Gold World News Flash |
- Whoops! Will China's Government Pay Heed To One Of Its Central Bankers?
- Peter Schiff on Why the American Economy Is Broken – and What to Do About It
- 9.4% Unemployment! How The Government Lies.
- SILVER MANIPULATION EXPLAINED
- Precious Metals: The Outlook for 2011
- [## JANUARY MACRO ECON REPORT COMING wednesday 12th ##]
- The Silver Bears Are Back For Round Three, Explaining Two Key Recent Developments In The World Of Silver
- Ambrose Evans-Pritchard: Deepening crisis traps America's have-nots
- France Scales Back its Goal of Global Monetary Reform
- Got Gold Report – January Gold, Silver Pullback
- A Global Album Of Sovereign Insolvency
- The Illusion of the U.S. Savings Rate
- Mistakes With Minimum Wage
- 2010 Silver Eagle Bullion Annual Sales Record at 34.6 Million
- Weekly metals wrapup, Embry interview posted at King World News
- Banks lose crucial Massachusetts foreclosure case
- Never any blackout on Fed's private chats with investment houses
- Gold in Canadian Dollars: The Impact of Interest Rates
- Outlook 2011: Fear and Love Driving Gold Demand
- Does Breaching Its 50 DMA Spell Gloom for Gold?
- How to Escape from Debt Slavery
- $250 Silver – Chris has some ideas
- Unlike any other multi-billion dollar business in history, the fact is, if people wanted to they could shut facebook down forever in a day
- Send in the clowns
- Using John Williams (shadowstats) numbers to get the real inflation adjusted price for Gold
- 2011 Resolutions
- Yellen Bluffs
- Massive Silver Withdrawals From The Comex
- Will the Gold Rally Last?
- Imagine paying your next parking ticket in gold Krugerrands or renewing your driver license using American Gold Eagles.
- “On The Edge” with David Morgan of silver-investor.com
- Gold Bottom or Breakdown?
- Central Banks are Acquiring Gold, Dumping US Dollars
- Collapse of the Welfare State
- Focus on Dine Equity (DIN): High Debt Binging During The Credit Bubble Causes Indigestion For This Food Chain!
- On The Four Year Anniversary Of The Paulson-ACA Meeting That Conceived Abacus
- New Year Silver Sale
| Whoops! Will China's Government Pay Heed To One Of Its Central Bankers? Posted: 09 Jan 2011 04:24 PM PST Central banker urges China to cut U.S. debt holdings: report China should further diversify its huge foreign exchange reserves away from U.S. government debt to reduce its risk exposure, a central bank official said in comments published on Monday. Here's the news report from reuters: LINK One would have to guess that this comment out of China this evening is why the dollar is lower and gold/silver have popped higher from Friday's close. 
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| Peter Schiff on Why the American Economy Is Broken – and What to Do About It Posted: 09 Jan 2011 03:33 PM PST Sunday, January 09, 2011 – with Anthony Wile Peter Schiff The Daily Bell is pleased to present an exclusive interview by Peter Schiff (left). Introduction: Peter Schiff is CEO of Euro Pacific Capital, a full-service registered broker/dealer, member FINRA/SIPC, which specializes in foreign securities. He is recognized for his knowledge of the foreign securities markets as well as the currency and gold markets. Mr. Schiff delivers lectures at major economic and investment conferences, and is quoted often in the print media, including the Wall Street Journal, New York Times, L.A. Times, Barron's, BusinessWeek, Time, and Fortune. His broadcast credits include regular guest appearances on CNBC, Fox Business, CNN, MSNBC, and Fox News Channel, as well as hosting the daily Peter Schiff Show on radio. As an author, he has written five bestselling books, including the recent: "Crash Proof 2.0: How to Profit from the Economic Collapse" and "How an Economy Gro...
