable news arena. The CNN employees said they did not know whether he was moving to another network.

Dobbs’s views on immigration provoked a protest by Hispanic groups. Members of the groups complained that CNN was allowing him “to spread lies and misinformation about us.’’

Last month, the New Jersey State Police were called to Dobbs’s home to investigate a report of gunfire. He suggested that his family had been singled out because of his views on illegal immigration and border security.

The Fed balance sheet contracted $30.037B for the week ended Wednesday, on a $$29.789B decline in TAF…Isn’t it strange how the stock market and commodities have pronounced movement on a Thursday that is usually in concert with the Fed’s H.4.1 that is released thirty minutes after the NYSE close?

Seven Wall Street lobbyists trooped to Capitol Hill on Nov. 9, hoping to convince Representative Paul Kanjorski’s staff that his plan to dismantle large financial firms was a bad idea.

They walked out with a sobering conclusion, according to the accounts of two attendees who requested anonymity because the meeting was private. Not only was Kanjorski serious, he planned to offer the legislation as early as next week -- and it just might pass. [No wonder JPM, C and banks have been under-performing the S&P since Oct. 14.]

The Federal Reserve will prohibit banks from charging overdraft fees on automated teller machines or debit cards, unless a customer has agreed to pay extra charges for exceeding account balances. [No wonder banks are now under-performing.]

Senate Majority Leader Harry Reid may seek to apply Medicare taxes to capital gains earned by wealthy Americans as part of health- overhaul legislation in order to scale back a proposed levy on high-end insurance plans, two congressional aides said.

Reid’s proposal, being advanced by Massachusetts Senator John Kerry, would apply Medicare taxes to non-wage income earned from capital gains, dividends, interest, royalties, and partnerships for American couples earning more than $250,000, the aides said. He’s also considering an alternative that would simply increase the 1.45 percent Medicare tax on salaries of couples who earn more than $250,000, one of the aides said.

Pelosi's 5.4% income surtax would hit capital gains and dividends. That surtax takes effect on January 1, 2011, or the day the Bush tax rates of 2001 and 2003 expire. Today's capital gains tax rate of 15% would bounce back to 20% because of the Bush repeal and then to 25.4% with the surtax. That's a 69% increase, overnight.

The BIS: Regular OTC Derivatives Market Statistics

12 November 2009

Key developments:

· Notional amounts of all types of OTC contracts rebounded somewhat to stand at $605 trillion at the end of June 2009, 10% above the level six months before,

· Gross market values decreased by 21% to $25 trillion,

· Gross credit exposures fell by 18% from an end‐2008 peak of $4.5 trillion to $3.7 trillion,

· Notional amounts of CDS contracts continued to decline, albeit at a slower pace than in the second half of 2008 and

· CDS gross market values shrank by 42%, following an increase of 60% during the previous six month period.

The volume of outstanding interest rate derivatives contracts – the largest segment of the derivatives market…rose 13 percent to $437,198bn concentrated in maturities greater than five years…

It’s clear to see the trigger for the next financial crisis. If CDS took the financial system to abyss and its notional value at its peak was estimated at about $38 trillion; what will occur if interest rates unexpectedly rise on $437 trillion of derivatives?