Daily Digest

Daily Digest 12/21 - Oil, Gold, Portugal, Legalized Thievery, Peak Oil

Tuesday, December 21, 2010, 12:28 PM
  • Soros Gold Bubble at $1,384 as Miners Push Buttons
  • Mortgage Lenders Ordered to Appear in NJ Court
  • Moody's Warns It May Cut Portugal's Rating
  • The Great Bank Heist of 2010
  • A Bleak Year in Europe
  • First POMO Of The Day Closes, Brings Fed's Treasury Debt Holdings To $999 Billion
  • J.P. Morgan Tops in Investment-Banking Revenue
  • Oil Imports to China Set to Slow in 2011 as Economy Cools
  • Iraq's Crude Production to Advance 17% Early Next Year, Oil Minister Says
  • Iran Oil Fields in Decline and Need Enhanced Discovery to Meet Demand

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Soros Gold Bubble at $1,384 as Miners Push Buttons 

History shows that when the price of an asset takes a parabolic climb like gold’s has, it’s eventually bound to crash, according to Mark Williams, an executive-in-residence and master lecturer at Boston University’s finance and economics department. And when it does it’s almost always the smaller, individual investors that get out too late, he said.

As much as half of the gold in exchange-traded funds may be held by individual investors, according to BlackRock, the world’s largest money manager. “Your little guy is going to get hit by the doorknob on the way out,” Williams said.

Mortgage Lenders Ordered to Appear in NJ Court

Six lenders who have combined to file nearly 30,000 foreclosure actions in New Jersey this year face the possible suspension of their operations next month under a court order announced Monday by state Supreme Court Chief Justice Stuart Rabner. "It's important that the judiciary ensures judges are not rubber-stamping documents that may not be reliable," Rabner said in a conference call Monday. He said he believes New Jersey is the first state to take such action against mortgage lenders, a view echoed by Ira Rheingold, an attorney and executive director of the Washington-based National Association of Consumer Advocates, which has tracked the foreclosure crisis. "To have a state Supreme Court haul in these lenders, it's something I have not seen reach this level," Rheingold said.

Moody's Warns It May Cut Portugal's Rating 

Moody's Investors Service Tuesday warned it may lower Portugal's credit rating by as much as two notches, dealing another blow to investor confidence in the euro zone.

Moody's warning came less than a week after the ratings agency said it may downgrade its ratings on Spanish government debt. It also came as Prime Minister Jose Socrates said he was "very satisfied" with the government's latest budget figures, which showed the central government deficit narrowing for the first time this year.

The Great Bank Heist of 2010 

This was the year America finally took on the power and greed of the Wall Street banks.

And the banks won.

They dodged the bullet of real reform, probably for all time. They bounced back to post huge profits, helped by legal theft from the middle class. They completed their takeover of both political parties — and bought themselves a new Congress even more pliable than the old one

Middle-class America is flattened, devastated and broke. The bankers that caused it all have escaped punishment. They’re raking in huge profits. Oh, and the tax cuts just got extended for high earners, too!

Game over.

A Bleak Year in Europe

Images define a year. A captured moment. A snapshot. Some we share together - like Charles and Camilla caught open-mouthed as the mob circles. Other images are our own. Three, in particular, stay with me.

First POMO Of The Day Closes, Brings Fed's Treasury Debt Holdings To $999 Billion

Today's first POMO has closed, with Brian Sack buying $7.790 billion of Treasury maturing between 6/30/2016 and 11/30/2017. Among the bonds purchased was $689 million of PK0, auctioned off less than a month ago, meaning the Primary Dealers continue to flip bonds from auction straight back to the Fed, making a few million in the process each and every time. And while not even POMO matters anymore, in a market entirely dominated by Delta, i.e., Goldman (even Joe Kernen earlier announced on live TV that "Goldman can do whatever it wants in the futures market."), trades, and where the cumulative TICK is now progressively negative, the only thing that may be of relevance is when will the Goldman vol traders decide they have had enough and start unwinding the trade on which they are massively profitable at this point. What certainly does matter, is that total US debt is now $999 billion, just $1.3 billion away from a trillion, a level which will be breached, as we expected last week, during today's second afternoon POMO in which the Fed will monetize another $1.5-$2.5 billion in TIPS.

J.P. Morgan Tops in Investment-Banking Revenue

J. P. Morgan Chase & Co. held onto its lead in investment-banking revenue in 2010, followed by Bank of America Corp. and Goldman Sachs Group Inc., according to preliminary year-end data released Tuesday by Dealogic. J. P. Morgan had $5.2 billion in investment-banking revenue for the year, including fees from debt and equity underwriting, advisory and lending, as the deal markets returned to life following the credit crisis. Bank of America had investment-banking revenue of $4.6 billion for the year, while Goldman had $4 billion. Morgan Stanley came in fourth, with revenue of $3.8 billion.