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| 9.4% Unemployment! How The Government Lies. Posted: 09 Jan 2011 03:22 PM PST Hooray…Happy days are here again! That is exactly what the elite would have us believe with the 9.4% unemployment number in this huge CONfidence game otherwise known as the USEconomy. "During times of universal deceit, telling the truth becomes a revolutionary act" -George Orwell We were having dinner at my in-law's house and I had overheard the TV playing in the back ground. At one point, I thought I had heard the squealing of teenagers who were fawning over Justin Beiber. Instead, it turned out that it was someone on the news reporting the new, much lower 9.4% unemployment rate. I could hear the panting of excitement spoken by the breathless reporters who were interviewing very serious economists about this new 9.4% rate. The news aired their personal interest piece about a girl who was just hired at an internet company. She commented with the utmost confidence that the economy was getting better!! You have all heard that saying, "it is a recession when your neighbor loses a job, but when you lose a job it is a depression." Well, according to her, we are out of her depression. But alas, this is all a dream and the media is using their very best, tried and true propaganda to keep the people from getting too upset with reality. Let me just state that the real rate of unemployment is much, much more than the 9.4% and if the government really reported what was really going on, there would be revolution in the morning. Allow me to destroy this fictional 9.4% number and the billion dollar propaganda machine that provides cover for the trillion dollar banking and government schemes. I will accomplish this magical feat with writing a blog post in my pajamas. That is real magic! "There are three types of lies: Lies, Damned Lies, and Statistics." -Mark Twain. 
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| Posted: 09 Jan 2011 02:16 PM PST DA BEARS EXPLAIN THE MANIPULATION OF THE SILVER MARKET
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| Precious Metals: The Outlook for 2011 Posted: 09 Jan 2011 01:57 PM PST This Thursday night is our first precious metals Solari Report of the new year. Franklin and I will talk about what happened in 2010 and share our outlook for the silver and gold markets in 2011. One of our expectations is that we will experience greater volatility in all markets, as well as in the general [...]
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| [## JANUARY MACRO ECON REPORT COMING wednesday 12th ##] Posted: 09 Jan 2011 01:00 PM PST
This post has been generated by Page2RSS
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| Posted: 09 Jan 2011 11:47 AM PST
Confused by the recent downdraft in the price of (paper) silver... Even more confused by what is happening with the record open interest in the metal? Have no fear. The bears are here, and explain things in their traditionally simple and sound effect-filled way.
And for those who are confused by the above, here is another explanation of what may be happening courtesy of a "letter" to Blythe (thanks John).
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| Ambrose Evans-Pritchard: Deepening crisis traps America's have-nots Posted: 09 Jan 2011 10:56 AM PST By Ambrose Evans-Pritchard http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/824918... The United States is drifting from a financial crisis to a deeper and more insidious social crisis. Self-congratulation by the US authorities that they have this time avoided a repeat of the 1930s is premature. There is a telling detail in the US retail chain store data for December. Stephen Lewis from Monument Securities points out that luxury outlets saw an 8.1pc rise from a year ago, but discount stores catering to America's poorer half rose just 1.2 percent. Tiffany's, Nordstrom, and Saks Fifth Avenue are booming. Sales of Cadillac cars have jumped 35 percent, while Porsche's US sales are up 29 percent. Cartier and Louis Vuitton have helped boost the luxury goods stock index by almost 50 percent since October. Yet Best Buy, Target, and Walmart have languished. Such is the blighted fruit of Federal Reserve policy. The Fed no longer even denies that the purpose of its latest blast of bond purchases, or QE2, is to drive up Wall Street, perhaps because it has so signally failed to achieve its other purpose of driving down borrowing costs. Yet surely Ben Bernanke's "trickle down" strategy risks corroding America's ethic of solidarity long before it does much to help America's poor. ... Dispatch continues below ... ADVERTISEMENT Opportunity in the gold coin market Swiss America Trading Corp. alerts GATA supporters to an opportunistic area of the gold coin market. While the gold bullion market has been quite volatile lately and as of November 29 gold has risen only $7 per ounce over the last month, the MS64 $20 gold St. Gaudens coin has risen about 10 percent in the same time. The ratio between the price of these coins and the price of gold is rising. If you'd like to learn more about the ratio and $20 gold coins, Swiss America can e-mail you a three-year study of it as well as other information. Swiss America also can provide a limited number of free copies of "Crashing the Dollar," a book written by Swiss America's president, Craig Smith. For information about the ratio between the $20 gold pieces and the gold price and for a free copy of "Crashing The Dollar," please call Swiss America's Tim Murphy at 