Well dear reader before going into the topics following the overview. In this blog you will find information about
The Stress tests
Another kind of stress, swine flu
Banks and Bankster, about Goldman, Wells Fargo and the problems German Banks have to face. The information you can find will show you that the 1st quarter results of the financial institutions are not as good as they make us believe
Crisis, with a comment from Dr. Schoon and the IMF
Gold, Buy on dips part two, Gordon Brown indicator, Orlandini and China buying gold
Oil how the prices were managed down to actual levels
Food there will be shortages soon
Now lets have the last weeks overview from www.prudentpear.com
For the week, the S&P500 slipped 0.4% (down 4.1% y-t-d), and the Dow declined 0.7% (down 8.0%). Other sectors were much stronger. The Morgan Stanley Cyclicals surged 7.0% (up 8.4%), and the S&P Homebuilding index gained 4.6% (up 31.9%). The Morgan Stanley Retail index jumped 3.9%, increasing 2009 gains to 31.2%. The Transports rose 1.4% (down 11.3%). The Morgan Stanley Consumer index fell 1.6% (down 4.8%), and the Utilities declined 2.1% (down 14.2%). The S&P 400 Mid-Cap (up 2.2%) and small cap Russell 2000 (down 4.1%) indexes were both about unchanged. The Nasdaq100 gained 1.4% (up 13.3%), and the Morgan Stanley High Tech index jumped 3.4% (up 23.7%). The Semiconductors declined 0.5% (up 19.6%), while the InteractiveWeek Internet index rose another 2.3% (up 30.7%). The Biotechs sank 3.3% (down 4.6%). The Broker/Dealers dipped 0.4% (up 19.6%), and the Banks were hit for 7.1% (down 22.0%). While Bullion was little changed, the volatile HUI Gold index rallied 12.9% (up 2.8%).
Well dear reader the title “STRESS” is not meant to write about me having stress. I am fine thanks. We stress I rather wanted to mention the bank stress tests performed recently. Of course it is impossible to really have clear overview in such a short time having only a handful of so called experts making these tests. However, and I must say that this does not come as a surprise, the government lets us know that things are OK and, that of course, we do not have to worry at all. But is it really so? Personally, as you might guess, I have my serious doubts. Of course the government would never tell us that there are or could be problems. This would be a serious blow to the already disastrous situation. Well dear reader don’t get misled by the positive first quarter result news from the banks. Good looking results due to new accounting rules and trading profits because the government gives them money at practically zero cost, does not mean that they have really made the turn around. Don’t you think so? Well we can ask ourselves what it means when Bank of America sets aside another US $6 billion when they already announced that earnings are wonderful being now allowed to price their worthless assets arbitrarily. That certainly does not smell that good.
Following some information about the stress test. Of course this information is not confirmed and therefore cannot prove the accuracy. However I could very well imagine that the information is accurate.
The Turner Radio Network has obtained the stress test results. They are very bad. The most salient points from the stress tests appear below.
1) Of the top nineteen (19) banks in the nation, sixteen (16) are already technically insolvent.
2) Of the 16 banks that are already technically insolvent, not even one can withstand any disruption of cash flow at all or any further deterioration in non-paying loans.
3) If any two of the 16 insolvent banks go under, they will totally wipe out all remaining FDIC insurance funding.
4) Of the top 19 banks in the nation, the top five (5) largest banks are under capitalized so dangerously, there is serious doubt about their ability to continue as ongoing businesses.
5) Five large U.S. banks have credit exposure related to their derivatives trading that exceeds their capital, with four in particular - JPMorgan Chase, Goldman Sachs, HSBC Bank America and Citibank - taking especially large risks.
6) Bank of America`s total credit exposure to derivatives was 179 percent of its risk-based capital; Citibank`s was 278 percent; JPMorgan Chase`s, 382 percent; and HSBC America`s, 550 percent. It gets even worse: Goldman Sachs began reporting as a commercial bank, revealing an alarming total credit exposure of 1,056 percent, or more than ten times its capital!