Oil Imports to China Set to Slow in 2011 as Economy Cools 

China’s appetite for oil, which helped drive crude to the highest level since October 2008, may ease next year as the government takes steps to tackle inflation and work on expanding refineries slows.

The nation, the world’s biggest oil consumer behind the U.S., may import 5.1 million barrels a day in 2011, up 6.3 percent from this year, according to the average of six analyst estimates in a Bloomberg survey. That compares with a 20 percent jump so far in 2010.

China’s inflation accelerated to the fastest pace in 28 months in November, fueling speculation the government will raise interest rates next year

Iraq's Crude Production to Advance 17% Early Next Year, Oil Minister Says 

Iraq forecast a 17 percent rise in oil output next year and invited companies from South Korea and Kazakhstan to sign immediately a delayed contract for the Akkas gas field, Oil MinisterHussain al-Shahristani said.

“Iraq’s oil production capacity will increase to 2.75 million barrels a day early next year,” Shahristani said in an interview in Baghdad yesterday. The country now produces about 2.35 million barrels of crude a day. Shahristani attributed the expected increase to investments by the international oil companies that have signed contracts to develop Iraqi fields.

Iran oil fields in decline and need enhanced recovery to meet demand

(Read the last sentence carefully)

Iran's oil sector is a key factor in the Middle East and the world at large. Iran is OPEC's second largest oil producer. The nation now claims oil reserves of 150 billion barrels as a result of a 34 billion barrel discovery in the Persian Gulf. The climate of Iran's oil industry is clouded U.S. and U.N. sanctions which hamper refinery upgrades. The sanctions also prevent major oil companies from working in the country. The biggest factor holding back the industry is a 13% annual decline rate.

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 12/21 - Oil, Gold, Portugal, Legalized ...

"LISBON/MADRID (Reuters) - Portugal was put on notice on Tuesday that its credit rating could be cut and fellow euro zone debtor Spain had to pay more to issue new debt, suggesting the currency bloc's crisis will rage unabated in 2011.

China, the world's new economic powerhouse, urged European policymakers to demonstrate as a matter of urgency that they can contain the euro zone's debt problems and pull the bloc around.

Ratings agency Moody's said it may cut Portugal's credit rating by one or two notches within three months, citing weak growth prospects as the government seeks to cut its debt, and climbing borrowing costs, although it said its solvency was not in question.

"The likely deterioration in debt affordability over the medium term and ongoing concerns about the economy's ability to withstand fiscal consolidation ... mean its outlook may no longer be consistent with an A1 rating," said Anthony Thomas, Moody's lead analyst for Portugal.

The cost of insuring Portuguese sovereign debt against default rose in response and the euro slipped."

"Andrew Bosomworth, head of Pimco's portfolio management in Europe, said current policies are untenable in the absence of fiscal union and will lead to a break-up of the euro.

"Greece, Ireland and Portugal cannot get back on their feet without either their own currency or large transfer payments," he told German newspaper Die Welt.

He said these countries could rejoin EMU "after an appropriate debt restructuring", adding that devaluation would let them export their way back to health.

Mr Bosomworth said EU leaders were too quick to congratulate themselves on saving the euro last week with a deal for a permanent bail-out fund from 2013.

"The euro crisis is not over by a long shot. Market tensions will continue into 2011. The mechanism comes far too late," he said. "

"Spain sold 3.88 billion euros ($5.1 billion) of three- and six-month Treasury bills, near the maximum target, even as borrowing costs rose amid lingering concern the nation will struggle to fund its deficit.

The Treasury auctioned 3 billion euros of 84-day bills at an average yield of 1.804 percent, the Bank of Spain said today in Madrid. That compares with 1.743 percent the last time the securities were issued on Nov. 23. The government also sold 876.7 million euros of 175-day debt at 2.597 percent, up from 2.111 percent last month. It aimed to sell a maximum of 4 billion euros from the two sales. "

"NEW YORK (AP) — New York's incoming governor, Democrat Andrew Cuomo, says he won't raise taxes even though he will inherit a budget deficit of at least $9 billion when he takes office in January. Ohio Republican Gov.-elect John Kasich is promising to cut taxes, despite a shortfall of about $8 billion.

And in California, incoming Democratic Gov. Jerry Brown — who ardently pursued innovative clean energy and environmental protection programs during his first stint in office, in the revenue-rich 1970s and '80s — will have to figure out this time how to close a budget gap projected at more than $25 billion.

