Daily Digest

Daily Digest 11/3 - Fed Launching Bond Purchases, Homeownership At New Lows, The 'Magic' Of Quantitative Easing

Wednesday, November 3, 2010, 9:46 AM
  • Fed Set To Launch Fresh Round Of Bond Purchases
  • October 2010 Silver Eagle Bullion Coins Surged, Sales Near Annual Record
  • Harrisburg Doesn't Have Cash for Debt Payments
  • Detroit Utility Struggles To Stay On Top Of Theft
  • Congress' Next Big Issue: How to Handle Jobless '99ers'
  • U.S. Homeownership at Decade Low as Foreclosures Rise
  • FAO food price index hits 27-months high in October
  • Melt Values of Silver Coins Posted at Coinflation
  • National Debt Passes $13.7 Trillion
  • The 'Magic' Of Quantitative Easing
  • ECB, Bank of Japan Keep Wary Eye On Fed
  • Libya Says Oil At $100 Good For Producers
  • Fed Easing Could Send Oil Above $90 A Barrel
  • Bruederle Calls for German `Raw Materials Inc.' to Prevent China Monopoly
  • Oil to Rise as Capacity Drops, Morgan Stanley Says
  • Alaskan October Oil Output Drops 5.9% on Lower Field Output
  • Cotton Prices Set Record High on Supply FearsChina Can Use More Copper Than World Has Now

Our 'What Should I Do?' guide offers a detailed management plan for your personal finances.


Fed Set To Launch Fresh Round Of Bond Purchases

The Fed owns roughly 12.5 percent of all outstanding Treasury bonds and notes. If it were to buy $1 trillion more, as some economists expect it eventually will, the portion of its holdings compared with all outstanding Treasuries could jump to 27 percent.

October 2010 Silver Eagle Bullion Coins Surged, Sales Near Annual Record (Look at the graphs)

Sales of American Silver Eagle bullion coins surged in October 2010, breaking a string of four straight monthly declines and reaching near an all-time annual high. Going back to the series introduction in 1986, there has only been one other October where the eagles scored better.

Harrisburg Doesn't Have Cash for Debt Payments

The city doesn't have the funds to pay a $99,025 payment for a 2006 "lease revenue note." Its debt-service fund is also about $28,000 short on covering a $206,927 payment due on a 2005 taxable-revenue bond that financed the expansion of the city's minor-league-baseball stadium, Mr. Ardo said.

The 2005 bonds are insured by Ambac Assurance Corp., according to its official statement. Its parent, Ambac Financial Group Inc., said Monday it may file for bankruptcy, which many analysts say won't affect the insurance unit's claims-paying ability. Harrisburg has already missed more than $10 million in debt payments tied to a $288 million incinerator project and is being sued by the bond insurer Assured Guaranty and Dauphin County, which made the payments to bondholders.

Detroit Utility Struggles To Stay On Top Of Theft

If you walk into a gas station or a party store in the city of Detroit, you might see a flyer taped up, advertising "help with gas and lights." But the phone number probably won't connect to a charity program or aid organization. More likely, it'll put you in touch with a fixer who will help you steal electricity or natural gas...... Part of the reason theft is so rampant in Detroit, Johnson says, is because the city has 60,000 abandoned homes.

"Every one of those abandoned homes is a potential squatter house," says Johnson. "So therefore you can't get utility service. So they steal.

Congress' Next Big Issue: How to Handle Jobless '99ers' (CNBC)

Their numbers rose to record levels in September as a total percentage of the unemployed. More than one in 10 jobless Americans—1.47 million, or 10.4 percent of the total—have been out of work for more than 99 weeks, with a few million more on the fourth and final tier of benefits.

They are among the individuals most impacted by the economic slowdown, and without help as many as five million more could be joining their ranks soon.

U.S. Homeownership at Decade Low as Foreclosures Rise

The homeownership rate was 66.9 percent, matching the second-quarter level that was the lowest since 1999, the U.S. Census Bureau said in a report today. The homeowner vacancy rate, or the share of properties vacant and for sale, was unchanged at 2.5 percent, according to the report.

Lenders are repossessing properties as borrowers fall behind in mortgage payments after the worst housing crash since the Great Depression. Banks seized a record 288,345 homes in the third quarter, up 22 percent from a year earlier, according to an Oct. 14 report from RealtyTrac Inc. in Irvine, California.

