Monday, December 3, 2012

Bernanke set to cue up next rounds of QE , meanwhile note the November jump in gold and silver purchases ( not the paper silliness , the physical being bought hand over fist in November ) ....... which leads into the inevitable COMEX default as GLD / SLV and other paper investors get " Corzined " ....... and you know this is coming , so why are people still knee deep in ETF s or trading on the COMEX ?

http://www.zerohedge.com/news/2012-12-03/time-bernanke-reevaluate-his-sworn-testimony-congress


Time For Bernanke To Retract His Sworn Testimony To Congress

Tyler Durden's picture
Submitted by Tyler Durden on 12/03/2012 20:44 -0500




Three months ago, as part of our ongoing explanation of what happens next to the Fed's balance sheet (which is now established as official canon in advance of the December 12th FOMC, when Bernanke will effectively announce QE4 consisting of $40 billion in MBS and $45 billion in unsterilized TSY purchases as we predicted the day QE3 was announced), we said that "the Fed will continue increasing its 10 Yr equivalents by roughly 12% (of the total market) per year, for at least the next 3 years, at which point it will own 60% of the entire Treasury market. It means that the Fed will monetize all gross long-term issuance every year for the next 3 years." Most looked at the bold sentence without it registering just what it means. Perhaps, now that the "serious" media has finally taken on the topic of applying a calculator to the one driver of all marginal risk demand, it will register a little better.
In a Bloomberg story titled, appropriately enough "Treasury Scarcity to Grow as Fed Buys 90% of New Bonds" we read that "the Fed, in its efforts to boost growth, will add about $45 billion of Treasuries a month to the $40 billion in mortgage debt it’s purchasing, effectively absorbing about 90 percent of net new dollar-denominated fixed-income assets, according to JPMorgan Chase & Co." Actually that's incorrect and it is more like 100%. What is however 100% correct is what the bolded means in plain language: it is now accepted that the Fed will outright monetize all gross US issuance. Let us repeat this sentence for those who just had flashbacks to Adam Fergusson's "When money dies." The Fed is now monetizing practically all net new debt. So what did the Chairman say about this absolutely certain eventuality back in 2009 to Congress...
Our only question: was the Chairman simply lying of lying under oath?
And finally, because it appears it takes the MSM between 3 and 36 months to catch up to Zero Hedge, there is another relevant question that we posed 3 months ago:
Another way of visualizing this is how many assets as a percentage of US GDP the Fed will hold on its books. Currently, this number is 18%.By the end of 2013, the Fed's historical flow operations will be accountable for 24% of US GDP.

Why is this important? Simple: when the time comes for the Fed to unwind its balance sheet, if ever, the reverse Flow process will be responsible for deducting at least 24% of US GDP at the time when said tightening happens. If ever.

Hence no unwind. We are confident to state this, just as we were confident with our other forecast from three months ago:
What is scariest, is that as of this moment, all of this is priced in. Any incremental gains in the stock market will have to come from additional easing over and above what Bernanke just announced.
What Bernanke implicitly, and in one week explicitly, has announced is that it now takes $85 billion in monthly Flow injection from the Fed just to keep the market from collapsing. Oh, yes, and the market still has to surpass the highs seen the day after QEternity was announced.

And  just look at what folks are doing as the writing on the wall for the dollar comes into view....

http://www.silverdoctors.com/gold-eagle-sales-explode-in-november-up-nearly-4-fold-yoy/

GOLD EAGLE SALES EXPLODE IN NOVEMBER, UP NEARLY 4 FOLD YOY

DECEMBER 3, 2012 BY  12 COMMENTS
In the midst of a 2 month price consolidation for both gold and silver, US Mint gold and silver eagle sales exploded in November, coming in a 3,159,500 oz of ASE’s, the 3rd highest monthly total for 2012, and 136,500 oz of AGE’s, by far the highest monthly gold sales for the US Mint for 2012.
While silver eagle sales were strong, the story is in gold eagle sales, which roared back to life in the wake of Obama’s re-election.  The silver/gold sales ratio narrowed to 23/1, after reaching such extremes as 74/1 as recently as August.
The 136,500 oz gold eagle sales total was nearly triple the October sales total of 59,000, and was up an astonishing nearly 4 fold year over year from Nov 2011, which saw 41,000 oz sold.   November silver eagle sales were nearly as strong, up 2.5 fold year over year from 1,384,000 sold in November 2011.
While annual sales totals for gold and silver eagles will fall well short of 2011 records, the recent massive increase in demand indicates that the next up-leg in the secular gold and silver bull markets will likely be extraordinary and unprecidented.
Got PHYZZ??
2012 US Mint Gold Eagle sales courtesy SRSrocco:

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Silver is coiling , coiling , coiling - waiting for a spark.....