7) Not only are there serious questions about whether or not JPMorgan Chase, Goldman Sachs,Citibank, Wells Fargo, Sun Trust Bank, HSBC Bank USA, can continue in business, more than 1,800 regional and smaller institutions are at risk of failure despite government bailouts! The debt crisis is much greater than the government has reported. The FDIC`s "Problem List" of troubled banks includes 252 institutions with assets of $159 billion. 1,816 banks and thrifts are at risk of failure, with total assets of $4.67 trillion, compared to 1,568 institutions, with $2.32 trillion in total assets in prior quarter.
Well dear reader to say it bluntly, the entire US Banking System is in complete and total collapse.
http://turnerradionetwork.blogspot.com/2009/04/leaked-bank-stress-test-reults.html
Swine Flu
Beyond the potential human tragedy, the unfolding story of a possible swine-flu pandemic could hit economic activity hard. If the perceived threat to public health becomes severe enough, it quickly could impact the normal course of commerce, particularly in terms of travel and conditions where heavy person-to-person contact is usual, including day-to-day operations of many businesses. Even with a minimal threat, there likely will be ongoing heavy media coverage over the near-term, and such tends to slow personal consumption, as people sit at home watching television instead of going out to the malls to shop. Such also might provide some temporary distraction for the public from the still-mounting economic and financial system woes.
Banks and Banksters
How to Puff Up Earnings, Goldman Sachs Style
Leave it to the clever boys at Goldman Sachs to turn dross into gold: They have come up with a way to hide massive losses so clever, it requires special comment: The Orphan Month.
http://www.ritholtz.com/blog/2009/04/how-to-puff-up-earnings-goldman-sachs-style/
more from Goldman
by Reggie Middleton
Now, if any of you are paying attention, you should be agasp in your chair. Why in the hell does Goldman carry more real estate assets exposure off balance sheet than on. Well, just take a look at those pretty graphs above. The answer is self-evident! Then there is also the spate of current events that are bound to make those commercial real estate credits worth a mint... Such as the nation's second largest Commercial property owner filing bankruptcy last week (as I made clear that they would fold in some form or fashion in 2007 - GGP and the type of investigative analysis you will not get from your brokerage house).
Long story short, if you are bullish on commercial real estate and CLOs, then you may want to be bullish on Goldman. However, if you foresee any real estate problems, then this heavily laden, heavily valued, publicly traded fixed income and real estate hedge fund may not be seeing the best of days in the near to medium term!
http://www.safehaven.com/article-13160.htm
PAUL B. FARRELL
Jack Bauer can't stop 'The Goldman Conspiracy'
10 reasons why Wall Street has absolute power over America's democracy
http://www.marketwatch.com/news/story/even-jack-bauer-couldnt-stop/story.aspx?guid={BE0D1772-A628-454D-80BF-C4484CEBA7DF}&siteid=yahoomy&ref=patrick.net
Huffington Post
Ryan Grim and Julie Satow
April 13, 2009 at 10:24 PM
Wall Street has long viewed quarterly earnings skeptically, but this season may be one of the least realistic in recent memory. That's because banks are doing everything they can to wring out a profit and gain that most valued of commodities--investor confidence.
Facilitating the banking industry's efforts to post a profit is the relaxation of mark-to-market accounting and the fact banks can borrow funds at historically low rates while selling them at historically high rates.
"Banks are doing everything and anything in their power right now to get their earnings as high as possible," Paul Larson, an equities strategist at research firm Morningstar, said.
"I have been in the business 25 years and earnings have always been an ongoing mystery, but it has gotten worse and worse," said James Paulsen, the chief investment strategist at Wells Capital Management.
On Monday evening, Goldman Sachs reported quarterly earnings of $3.39 per share, exceeding analyst forecasts by more than 100%. Last week, Wells Fargo reported projected earnings of $3 billion, more than double what the Street had predicted.
In Wells Fargo's case, it reported that its losses on loans and other assets had improved despite the collapse of the real estate market and growing foreclosures.
Either Wells Fargo found an amazingly disproportionate number of folks who are making mortgage payments, or some accounting gimmickry is at play.