FAO Food Price Index Hits 27-Months High in Oct

Global food prices rose in October, with the FAO Food Price Index climbing for the fifth month in a row and reaching the highest level in 27 months, the U.N. Food and Agriculture Organisation said on Tuesday.

Melt Values of Silver Coins Posted at Coinflation

Melt value of a 1964 Roosevelt dime at $1.80

Melt value of a 1964 washington quarter at $4.51

Melt value of a 1963 Franklin half dollar at $9.02

Melt value of a 1935 peace dollar is at $19.29

National Debt Passes $13.7 Trillion

Total Public Debt Outstanding: 13,713,087,906,377.36

The 'Magic' Of Quantitative Easing (CNN Money video)

ECB, Bank of Japan Keep Wary Eye On Fed

The U.S. Federal Reserve is poised to pump more dollars into the U.S. economy, casting a long shadow over imminent decisions by other big central banks wary about what the Fed's move might do to the dollar.

The European Central Bank, the Bank of England and the Bank of Japan all hold meetings this week, amid concerns the Fed's monetary injection may send the dollar down against the euro and the yen, potentially holding back exports and harming the shaky recoveries in Europe and Japan.


Libya Says Oil At $100 Good For Producers

Oil producers would be increasingly comfortable with crude prices of $100 a barrel, because higher food prices and a weaker dollar are eroding their income, the top oil official for OPEC member Libya said on Tuesday.

The comments add to indications the Organization of the Petroleum Exporting Countries is unlikely to step in soon to quell rallying prices. Saudi Arabia on Monday also shifted upwards from a price range of $70-$80 it has backed for around two years. "Now the price will be more comfortable for the producers if it is around $100," Shokri Ghanem, chairman of Libya's National Oil Corporation, told Reuters. "The dollar is down and the prices of the other commodities are up."

Fed Easing Could Send Oil Above $90 A Barrel

Brent crude oil could rise above $90 a barrel before the end of the year if the Federal Reserve announces a new asset purchase programme of $500bn or more, says Francisco Blanch, global head of commodity research at Bank of America Merrill Lynch.

He believes the perception that more quantitative easing from the Fed has been fully priced in by commodity markets is misleading. “We believe oil is only starting to reflect current dollar weakness, leaving room for oil prices to rise as emerging market currencies strengthen.”

Bruederle Calls for German `Raw Materials Inc.' to Prevent China Monopoly

German Economy Minister Rainer Bruederle called on companies in Germany to form a commodities syndicate to focus investment on obtaining rare-earth metals and push back on a Chinese monopoly over the materials... Policymakers in Europe, the U.S. and Japan have called on China to restore rare-earth exports after the Chinese government in July announced cuts in production of the elements used in everything from hybrid vehicles and flat-screen TVs to weapons systems. China produces more 90 percent of the world’s rare earths.

Oil to Rise as Capacity Drops, Morgan Stanley Says

Crude oil prices will rise as spare production capacity drops to “untenable levels” by the end of 2012, Morgan Stanley said in a research report. Spare capacity passed its peak this year and may decline to 4.1 million barrels a day by the end of 2011 from 5.9 million barrels today, Hussein Allidina, an analyst at Morgan Stanley, said in the report today. It could drop to 2.5 million barrels a day by end-2012, he said.

“Tighter, impossible levels of spare capacity are seen from 2013 to 2015,” the report said. “With demand relatively inelastic in the short run, we reiterate our view that higher prices will be needed to ration demand.”

Alaskan October Oil Output Drops 5.9% on Lower Field Output

Alaskan oil production in October fell 5.9 percent from a year earlier because of lower output from fields including BP Plc-operated fields such as Prudhoe Bay, Endicott and Northstar.

Production averaged 654,418 barrels a day last month, compared with 695,235 in October 2009, according to the Alaska Tax Division. Output increased 3 percent from September when fields were returning to production from maintenance that began in July. The last time output in Alaska posted a year-on-year gain was in 2002, state records show.

Cotton Prices Set Record High on Supply Fears

Cotton prices jumped to another record high Tuesday amid growing concerns about meeting robust demand with tight global supplies.