1-800-289-2646 X1041 or Fred Goldstein at X1033. Or e-mail them at trmurphy@swissamerica.com and figoldstein@swissamerica.com. The retail data can be quirky but it fits in with everything else we know. The numbers of people on food stamps have reached 43.2 million, an all time-high of 14 percent of the population. Recipients receive debit cards -- not stamps -- currently worth about $140 a month under President Obama's stimulus package. The US Conference of Mayors said visits to soup kitchens are up 24 percent this year. There are 643,000 people needing shelter each night. Jobs data released on Friday was again shocking. The only the reason that headline unemployment fell from 9.7 to 9.4 percent was that so many people dropped out of the system altogether. The actual number of jobs contracted by 260,000 to 153,690,000. The "labour participation rate" for working-age men over 20 dropped to 73.6 percent, the lowest the since the data series began in 1948. My guess is that this figure exceeds the average for the Great Depression (minus the cruellest year of 1932). "Corporate America is in a V-shaped recovery," said Robert Reich, a former labour secretary. "That's great news for investors whose savings are mainly in stocks and bonds, and for executives and Wall Street traders. But most American workers are trapped in an L-shaped recovery." It is no surprise that America's armed dissident movement has resurfaced. For a glimpse into this sub-culture, read Time Magazine's "Locked and Loaded: The Secret World of Extreme Militias." Time's reporters went underground with the 300-strong "Ohio Defence Force," an eclectic posse of citizens who spend weekends with M16 assault rifles and an M60 machine gun training to defend their constitutional rights by guerrilla warfare. As it happens, I spent some time with militia groups across the US at the tail end of the recession in the early 1990s. While the rallying cry then was gun control and encroachments on freedom, the movement was at root a primordial scream by blue-collar Americans left behind in the new global dispensation. That grievance is surely worse today. The long-term unemployed (more than six months) have reached 42 percent of the total, twice the peak of the early 1990s. Nothing like this has been seen since World War II. The Gini Coefficient used to measure income inequality has risen from the mid-30s to 46.8 over the last quarter century, touching the same extremes reached in the Roaring Twenties just before the Slump. It has also been ratcheting up in Britain and Europe. Raghuram Rajan, the IMF's former chief economist, argues that the subprime debt build-up was an attempt -- "whether carefully planned or the path of least resistance" -- to disguise stagnating incomes and to buy off the poor. "The inevitable bill could be postponed into the future. Cynical as it might seem, easy credit has been used throughout history as a palliative by governments that are unable to address the deeper anxieties of the middle class directly," he said. Bank failures in the Depression were in part caused by expansion of credit to struggling farmers in response to the US Populist movement. Extreme inequalities are toxic for societies, but there is also a body of scholarship suggesting that they cause depressions as well by upsetting the economic balance. They create a bias towards asset bubbles and overinvestment, while holding down consumption, until the system becomes top-heavy and tips over, as happened in the 1930s. The switch from brawn to brain in the internet age has obviously pushed up the Gini count, but so has globalization. Multinationals are exploiting "labour arbitrage" by moving plant to low-wage countries, playing off workers in China and the West against each other. The profit share of corporations is at record highs across in America and Europe. More subtly, Asia's mercantilist powers have flooded the world with excess capacity, holding down their currencies to lock in trade surpluses. The effect is to create a black hole in the global system. Yes, we can still hope that this is a passing phase until rising wages in Asia restore balance to East and West, but what it if it proves to be permanent, a structural incompatibility of the Confucian model with our own Ricardian trade doctrine? There is no easy solution to creeping depression in America and swathes of the Old World. A Keynesian "New Deal" of borrowing on the bond markets to build roads, bridges, solar farms, or nuclear power stations to soak up the army of unemployed is not a credible option in our new age of sovereign debt jitters. The fiscal card is played out. So we limp on, with very large numbers of people in the West trapped on the wrong side of globalization, and nobody doing much about it. Would Franklin Roosevelt have tolerated such a lamentable state of affairs, or would he have ripped up and reshaped the global system until it answered the needs of his citizens? 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(TSX-V: PCY) reports that it has received additional assays results from its 100-percent-owned Wellgreen PGM Ni-Cu property in the Yukon, Canada. Diamond drill holes WS10-179 to WS10-182 were drilled during the summer of 2010 by Northern Platinum (which merged with Prophecy on September 23, 2010). WS10-183 was drilled by Prophecy in October 2010. Highlights from the newly received assays include 71.17 metres from surface of 0.52 percent NiEq (0.310 percent nickel, 0.466 g/t PGMs + Au, and 0.233 percent copper) and ended in mineralization. For more drill highlights, please visit: http://prophecyresource.com/news_2010_nov29.php