"You can do all kinds of restructurings, this that and the other thing, to put things off for awhile. And the market they're in did not do very well at all, so skepticism should be the order of the day," said William Black, a top federal banking regulator during the S&L scandal…
http://www.huffingtonpost.com/2009/04/13/the-farce-behind-quarterl_n_186424.html
More about Wells Fargo
Wells Fargo May Need $50 Billion in Capital, KBW Says By Ari Levy
April 13 (Bloomberg) — Wells Fargo & Co., the second- biggest U.S. home lender, may need $50 billion to pay back the federal government and cover loan losses as the economic slump deepens, according to KBW Inc.’s Frederick Cannon.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aNsEBgrV8HA0&refer=home
from a saavy writer at www.lemetropolecafe.com
Right as the CFO of Wells Fargo was on CNBC spouting out that WFC has a better loan portfolio than others, this piece of data hit the newswire showing that in California mortgage defaults hit a new record during the first 3 months of 2009:
http://www.calculatedriskblog.com/2009/04/dataquick -mortgage-defaults-hit-record.html
Two points of note: 2009 will probably be record year for notices of default AND "defaults are movin' on up into the mid and high priced areas."
This is the "better loan portfolio" of Wells Fargo: 41% of WFC's mortgage portfolio is based in California AND 50% of WFC's portfolio is comprised of pay-option ARM mortgages, which are entering into a "bulge" period of resets and are widely considered to be the most toxic of the 1st lien mortgages.
Well anyway, don’t believe a CEO or CFO. Remember Bear Stearns and others? Before going out of business their C..’s let us know that everything is fine. Don’t worry.
Goldman Sach's Stress Test: Breaking Ranks with the Crowd Once Again! by Reggie Middleton
http://www.safehaven.com/article-13078.htm
Germany's slump risks 'explosive' mood as second banking crisis looms
A clutch of political and labour leaders in Germany have raised the spectre of civil unrest after the country's leading institutes forecast a 6pc contraction of gross domestic product this year, a slump reminiscent of 1931 and bad enough to drive unemployment to 4.7m by 2010
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/5209033/Germanys-slump-risks-explosive-mood-as-second-banking-crisis-looms.html
Crisis
Although the number mentioned in the report on below link seems to me more like an understatement, the information is still interesting.
IMF Says Losses From Crisis May Hit $4.1 Trillion
http://www.bloomberg.com/apps/news?pid=20601087&sid=azkSmZrrIHKQ&refer=home
"GM's CFO says the company won't make its June 1 debt payment of $1 billion."
http://www.businessinsider.com/gm-defaults-2009-4
Well dear reader considering that GM said just a month ago that they didn't need the scheduled TARP payment, an announcement that was part of the news that got the equity rally started in the first place, it is a surprise that they now cannot repay debt. Well it might be a surprise for most but not for you I guess. Knowing that we live in managed market and that managing the news (lies instead of the truth) is part of it, the news should not come as a surprise.
With other words, please take these wonderful news that we get delivered from our governments with the necessary caution.
In fact nothing has changed. Stress tests or not. Better than expected 1quarter results of the banks, due to new accounting rules (one might be tended to say fraud) or not. We are still in the same difficult environment with more people without jobs, less spending and consumption, real estate in troubles (default rates are increasing and not only the low quality mortgages but defaults of top quality mortgages too), the big banks that are in fact already bankrupt and (what worries me most) the derivatives in the market are still above the 600 trillion. This is huge and is very dangerous indeed. Especially when a rather small part (CDO’s) had already such a disastrous impact last year. Well to me that does look rather as having to withstand some more of the same or worse.
THE COLLAPSE OF GOVERNMENT
This is the possible but as yet unthinkable conclusion to the current crisis. Governments are spending what they do not have in the attempt to save what cannot be saved. Banks leveraged their bets far beyond what even governments can cover and now, as a consequence, the survival of each is questionable. Nothing is forever and the fact that finance and large government have come to dominate today’s world is no guarantee they will do so tomorrow. The foundation of each has been paper money and the ability to spend it as if it were real. That it is not so will be the undoing of each.
A new and different world will then arise.