Cotton for December delivery added 5 cents to settle at $1.3426 a pound, a record high. That's up 84 percent from July...."I'd be buying those socks and underwear and T-shirts now," First Capitol Group analyst Sharon Johnson said. "It is not going to be pretty when these prices really hit"

China Can Use More Copper Than World Has Now

China is on pace to almost triple its annual use of copper to 20 million tons in 25 years, according to CRU, a London-based metals and mining consulting firm. That’s more than the world produces today. Rising demand will create a potential global shortage of 11 million tons a year by 2035, CRU forecasts.

Article suggestions for the Daily Digest can be sent to [email protected]. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the "3 Es."


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Re: Daily Digest 11/3 - Fed Launching Bond Purchases, ...

"Nov. 3 (Bloomberg) -- China’s holdings of South Korean government bonds almost tripled in the first 10 months of this year as policy makers shifted part of the world’s largest foreign-exchange reserves out of U.S. Treasuries and into emerging-market assets."

"Nov. 3 (Bloomberg) -- International trade transactions settled in yuan more than doubled to a record in the third quarter as companies including Nokia Oyj and Metro AG turned to a currency that rose 24 percent against the dollar in six years.

The value of settlements jumped 160 percent from the prior three months to 126.5 billion yuan ($19 billion), the People’s Bank of China reported late yesterday. The amount exceeded all but one of seven forecasts in a Bloomberg survey of analysts. Metro, Germany’s biggest retailer, says paying Chinese suppliers in yuan benefits both parties.

“Doing business with China is much easier now,” said Thomas Burkhalter, finance director of Metro’s Hong Kong-based purchasing unit. “In the past, we have faced problems when there was a sudden movement in the U.S. dollar, which led suppliers to demand additional costs to cover exchange losses.”"

"China’s gold market may double in the next decade as retail investment and jewelry demand gain, an official from the World Gold Council said today.

Consumption may gain to 800 metric tons to 900 tons in the next ten years, Wang Lixin, the World Gold Council’s Greater China general manager, said at a Shanghai conference today. “It probably will be achieved earlier than that.” China’s jewelry and investment gold demand was 428 tons in 2009, according to the council."

"Not until March 1, 2014 will the last of the seven million properties that are currently delinquent, in foreclosure, or bank-owned finally return to life as homes or investments.

To put things in perspective, the XXII Olympic Winter Games in Sochi, Russia will have just ended, the next Presidential Administration will in office, Avatar 2 will be in release, the NFL’s top teams will be getting ready to play the Super Bowl at the Meadowlands, and freshmen in college today will be getting ready to graduate.

Forty months until today’s glut of distressed properties, known as the “shadow inventory,” are finally past us. That’s the latest prediction from Fitch Ratings, the expert source on the mortgage backed securities market."

"(Reuters) - Freddie Mac, the second-largest provider of U.S. residential mortgage funding, on Wednesday said ongoing weakness in housing resulted in a $4.1 billion third quarter net loss and another draw from the Treasury to maintain positive net worth.

Freddie Mac's (FMCC.OB) loss included a $1.6 billion dividend payment on senior preferred stock purchased by the Treasury since the financial crisis and housing slump pushed the mortgage buyer into conservatorship in late 2008.

It has requested $100 million from Treasury under its preferred stock purchase agreement, which would increase the total draws to $64.2 billion.

"As we near the end of 2010, the housing market remains fragile and has recently come under renewed pressure from slowing economic growth, weaker employment and foreclosure uncertainties," Freddie Mac Chief Executive Charles Haldeman said in a statement.

"We believe that it will be a considerable time until the housing market has a sustained recovery," he added."


  • Other news, headlines and opinion:

Fed Easing May Spark European Deflation, Impose Global `Tax,' Mundell Says

Hong Kong launches first local gold fund

The Era of High Growth Is Over: Derivatives Expert

Korea expected to see steep rise in national debts

QE2 of Fed Will Inflict Heavy Forex Loss on Asian Central Banks

Bernanke May Ignore Risk of Inflation, Growth Acceleration Similar to 2004

Bernanke Faces Greater Scrutiny After Republican Election Gains

The Fed's big gamble: Here's what could go wrong

Ireland Debt Swaps at Record High as Allied Signals 60% Chance of Default

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Re: Daily Digest 11/3 - Fed Launching Bond Purchases, ...