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| France Scales Back its Goal of Global Monetary Reform Posted: 09 Jan 2011 10:41 AM PST After the last G20 meeting in South Korea, France attained the Presidency of the G20. In recent years, especially with the onset of the Global Financial Crisis, the G20, and to an extent, the IMF have become the de facto global bodies for international cooperation, or at least a forum for the appearance of cooperation. The UN has become largely ineffective, if not entirely absent from the crisis. Last year, French President Nicolas Sarkozy was rather ambitious in what his goals would be in confronting the global financial crisis. From Bloomberg last November, at the G20 in Seoul: The group's final statement after a summit in Seoul today, which cited the dangers of competitive devaluations and volatile capital flows, underscored Sarkozy's main goal as president of the group of "updating" the global monetary order, he said in a closing press conference. "It's already a success that the G-20 agrees that the international monetary system is a problem," Sarkozy said. "That wasn't always the case." While Sarkozy avoided castigating any country for unstable foreign-exchange markets, in the past he blamed the dollar's dominant role as a reserve currency for helping fuel the financial crisis. French officials have been vague about what they'd suggest to replace it, partly because there aren't any ready alternatives.SOURCE No one can say that Sarkozy lacked ambition. I guess it is due to the uniquely French habit of publicly admonishing the US and its (mis)handling of the US Dollar. Charles de Gaulle was well known for his criticism of US monetary and fiscal policy in the 1960s. Many would say it was France's alarm over US Dollar management that accelerated the end of the Bretton Woods System of US Dollar/Gold convertibility. de Gaulle, after all, not only wanted his dollars exchanged for gold, he actually sent battleships to New York City to physically pick the stuff up. Germany was not so distrustful, and to this day, much German gold sits in the vaults of the NY Federal Reserve. But enough of the history. It looks like Sarkozy has scaled back his ambitious plans for heading the G20 this year. From iMarketNews: G20: France Downsizes its Aim to Reform Global Monetary System France's high hopes for an overhaul of the global monetary system under its presidency of the G20 slammed into the hard realities of sovereign national interests at a brain-storming session this week. A debate among eminent academics and finance ministers -- all sympathetic to the aim of restructuring the chaotic and risk-prone world of volatile exchange rates and uncontrolled capital flows -- over alternatives and how to get there made clear that the odds for even minor corrections are extremely small. French Finance Minister Christine Lagarde, who knows as well as anybody how intractable international negotiations can be, made clear from the outset that France's ambitions for reform are in fact fairly modest. "I won't supply any answers," Lagarde told a two-day colloquium here bravely entitled "New World, New Capitalism." Rather the aim of France as it takes over the presidency of the G20 this year is to pose the questions, solicit responses and explore solutions, she said. This is big a step down from President Nicolas Sarkozy's dream of dethroning the dollar and ushering in a multi-polar monetary order. SOURCESo there you have it. Once again, international cooperation is subordinated to national interests. But this should not really be a surprise. In the early 1900s, it was the British Pound that was the world's reserve currency. And why? Because of a thing called the British Empire. And at the close of World War II, as the British Empire faded, the US, the lone dominant power, took over that role with the US dollar under what was called the Bretton Woods System. That system lasted until 1971 when Nixon closed the gold window and ended gold convertibility of the US Dollar. The new system, the one we have today, was once again dictated by the US to the rest of the world. The US was still a Superpower, and the Western World was still living under the threat of the USSR. Not much room for disagreements back then. However, those days are over. If historically, a monetary system is dictated to the rest of the world by the pre-eminent economic and military power, what happens when that superpower's status is diminishing as others attain military and economic strength? Has there ever been a period in history when global cooperation amongst (somewhat) equals resulted in an agreed upon monetary system? I can not find any examples. Alan Beattie, in yesterday's Financial Times, wrote: Tensions Rise in Currency Wars. The Financial Times also had another article titled: Trade War Looming, Warns Brazil. These should be no surprise. When a Superpower is facing tremendous financial issues of its own in an increasingly multipolar world, it will have a difficult time dictating what everyone else should do. And everyone else does what they have to do to protect themselves - thinking about the global consequences is a secondary concern, if it is a concern at all. It is a central tenet to the theory of this blog that international conflict, not cooperation will likely be the outcome of the global financial crisis. So far, I have yet to see any concrete steps that lead in the direction of global cooperation. 