Darryl Robert Schoon
April 22 – Bloomberg (Michael McKee): “Millions of lost jobs mean billions in lost tax revenue for the U.S. government, and billions in additional Treasury debt to fund a federal budget deficit that may soar to more than four times last year’s record $454.7 billion… With spending on unemployment insurance and other safety- net programs rising, the deficit is already at a record $956.8 billion six months into the fiscal year.”
Gold
Remember “buy on dips”. We got another good chance to buy low. Believing that the bank crisis will brake out again and that stocks will head lower soon, it might be the moment to increase gold positions.
Gold is money. Yes dear reader you know it already. Please read the article from James Turk which shows clearly that gold is money and furthermore shows clearly that the average return of gold since 2001 is really nice.
http://www.24hgold.com/english/news-gold-silver-don-t-invest-in-gold--save-it.aspx?contributor=James%20Turk&article=1979999838G10020
a special kind of buy indicator
The Gordon Brown Gold Rally Indicator flashes buy signal
http://www.usagold.com/amk/abcs-gold-rally-indicator.html
more about gold
In 6000 years of recorded human history gold has been desirable as a “collectable” and it still is today. This is truly amazing. There were no postage stamps, muscle cars, first edition books, fine wines, fine arts 6000 years ago. But there was gold. And 6000 years later man still lusts after this “collectable”. It is the most durable collectable ever. It is the collectable of all collectables because it has universal appeal to almost everyone on the planet and has been for all of history. It doesn’t need an expert to assess it. It is so dense at 19.3 times the density of water, and it is so malleable that even an amateur can recognize its distinctive feel in the hand. It is extremely difficult to make convincing imitations…lead is only half the density and is the wrong color.
Gold is very scarce. There are only 140,000 tons above ground which is all the gold ever mined. It is not consumed so all the gold ever mined is still in existence somewhere. That is equal to ¾ ounce per person on earth, or as is popular these days, just enough to fill two Olympic size swimming pools.
and following Orlandinis opinion about gold where he sees that a head and shoulder formation happened:
I want to talk about the significance of such a large formation over such a long period of time. So far the reverse head-and-shoulders formation is ten months in the making and assuming it holds
SUPPORT RESISTANCE
JUNE GOLD 901.40 912.70
889.90 932.20
873.40 940.60
up, it would be an extremely bullish event. What makes it even more promising is the fact that almost everyone has given up on gold, and I do mean everyone. Also, it is my understanding that there is also a significant of unregulated OTC derivatives on the short side of gold and if that is the case, they could very well get squeezed hard if gold moves much above the 912.70 resistance level. If gold has seen the worst that the manipulators can throw at it, then it should slowly grind its way higher until we reach the critical resistance at 999.90 which turned back the two previous attempts. Aside from that there will be additional resistance from the neckline formed by the reverse head-and-shoulders formation and coming in at +/- 1,016.00. Gold will definitely have to work hard to claw its way through this area, but when it does it will literally explode to the upside and should reach my price target of 1,375.00. Better late than never!
Well dear reader just recently China enacted bold moves to position the Yuan to take over their trade sphere, if the USD were to fall too much. Gold is reacting to this and the USD. China is swapping currency with big trade partners who can use Yuan to buy from China. China moves to buy up the commodities they want, and do publicly now.
The moves to SDR and IMF stuff for a world alternative to the USD- t hat caused a big stir.
The recent announcement that China has been adding about 90 tons of gold a year for recent years adding 400 somthing tons and now at 1050 tons of gold. Formerly, China did all this as secretly as possible. Now it's all public.
They are clearly moving seriously to position for a USD crisis, and seem to be moving much faster than they did before in recent years, making public complaints about the USD situation, China having to effectively finance the bailouts –
Well dear reader that looks very gold bullish to me.
Silver
Well dear reader the following table is in my opinion interesting as it shows us that it is very difficult for silver producers to make profits with the actual low prices.
Oil
Well dear reader several times I mentioned that markets are manipulated. Not only the gold and silver markets but all. Some to the upside, like stocks and others as pleased. Following an excellent article describing how Goldman through inside information was able to gain nicely by manipulating the oil market.
Did Goldman Goose Oil?
How Goldman Sachs was at the center of the oil trading fiasco that bankrupted pipeline giant Semgroup.