WASHINGTON (MarketWatch) -- Federal Reserve policymakers on Wednesday unveiled plans to purchase $600 billion of Treasurys by the end of June 2011 to revive the economy. This is a pace of about $75 billion per month. The Fed said it would regularly review the pace and the size of the program "as needed to foster maximum employment and price stability. The Federal Open Market Committee voted 10 -1 to use the credit programs. In its statement, the Fed said the recovery has been disappointingly slow. The Fed kept its benchmark interest rate at a record low level between 0-0.25%. Rates have been at this level since December 2008. The central bank made no change to the key pledge to keep rates "exceptionally low" for an "extended period." Thomas Hoenig, the president of the Kansas City Federal Reserve Bank, dissented for the seventh straight meeting, saying the risks of the new purchases outweighed the benefits.


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Re: Daily Digest 11/3 - Fed Launching Bond Purchases, ...

components of ISM manufacturing index:


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More lawsuits filed vs. banks accused of manipulating PM market

HSBC and JPM sued under RICO for silver market manipulation.  Are the sharks are smelling blood in the water?


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Re: Daily Digest 11/3 - Fed Launching Bond Purchases, ...

What does this "35% Per-Issue Limit" mean?  Is that 35% of a weekly Treasuary auction?  Can anyone help me here?


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Re: Daily Digest 11/3 - Fed Launching Bond Purchases, ...

While you were sleeping....

Emerging Market Policymakers Vow to Combat Fed's Easing

Policymakers from Brazil to South Korea and China on Thursday pledged to come up with fresh measures to curb capital inflows after the U.S. Federal Reserve said it would print billions of dollars to rescue the economy.


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Fed Will Surpass China As Top Holder Of US Debt By The End Of Th

Saxplayer, great articles!  Of the ones I've read so far, the one on Detroit, and on China's seriously increasing demand for copper, were really interesting. -Good indicators of where some things may be heading!

Sager, yeah, I saw that article too.  It does make you think public (mass) perception and opinion may really be shifting, when you see lawsuits against corruption amongs some of the big players actually (maybe?) gaining footing!

Chris, looking forward to reading your insights into this latest round of QE as it unfolds!!

grl, thanks for the news re the global reactions to our (US - sigh!) currency flooding.

Here's another addition, from ZH last night: "Presenting The Fed's Balance Sheet Through 2012 - Fed Will Surpass China As Top Holder Of US Debt By The End Of The Month", at http://www.zerohedge.com/article/presenting-feds-balance-sheet-through-2012-fed-will-surpass-china-top-holder-us-debt-end-mon

As is all too well known by now, starting over the next few days, the Fed will commence purchasing $75 billion in Treasury securities monthly until the end of June, and will buy an additional $35 billion in Treasurys to make up for declining holdings of MBS (due to repurchases). We still believe that as a result of the imminent drop in rates (especially those around the curve belly), as we have claimed for over a month, the feedback loop that will be created will result in a far greater repurchase frequency of MBS securities over the next 8 months, and we would not be surprised if at some point in Q2 2011, the Fed is buying $150 billion in Treasurys monthly. Since nobody will believe this until it is actually confirmed by the H.4.1., we will leave this topic alone for the time being. And after all its will "only" mean a rotation of Fed holdings, a switch in duration, and an impact on the shape of curve. What is certain is that on June 30, the Fed's balance sheet will have $2.68 trillion (or more) in holdings, of which $1.77 trillion will be in Treasurys, compared to the $840 billion today. What is also certain is that the Fed will not be able to stop there. Which is why we have extended the projection period through January 2012. At that point the Fed will hold $2.6 trillion in US Treasuries, or roughly 25% of total US marketable debt at that point.  And for those who collect now completely irrelevant statistics, the Fed will surpass China's $868 billion in UST holdings before the end of November. Yes, ladies and gentlemen, shit just got real.

Incidentally, nowhere do we assume that the Fed will have launched QE 3, 4, and so forth, over the next 12 months, even though we now estimate the probability of America becoming an exponentially self-monetizing, Weimar-type case study in hyperinflation at over 50%.

Double yikes!!


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Re: Daily Digest 11/3 - Fed Launching Bond Purchases, ...

RE: the energy stealing story from Detroit:

"...a growing number of people who can pay their bills are also stealing energy"

I don't know whether to be encouraged or scared by this statement.  The masses of middle class people finally realizing that following all the rules is a suckers game is what it will take for real change to get started

But real change, like the kind we need, is messy, scary, and sometimes dangerous.   And likely to make things far worse befre they get better.  Mostly because as part of this change, we will have to inevitable face some of the reality that our current system ignored (Sure, infinite exponential growth can take place in a system with finite resources!)