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| Got Gold Report – January Gold, Silver Pullback Posted: 09 Jan 2011 10:02 AM PST The U.S. national debt now has a "14" handle, as in $14 trillion to start 2011. Good thing for the U.S. dollar that the current focus of sovereign debt angst is across the pond on the PIIGS in Europe. Those serious debt worries have cut the legs out from under the euro (again), giving an "assist" to gold and silver bears in U.S. dollar terms, with the metals already under profit taking pressure.
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| A Global Album Of Sovereign Insolvency Posted: 09 Jan 2011 09:17 AM PST
When it comes to providing analytical perspectives and empirical insights into the realm of sovereign deterioration, few come close to the work of Reinhart and Rogoff. Citi’s Willem Buiter is one such man. In his latest summary piece describing in excruciating detail just how bad things are at the sovereign level (and judging by tonight's opening print in the EURUSD more are starting to realize this), Buiter provides a terrific country by country guide of what is now an insolvent world, starting with the merely extremely risky, going through the backstop-baiters, and finishing with the time bombs that have already gone off and everybody pretends not to care. For those who do care, this is a definitive guide to what each individual European (and not only) country can look forward to in an age of global moral hazard. The only open question: with China's interest now to preserve the Euro's viability, how will Beijing act in the next few months as the eurozone finally starts unraveling. But before getting into the gritty details, here is the latest updates series of sovereign charts.
“Average government maturities are between five and eight years in most countries”
“High debt EA periphery is also largely united (except Italy) in running current account deficits and having large negative net international asset positions”
10 Year Sovereign Yieds
Selected Countries Growth Outlook
Change in PIIGS’ Cost of Capital
Composition and Ownership of European Sovereign Debt
And with that chartist update out of the way, here is how Buiter ranks the sovereign conflagration, from the place where the fire is burning brightest, to where it is merely dormant.
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| The Illusion of the U.S. Savings Rate Posted: 09 Jan 2011 09:17 AM PST By Jeff Nielson, Bullion Bulls Canada As a "numbers guy", there is one clich̩ for which I have always held the utmost contempt: "statistics can be used to say anything". This is literally a half-truth in that the actual truth is that statistics can be abused to say anything Рprimarily because the general public is so utterly clueless about the rules of statistics that they rarely notice when those rules are violated. Worse still, the majority of statistical "abuses" do not involve violations of the (extremely) technical rules which govern all statistics, but with simply a failure of logic and/or common sense. In this respect, it would be hard to name another statistic which has received such utterly abysmal treatment by "experts" and media talking-heads alike than the U.S. savings rate. Many people are aware that in the previous decade the U.S. savings rate plummeted into deeply negative territory for the first time since the Great Depression. However, when the "savings rate" surged back into positive territory, all of these media pundits have made the logical/statistical error of concluding that "Americans" are saving significant sums of money again.