Twenty-six states elected new governors last month — 17 Republicans, eight Democrats and one independent — and now they are going to have to reconcile their principles and campaign promises with some harsh fiscal realities: This is the worst budget climate for the states in at least a generation.

Cumulatively, the states face budget shortfalls of nearly $140 billion next year, according to the Center on Budget and Policy Priorities, a Washington think tank. To make matters worse, billions in aid to states from the federal government's $800 billion stimulus plan is set to dry up early next year."

"Dec. 21 (Bloomberg) -- Corporate bond sales froze yesterday after investors withdrew the largest dollar amount on record from investment-grade U.S. bond mutual funds last week.

The outflows were $2.5 billion in the week ending Dec. 15 amid rising Treasury yields, according to a Bank of America Merrill Lynch report citing data from research firm EPFR Global. High-yield mutual funds had $222 million of inflows, following $533 million in the earlier period, according to the report."

"Dec. 21 (Bloomberg) -- The pound fell versus the euro and dollar after the nation’s November budget deficit swelled to a record, exceeding economists’ forecasts.

Sterling weakened against 15 of its 16 most-actively traded peers as a survey showed British consumer confidence stayed at a four-month low. Net government borrowing rose to 22.8 billion pounds ($35.4 billion), up from 16.7 billion pounds a year earlier, the Office for National Statistics said. The median of 12 forecasts in a Bloomberg survey was 16.8 billion pounds.

The fact that borrowing costs have surged does highlight the tough task that the coalition government actually has,” said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. in London."

"As federal stimulus funds dry up and Maryland faces another $1.6 billion structural deficit, tough cuts to the state budget are on the horizon, Gov. Martin O'Malley told Patch.

O'Malley said the budget he will propose next month will be painful and many services will likely be impacted. While the projected gap between expected revenue and fiscal responsibilities mirrors that of the previous three years, there are no federal funds expected to arrive to bail out the state."

"FLINT, Mich. -- The Flint Police Department is closed on the weekends following the latest round of officer layoffs.

The Flint Journal reported new office hours took effect Saturday, the day after 20 police officers were laid off.

For the first time in decades, the department's doors will remain closed to the public on Saturdays and Sundays.

A sign on the door posts a phone number for the public to call if they must speak to a desk officer.

The department that historically has been open 24 hours a day already reduced daily office hours to 8 a.m. to 6 p.m.

Flint Mayor Dayne Walling laid off a total of 66 police officers this year to cope with a multi-million-dollar deficit. The city also made other cuts.

The layoffs bring Flint’s road patrol down to a total of 67 officers, with a total of 122 officers left on the department's payroll. In 1987, Flint had more than 300 officers.

TV5 was told the pink slipped officers were chosen based on seniority.

In March of this year, the city cut 46 officers in an effort to curb the city’s multimillion-dollar deficit.

Many residents fear the layoffs couldn't have been handed out at a worst time, as Flint recently record its record-setting 63rd homicide in 2010. The previous record was set in 1986, with 61 deaths. "

"Budget Committee Chair Roxanne Qualls says she hopes a budget will be passed tomorrow ... one that reduces, but cannot avoid layoffs, because of the size of the deficit ... 56-million dollars. About one hundred cops, one hundred firefighters, and one hundred other city workers are slated for layoffs unless things change. And police layoff notices are going out already.

The Sheriff's Department plan, from Council Members Qualls and Berding, would have the city layoff all 800 police patrol officers. The Sheriff's Department, which pays less, would hire them back, and the savings would be used to prevent fire layoffs."

"The use of food stamps has increased dramatically in the U.S., as the federal government ramps up basic assistance to meet the demands of an increasingly desperate population.

The number of food stamp recipients increased 16% over last year. This means that 14% of the population is now living on food stamps. That's about 43 million people, or about one out of every seven Americans.

In some states, like Tennessee, Mississippi, New Mexico and Oregon, one in five people are receiving food stamps. Washington, D.C. leads the nation, with 21.5% of the population on food stamps."