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Re: Daily Digest 11/3 - Fed Launching Bond Purchases, ...

News for 11/4:


"Asia-Pacific officials are preparing for stronger currencies and asset-price inflation as they blamed the U.S. Federal Reserve’s expanded monetary stimulus for threatening to escalate an inflow of capital into the region.

Chinese central bank adviser Xia Bin said Fed quantitative easing is “uncontrolled” money printing, and Japan’s Prime Minister Naoto Kan cited the U.S. pursuing a “weak-dollar policy.” The Hong Kong Monetary Authority warned the city’s property prices could surge and Malaysia’s central bank chief said nations are prepared to act jointly on capital flows.

“Extra liquidity due to quantitative easing will spill into Asian markets,” said Patrick Bennett, a Hong Kong-based strategist at Standard Bank Group Ltd. “It will put increased pressure on all currencies to appreciate, the yuan in particular has been appreciating at a slower rate than others.”"

"Market data collected by Lender Processing Services (LPS) during the month of September reveals that foreclosure timelines continue to increase, with borrowers in the latest stages of delinquency or in foreclosure languishing without having made a mortgage payment for up to 16 months.

The company’s Mortgage Monitor report released Wednesday illustrates the extreme congestion in foreclosure pipelines. LPS notes that the average time a loan remains delinquent in five particular judicial states – New York, Florida, New Jersey, Hawaii, and Maine – now exceeds 500 days."

"This month’s report also shows that approximately 1.13 million loans that were current at the beginning of January 2010 are at least 60 days delinquent or in foreclosure as of the end of September 2010 – a month-over-month increase of approximately 120,000 loans.

LPS says the last two months have seen an increasing trend in this new problem loan category – 1.84 percent of loans that were current six months ago are 60 or more days delinquent today.

The research firm puts the nation’s mortgage delinquency rate at 9.27 percent and the U.S. foreclosure inventory rate at 3.84 percent, for a total non-current loan rate of 13.11 percent."

  • Other news, headlines and opinion:

Look at the commodities headlines at Bloomberg


Asia May Coordinate to Prevent Currency Speculation, Thailand's Korn Says

China Will Boost Funds Investing Overseas to Curb Yuan Gains, Reduce Risks

Yuan Gains Drive Premium on Dollar Loans to a Two-Year High: China Credit

Hong Kong faces heat on dollar peg

Korea Should Cool Foreign Inflows, Central Bank Says

Tokyo threatens yen intervention

Brazil warns more Fed liquidity could lead to protectionist policies

Ireland Sovereign CDS Hit Fresh Record Wide Of 570 Bps

Bank of Japan Confronts Two-Decade Land Slump With Asset-Purchase Program

European Union Said to Plan Duties on Chinese Paper Goods to Fight Dumping

US money printing no 'magic wand' (ABC News)

Bank of America Edges Closer to Tipping Point: Jonathan Weil

'Fiscal squeeze' brought on by aging, economist says (Canada)

Tough Fiscal Problems Loom for Cities (Wall Street Journal on California pensions)

CDS costs on US Treasuries rise after Fed statement

Municipal Bond Market Isn't Facing Collapse, Wells Fargo Says

Romania Central Bank Raises Inflation Forecast on Effects of VAT Increase

Russia Bars Irish, Spanish Debt From Sovereign-Wealth Fund Investment List

Buffalo schools facing fiscal nightmare

Ireland is running out of time (by Ambrose Evans-Pritchard )

Applications for jobless aid rise sharply

Urban Decay in Flint, MI (Video)

Copper Rises 50% in `Red Gold' Rush on China Doubling Usage

$100 Oil Looms for JPMorgan, Merrill After Fed Stimulus: Energy Markets

Presenting The Fed's Balance Sheet Through 2012 - Fed Will Surpass China As Top Holder Of US Debt By The End Of The Month (zerohedge)

ICN 11/01/10 Constituion and Candidates, Social Security Underwater, TARP Losses Hidden (Informed Citizen News video)

Stock market losses kill Marin pension bonus bid

Hungarian Private Pension Funds Challenge Government Measures in Court

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