The error here comes from treating a number which is nothing but a simple average as if it was broadly applicable to the entire population. A hypothetical numerical example will illustrate this mistake. Let us assume that the "U.S. population" was comprised of fifty individuals: one billionaire (who managed to save $50 million dollars last year), and 49 poor people – who all saved nothing. The "savings rate" for this population would be (on average) $1 million/year. Does this mean that all of the poor people in the U.S. became "millionaires" last year? Obviously not. Similarly, it is an utterly meaningless number to state that the "U.S. savings rate" was 5% or 6%, when all of that "saving" is being done by the fat cats at the top. We know that this is unequivocally true from all of the other empirical evidence around us. Ten's of millions of Americans have lost their jobs, or been forced into part-time work. Ten's of millions of other workers have seen their wages falling. Meanwhile (in the real world) Americans are being ravaged by high inflation (such as the 59% annual increase in health insurance payments in California). Yet we are supposed to believe that despite falling incomes and rising expenses that the "savings" of these individuals has suddenly spiked? Such a conclusion would be possible – if Americans had significant "discretionary income" that they could now choose not to spend. However, one of the primary reasons that the U.S. savings rate had turned negative in the first place is that Americans as a whole had leveraged themselves into so much debt that they have no discretionary income. More articles from Bullion Bulls Canada….
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| Posted: 09 Jan 2011 09:11 AM PST As if China does not have enough problems with inflation as it is, being 5.1% overall and with 11.7% inflation in food prices, now, astonishingly, Bloomberg reports that "Beijing will raise the minimum wage by 20.8% in 2011, becoming the latest local government to lift pay in a country where inflation is running at the fastest clip in more than two years." Not only is that hefty 20.8% boost in wages going to be an instant increase in demand for all kinds of things that can't be instantly increased in supply, but it is the second raise in the minimum wage this year! Wages are rising, so demand for goods and services is rising, which means inflation in prices. Yikes! What in the hell are these Chinese morons thinking about? In perspective, the increase brings the minimum monthly income to, according to Bloomberg, 1,160 yuan, which they calculate as being the equivalent of $175 a month, which means that there are 6.62 yuan per dollar, which seems to be less than it used to be. Astonishingly, A Whole Lot Of Yuan (AWLOY) are going to be necessary because, again astonishingly, "The city will also raise pension and unemployment benefits." Wow! If you have achieved True Mogambo Enlightenment (TME), or if you have some tiny smattering of education about the history of the last 4,000 years, or even if you don't, you must instinctively know that creating more and more money, to give to more and more people, is a Gigantic Freaking Mistake (GFM). If it is NOT a GFM, then why hasn't every government in all of history done it, you moron? It is, alas, in some respects, not unlike that other GFM where you somehow agreed to marry, and then there was that GFM of having kids, and then that GFM of not immediately selling them on the open market when they were still young and cute and wouldn't imprint "dad" on me, but instead made another GFM by agreeing to "learn to love them," which turned out to be easier said than done, especially when they reach that age where they start getting "clingy" and want to "be with me", even though I am telling them, "Not now, sweetie! Daddy is busy writing hate mail to the evil Federal Reserve, telling them how much I hope they rot in hell because of the economic misery and suffering they have created when they spent decade after freaking decade creating more and more money, which will end, as such suicidal idiocy always does, in a painful, terrifying inflation, and the only people who will prosper will be people who own silver and gold, and enough firepower to keep the morons at bay! People like you and me, honey! Daddy's little darling! Sugar lumps! Now scram!" And then when kids get a little older, they start telling you how stupid you are, and how much they hate you, and how all they want is for me to love them, love them, love them and blah blah blah, and even though you retreat to the safety of the Mogambo Bunker Of Bunkers (MBOB) and slam the door, you can hear them through the walls, whining and bleating. Even so, creating more and more money to give to more and people is worse than that! In fact, continually creating excess money is the proverbial Primrose Path To Hell (PPTH), a fitting description because it looks so pretty and flowery all the way to the very gates of hell, whereupon nothing looks pretty or flowery ever, ever again, or until after you are dead, whichever comes first. And to prove once and for all that the Chinese central bankers and government officials are laughable idiots just like all the rest of the central banks and government officials Around The Freaking World (ATFW), the reason that Chinese local governments are "augmenting wages" and raising pensions, as unbelievable as it is, is to "head off worker unrest and help households cope with accelerating inflation." Hahaha! You can tell by my rude laugh that I am literally snorting in scorn and dismissive condescension at these Chinese idiots, who are now proved to be just like the rest of the corrupt idiots everywhere who think that the inflation in prices caused by previous inflations in the money will "head off" worker unrest because of inflation by giving them – Hahaha! – more inflation! Hahaha! Idiots! And being an Idiot-Proof Guaranteed Investment Winner (IPGIW) is just one more reason to buy gold and silver, as if you needed another reason to buy gold and silver! Whee! This investing stuff is easy! The Mogambo Guru Mistakes With Minimum Wage originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."