  • Other news, headlines and opinion:


Treasuries Fail to Recoup Loss as Commodities Signal Inflation

China's Gas Imports More Than Double on Rising Demand for Winter Heating

India's 10-Year Bonds Rise on Central Bank's Debt-Purchase Plan

Ukraine gross foreign debt rose $6.9 billion in Q3, according to NBU

Detroit Water and Sewer Revenue Bonds Are Downgraded by Moody's

Alberta premier backs off on goal of balanced budget

Costa Rican fiscal deficit 5.3% of GDP in 2010

Homeowners use 'show me the note' to fight foreclosure

Banks Use Swaps to Exploit Woes of US States, Cities, WSJ Says

Credit default risk of Germany reaches new high

S&P Cuts $5.46B In CDOs Backed by Subprime Mortgages

Gov. Jan Brewer asks for Congress' help on Medicaid (Arizona)

Abercrombie plans to ask for emergency funds to cover $71.6 million shortfall (Hawaii)

Allied Irish Banks moves £7.9bn property loans to country's 'bad bank'

Moody's warns it could downgrade Spain banks

$2tn debt crisis threatens to bring down 100 US cities (Refers to the 60 Minutes video)

Lansing Projects $15 million Deficit

Fed extends dollar swap arrangements

Scottish Investors Say No to Spanish Bonds Even at 5.5% Yield: Euro Credit

China Car Market to Extend Gains Over U.S., Automakers Say

Rein in deficits or risk EU-style crisis, Jim Flaherty warns provinces (Canada)

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Re: Daily Digest 12/21 - Oil, Gold, Portugal, Legalized ...

And there is a TIPS-related POMO this afternoon to the tune of a bit more than US$1 billion, so that'll push it over the trillion mark. 


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The Keiser Report features Canada

The second half of the show features Nicole Foss discussing the Canadian banking system and housing bubble. 

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Create? Why Not Destroy?
SagerXX wrote:

And there is a TIPS-related POMO this afternoon to the tune of a bit more than US$1 billion, so that'll push it over the trillion mark. 

So... If the Fed can create money to buy U.S. Treasury bonds, why can't it destroy? Cancelling that debt obligation would suddenly reduce the national debt by a trillion. Hmm....



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Soros Gold Bubble at $1,384 as Miners Push Buttons 

Gold is not in a bubble, it is finally being set free from it's price constraint.  

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Re: Create? Why Not Destroy?

... and who would get wiped out if that happened?  

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Dennis Kucinich Bill to "Delete the Fed"

This is the first I've heard of this very bold (dare I say encouraging) House Bill, so I thought I'd share...

In "Dennis Kucinich: Delete the Fed," Karl Denninger expresses his opinion about a just-introduced Bill by Kucinich (D) of Ohio calling to abolish the Federal Reserve. The Fed would be replaced with the "United States Monetary Authority" that would be charged with preserving the purchasing power of a new US currency - to be issued by the Treasury -  "United States Notes."

The Bill is called the "National Emergency Employment Defense Act of 2010" and it is included at the end of the editorial.

The link is: 


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Re: Daily Digest 12/21 - Oil, Gold, Portugal, Legalized ...

From December 19, 2010 segment on 60 minutes:  "State budgets:  the Day of Reckoning"

"(CBS)  By now, just about everyone in the country is aware of the federal deficit problem, but you should know that there is another financial crisis looming involving state and local governments.

It has gotten much less attention because each state has a slightly different story. But in the two years, since the "great recession" wrecked their economies and shriveled their income, the states have collectively spent nearly a half a trillion dollars more than they collected in taxes. There is also a trillion dollar hole iln their public pension funds.

The states have been getting by on billions of dollars in federal stimulus funds, but the day of reckoning is at hand. The debt crisis is already making Wall Street nervous, and some believe that it could derail the recovery, cost a million public employees their jobs and require another big bailout package that no one in Washington wants to talk about."


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"State budgets: the Day of Reckoning"

r, that 60-minutes segment was just fascinating—thanks. 

One of the video extras made the point that no one wants to talk about.  When the time comes, likely next spring, for additional federal bailout money to keep a number of the state and city budgets afloat, this will be portrayed as Red states bailing out Blue states, or, rural regions bailing out urban regions.    It will be interesting to see if the Congress will approve the billions (trillions?) needed to keep things going for another year. 

As divisive an issue that this will be in the USA, however, I can imagine how much more divisive it may seem in Europe: Germans bailing out the Greek or Irish.  

The US and EU are truly in a race to the bottom.

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Re: Daily Digest 12/21 - Oil, Gold, Portugal, Legalized ...

Meredith Whitney's video on this page is worth the watch! http://www.cnbc.com/id/40769692

A wave of defaults by state and local governments in the coming months will spark a selloff in the municipal bond market, hurting US economic growth and stocks and causing social unrest as governments are forced to lay off workers and cut back on services, well known financial analyst Meredith Whitney told CNBC Tuesday.

Meredith Whitney
Meredith Whitney on Closing Bell

Responding to the uproar over her "60 Minutes" interview broadcast on CBS Sunday night, Whitney defended her prediction that at least 50 to 100 cities and towns could default on their debt as states and the federal government cut back on financial support.