http://www.tfmetalsreport.com/blog/4348/simplot-scenario-silver



Monday, December 3, 2012 at 10:54 am
When both Andrew Maguire and Ted Butler write about the same thing over weekend, one should probably sit up and take notice.
In this case, what they were discussing was a possible, end-game scenario for the silver manipulation. The commercial short position has grown so extreme AND the physical supply has grown so tight that, suddenly, these two great minds were exploring the available options for JPM et al as they attempt to extricate themselves from what is growing into an unmanageable and untenable position.
Andy commented that in his "thirty years of experience, he'd never seen a more dangerous situation developing" and that, soon, the only possible way out would be a "back door solution". This "almost certain" resolution would hinge upon the cash settlement of futures contracts that would position paper traders on the sidelines before the "gap higher" next trading day in the new, physical market.
Andy's commentary had already roused my attention and then I read Uncle Ted's weekly review. In it, he discusses the "Maine Potato Default" of 1976. First of all, here are two links that can provide some background for you:http://www.time.com/time/magazine/article/0,9171,947729,00.html &http://news.google.com/newspapers?nid=1988&dat=19760526&id=a2YiAAAAIBAJ&sjid=06wFAAAAIBAJ&pg=1377,2637833
Here's the introductory paragraph of Ted's analysis:
"Since the problem is JPMorgan’s 38,000 contract net short position in COMEX silver, that problem will disappear if the regulators, as is within their powers, decree that a market emergency exists and orders all silver contracts to be unilaterally closed out and settled at an arbitrary price. In an instant, JPMorgan will be let off the hook and the problem, from a regulatory perspective, will exist no more. Yes, it would represent a contract and market default and reflect badly on the regulators, but it would resolve the extreme market structure issue immediately. Further, this is not a resolution that would be without precedent. Almost 40 years ago, the predecessor of the NYMEX defaulted on their important Maine Potato contract because the largest short seller, the late J.R. Simplot, couldn’t deliver as promised. All open contracts were artificially closed out at a set price and that was it. Yes, it was a scandal and a black eye on the world of commodity trading, but not one in ten million even remembers it today. The scandal led to a cessation in the trading of Maine Potato futures and a similar COMEX forced settlement today most likely would lead to the termination of silver futures trading in the US. One could argue that silver trading today is more important than potato trading was in the 1970’s, but my point is that to the average citizen, a COMEX silver shutdown would be forgotten in time and life would go on." Subscribe and read more at: http://www.butlerresearch.com
So why do I bring this up? A number of reasons.
  1. We KNOW that this silver manipulation cannot go on forever. In fact, the increasing physical supply tightness makes this eventuality a possible near-term event.
  2. A Comex/CME cash settlement screw job would not be surprising at all. If you don't believe me, ask anyone who had an account with MFGlobal for their opinion.
  3. Though painful to the short-term reputation of the Comex, the CME and the Silver Cartel (mainly JPM), the event would barely register in the financial press and would soon be forgotten. If you don't believe me, ask yourself the last time you saw a headline on the LIEBOR Scandal.
  4. Though there would likely be a significant runup in paper price and other warning signs of this impending "default", paper traders had better be fully aware of this possibility/probability.
  5. The Maine Potato Default of 1976 clearly shows that there is precedent for this kind of event.
  6. In this scenario, holders of all types of paper silver (futures contracts, paper certificates for physical, ETFs) will cash settled and be left on the sidelines, holding the bag, out of the market and unable to participate in the next-day reset in price.
  7. Once again, your only solution is the purchase and delivery of physical metal. Period. End of story. Yes, it's fun to trade and the leverage applied may allow you to increase the stack of your fiat. However, there is no substitute for physical metal. Holding physical metal is not just the only way you are guaranteed to participate when the Silver Scheme finally unravels, it is also your only protection against the other financial calamities that are just around the corner.
    It's nice to see a bounceback in price this morning, though we are clearly seeing some continued volatility. I expect our support levels to continue to hold and I expect a "Happy Tuesday" rally tomorrow as the banks will want to cover some of last week's shorts ahead of the CoT survey. Both charts got painted with ugly, engulfing candles back on Friday so we need to see a rally this week in order to invalidate them and discourage some momo-chasers from piling in. Rest assured, though, I still expect December to be a solidly bullish month that will set the stage for a powerful 2013.
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    this might be a spark if we hear Sprott say his silver is m. i. a.....


    
King World News: Sprott fund will announce if its silver isn't delivered
    

    

    

    
Submitted by cpowell on Sun, 2012-12-02 16:55. Section: 
    

    
11:55a ET Sunday, December 2, 2012
    

    
Dear Friend of GATA and Gold:
    

    
In the third excerpt of his recent interview with King World News, Sprott Asset Management CEO Eric Sprott says his company will make an announcement if there is any failure to deliver the silver recently purchased by the Sprott silver fund:
    


    
Full audio of the interview is 21 minutes long and can be heard at the King World News Internet site here:
    


    
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Posted by at

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