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| 2010 Silver Eagle Bullion Annual Sales Record at 34.6 Million Posted: 09 Jan 2011 09:10 AM PST Buyers snapped up 34,662,500 Silver Eagle bullion coins in 2010, capping the best sales year ever for the series which was introduced in October 1986 as a means to purchase silver inexpensively.
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| Weekly metals wrapup, Embry interview posted at King World News Posted: 09 Jan 2011 09:06 AM PST 9:20a ET Saturday, January 8, 2011 Dear Friend of GATA and Gold (and Silver): The weekly precious metals market review with Bill Haynes of CMI Gold & Silver and Dan Norcini of JSMineSet.com has been posted at King World News here: http://kingworldnews.com/kingworldnews/Broadcast/Entries/2011/1/8_KWN_We… And audio of the King World News interview with Sprott Asset Management's chief investment strategist, John Embry, which was summarized briefly for you Wednesday, has been posted here: http://kingworldnews.com/kingworldnews/Broadcast/Entries/2011/1/8_John_E… CHRIS POWELL, Secretary/Treasurer Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: http://www.gata.org/node/16
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| Banks lose crucial Massachusetts foreclosure case Posted: 09 Jan 2011 09:01 AM PST By Tom Weidlich http://www.bloomberg.com/news/2011-01-07/us-bancorp-wells-fargo-lose-piv… US Bancorp and Wells Fargo & Co. lost a foreclosure case in Massachusetts' highest court that will guide lower courts in that state and may influence others in the clash between bank practices and state real estate law. The ruling drove down bank stocks. The state Supreme Judicial Court today upheld a judge's decision saying two foreclosures were invalid because the banks didn't prove they owned the mortgages, which he said were improperly transferred into two mortgage-backed trusts. "We agree with the judge that the plaintiffs, who were not the original mortgagees, failed to make the required showing that they were the holders of the mortgages at the time of foreclosure," Justice Ralph D. Gants wrote. Wells Fargo, the fourth-largest U.S. lender by assets, dropped $1.10, or 3.4 percent, to $31.05 at 11:41 a.m. in New York Stock Exchange composite trading. US Bancorp declined 28 cents, or 1.1 percent, to $26.01. The 24-company KBW Bank Index fell as much as 2.2 percent after the decision was handed down. Claims of wrongdoing by banks and loan servicers triggered a 50-state investigation last year into whether hundreds of thousands of foreclosures were properly documented as the housing market collapsed. The probe came after JPMorgan Chase & Co. and Ally Financial Inc. said they would stop repossessions in 23 states where courts supervise home seizures and Bank of America Corp. froze U.S. foreclosures. Teri Charest, a spokeswoman for Minneapolis-based US Bancorp, didn't immediately return a call for comment. Jason Menke, a spokesman for San Francisco-based Wells Fargo, didn't have an immediate comment. Charest previously referred questions on the case to the loan servicer for both mortgage-backed trusts, American Home Mortgage Servicing Inc. Philippa Brown, a spokeswoman for Coppell, Texas-based American Home Mortgage, didn't have an immediate comment. In March 2009 Massachusetts Land Court Judge Keith C. Long voided the foreclosures, finding that the mortgage transfers were done months after the house sales. In October of that year, Long declined the banks' request to reverse that ruling after they argued that the documents that bundled together the mortgages had transferred those instruments to them. Today's court decision held out the possibility of securitization documents properly transferring mortgages. Such documents, along with "a schedule of the pooled mortgage loans that clearly and specifically identifies the mortgage at issue as among those assigned, may suffice to be proof that the assignment was made by a party that itself held the mortgage," Gants wrote. "However, there must be proof that the assignment was made by a party that itself held the mortgage." The case is U.S. Bank v. Ibanez, 10694, Supreme Judicial Court of Massachusetts (Boston). The lower-court cases are U.S. Bank National Association v. Ibanez, 08-Misc-384283, and Wells Fargo Bank NA v. LaRace, 08-Misc-386755, Commonwealth of Massachusetts, Trial Court, Land Court Department (Boston). Help keep GATA going: GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: http://www.gata.org/node/16