Muni experts, including an analyst from Standard & Poor's, dismissed her predictions, saying the numbers don't add up.

"I appreciate that the reaction is so violent," she said in a live interview with CNBC. "I didn't put the debt on these states. We're looking at the numbers. This is how it plays out."

The big problem is that cash-strapped states will no longer be able to provide the financial support to municipalities as they have in the past, said Whitney, who is CEO and founder of Meredith Whitney Advisory Group.

"States clearly have been funding municipal governments—for now up to 40 percent of their total expenditures," she explained. "As the states become more compromised from a fiscal standpoint, that funding is going to end."

The federal government is unlikely to bail out the states either, added Whitney, because the cost—which she put at $1 trillion—would cause a political backlash. "Who in Nebraska's going to want to bail out someone in Florida?" she said.

She also sees parallels with the turmoil in Europe over austerity measures imposed there.

"When you have so many different municipalities default ... you going to have so many issues in terms of layoffs of employees," she said. "This is going to be such a wider-spread issue. It's going to look like Europe in terms of programs are cut, you're going to see a lot of social unrest."

Whitney, who became famous for predicting the financial crisis, also said the bigger coastal states are underperforming economically—mostly because of the real estate decline—while the mid-section of the country is doing somewhat better. But she said that's not enough to even out the national economy and have GDP growth of more than 2 percent in the coming months.

Whitney added that it's way too soon to see muni bonds as a buying opportunity. But she said that can change quickly.

"When you start to see the first major defaults in this area [the states and cities], when you see more defaults and indiscriminate selling—if you do your research now and figure out who's protected where and which revenues are protected, there will be great buying opportunities," Whitney said.

"People are complacent about these defaults. The news about all this isn't out there yet," Whitney went on to say. "And only when it is out there, then there will be a buying opportunity [for munis]."

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Re: Dennis Kucinich Bill to "Delete the Fed"

They did something like this in Mexico several years back.  They lopped of three zeroes from their currency and issued the "New Peso" in the mid 90's, I think.  In fact, this very afternoon I was showing my grandson some old pesos that I had saved from my business days in that country.

But  first  they had hyper inflation which took the value of a 1000 peso note from US$80 in 1976 to less than US 30 cents by 1988.  Destroyed the middle class in the process.  Interestingly, they got into the habit of having financial crises every six years, during the (lame duck) period between election of the new President but before he took office.  (ring a bell?)   I was personally involved with running U.S. owned businesses in Mexico City during this entire timeframe.

Similar thing happened to Argentina early this century.  Brazil did the same thing in the late 80's  I had a ringside seat for that one too.

Too soon for the US to issue the new money.  First we have to trash our dollar until it's worthless, and wipe out the middle class savers and investors.  This will take a few years.  Then the new money comes out. 

I agree the Fed needs to go.  This idea that a little bit of inflation is good is totally ignorant.  Inflation is nothing more than a mechanism to force people's money into the formal economy where the government can track it and tax it.  Without inflation, one can stick his cash in the mattress and not worry about loss of purchasing power.  

Only a stable currency with consistent buying power will yield a healthy economy for the long term.  But, I noticed a long time ago that nobody listens to me, so, I do what I can on my own to protect my position.  That helps, but won't be enough when the SHTF.




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Re: Daily Digest 12/21 - Oil, Gold, Portugal, Legalized ...

WOW this is a much watch video


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Re: Daily Digest 12/21 - Oil, Gold, Portugal, Legalized ...

If you want to pimp your website, that's fine, but please at least do us the courtesy of explaining what it is you are trying to get us to view and why.

Otherwise, these gratuitous droppings will simply be deleted as they are not additive to the flow or conversation.

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Re: Daily Digest 12/21 - Oil, Gold, Portugal, Legalized ...

James Turk says we are on edge of hyperinflation:



With gold and silver consolidating recent gains, King World News interviewed James Turk out of Spain.  When asked about the action in both gold and silver Turk stated, “Rising interest rates along with the surge in commodity prices that we have been seeing in the back half of this year is writing on the wall that hyperinflation is very near.  If anyone needs further proof just look at what QE2 is already doing.  The Fed is turning government debt that the market doesn’t want into currency which is the cause of all hyperinflation.” 


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Re: Daily Digest 12/21 - Oil, Gold, Portugal, Legalized ...
cmartenson wrote:

If you want to pimp your website, that's fine, but please at least do us the courtesy of explaining what it is you are trying to get us to view and why.

Otherwise, these gratuitous droppings will simply be deleted as they are not additive to the flow or conversation.

Smackdown by Doc Martenson! :-)


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