When oil prices spiked last summer to $147 a barrel, the biggest corporate casualty was oil pipeline giant Semgroup Holdings, a $14 billion (sales) private firm in Tulsa, Okla. It had racked up $2.4 billion in trading losses betting that oil prices would go down, including $290 million in accounts personally managed by then chief executive Thomas Kivisto. Its short positions amounted to the equivalent of 20% of the nation's crude oil inventories. With the credit crunch eliminating any hope of meeting a $500 million margin call, Semgroup filed for bankruptcy on July 22.
http://www.forbes.com/forbes/2009/0413/096-sachs-semgroup-goldman-goose-oil_print.html
You don’t believe in manipulation? Read the following
Counterparty Risk Management Group II Report
The Counterparty Risk Management Group II Report, "Toward Greater Financial Stability: A Private Sector Perspective", has recently been published. The Report is an update and extension of previous work published in 1999.
The Report contains a comprehensive set of 47 'Guiding Principles' and 'Recommendations' regarding (1) Risk Management and Risk-related Disclosure Practices, (2) Financial Infrastructure: Documentation and Related Policies and Practices, (3) Complex Financial Products: Risk Management, Risk Distribution and Transparency, (4) Emerging Issues, and (5) Risk Management for Institutional Fiduciaries.
JPMorgan Chase actively participated with other industry leaders in the preparation of the Report and D.M. Wilson, Chief Risk Officer, served as a Vice Chairman of the Policy Group's effort. The Report is available at www.crmpolicygroup.org..
http://www.jpmorgan.com/pages/disclosures/risk
some more about managed markets
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=36975772
Food
Well dear reader we possibly will see food shortages soon. Riots due to not sufficient food might arise again soon. Once again I recommend to fill up you food stock.
WASHINGTON, April 6 (UPI) -- We tend to forget that the worldwide plunge into recession last year was the result of three separate phenomena that combined to breed disaster. The financial crisis was joined by a food crisis and a fuel crisis as the prices of food and energy soared, triggering food riots across the world.
And now there are ominous signs of another food crisis in the making this year, spurred in part by the ongoing credit crunch that has made it difficult for farmers to get loans.
"I think the world would like to focus on one crisis at a time, but we really can't afford to," warned Josette Sheeran, executive director of the U.N. World Food Program. Food supplies are tight and prices still high, she said, and more people in poor countries are unable to afford what they need because of the recession.
"These are not separate crises. The food crisis and the financial one are linking and compounding," she noted, adding that food shortages often trigger political instability. "I'm really putting out the warning that we're in an era now where supplies are still very tight, very low and very expensive."
Alarm bells are starting to ring about another food crisis this summer. Last week's acreage report by the U.S. Department of Agriculture found that 7 million fewer acres were being planted for all crops. This came after the USDA's January report that noted that winter wheat acreage was down 7 percent.
..."
http://www.upi.com/Emerging_Threats/2009/04/06/Walkers-World-New-food-crisis-looms/UPI-79101239032507/
when the economy turned south the fertilizer markets collapsed because Farmers are not buying it. In North America the orders are way down, and this region is the Worlds biggest food basket. The other countries even China have stopped buying fetilizer.
Considering that world population rose from roughly 1 billion in 1900 to 6 now, all based on the 'green revolution' based on oil and cheap energy and fertilizers, whats happening now is a super serious issue and we probably can easily see a repeat or worse food shortages around the world in 09.
"In a conference call with analysts and investors on Thursday, Doyle warned that the low levels of fertiliser use by farmers, which results in declining crop yields, could lead to a "grain crisis". Food shortages around the world were making headlines just a year ago, before they were supplanted by the financial crisis and its effects, but the problem still remains, he said. “A dangerous game is now unfolding around the world.” Fertilizer applications are being reduced at “unprecedented levels”, with fertilizer application levels in the US this year expected to be similar to levels seen in the 1983 growing season, Doyle said. “But farmers need to produce 90% more this year than in 1983.” “This level of reduction has never been seen before; no one can state precisely what the impact will be on the world's food supply,” he commented.."
http://www.miningweekly.com/article/potash-corp-will-out-more-output-if-needed-ceo-2009-04-24
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