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| Never any blackout on Fed's private chats with investment houses Posted: 09 Jan 2011 09:01 AM PST NY Fed's 'Mr. Inside' Dudley Flapping His Gums By John Crudele http://www.nypost.com/p/news/business/ny_fed_mr_inside_dudley_flapping_X… The president of the Federal Reserve Bank of New York doesn't know when to keep his mouth shut. The entire Fed regularly observes what it calls a "blackout period" starting one week before Federal Open Market Committee meetings and lasts until the Friday after those meetings. In case you don't know, FOMC meetings are where the Fed decides whether to change interest-rate policy. But there is also a communique released just hours after the meeting concludes in which the Fed gives its view of what the economy is doing. It might also hint at unusual moves like quantitative easing in this communique. Once it is released, that communique goes through a word-for-word analysis by everyone who follows the markets. Even a whiff of something changing could send markets soaring or collapsing. That's why the Fed muzzles its members. The form on which outside organizations can request a Fed speaker says "please be advised that there are timing restrictions — including FOMC blackout periods — for certain types of speeches." William Dudley, the head of the New York Fed, seems to have his own rules about talking to people during the blackout period. Dudley's office recently released his daily work schedule for the past two years. That schedule shows Dudley isn't shy about talking during those blackout periods with people on Wall Street who might benefit from his knowledge. Take March 11, 2009. The blackout period ran from March 10-18. I know this because those dates are written in capital letters — "PRE-FOMC BLACKOUT PERIOD" — right at the top of Dudley's calendar for that day, a reminder, I guess, from his assistant. Remember, the financial markets were in disarray back then and the FOMC was meeting on March 17 and 18 to figure out what to do. No speeches were allowed. Still, Dudley decided to have an "informal meeting" from 6 p.m. to 7 p.m. on March 11 with Goldman Sachs chief economist Jan Hatzius at the Pound and Pence restaurant near the New York Fed's headquarters. I have to give you some factoids here. Before he joined the Fed, Dudley was an executive with Goldman. So he and Hatzius could very well be friends who were talking about their kids' summer plans or their wives' spending habits. But still, there was a blackout period in effect. And a slip of the tongue by Dudley could have given Hatzius and Goldman valuable information. Even a pained expression on Dudley's face could have told Hatzius too much. I called the New York Fed and asked for a clarification of the blackout rules. What I wanted to know: Was the rule only for speeches? Could it be possible that private meetings that could benefit small groups are allowed but not public speeches that might help all investors? And what is the penalty for violations? The Fed never called me back. There was another blackout period from April 21-28, 2009. On April 22, one day into the blackout period, Dudley held a conference call at 9 a.m. with Jamie Dimon, the head of JPMorgan Chase. At 11:30 a.m. there was a meeting with Jeffrey Carp, executive vice president and chief legal officer of State Street Capital. There were apparently others at that meeting because there was a notation "et al." accompanying that meeting. At 1:15 p.m. Stuart Bohart, the co-head of Morgan Stanley's asset management unit, had lunch with Dudley in the New York Fed's Washington Room. And at 3 p.m. John Mack, head of Morgan Stanley, met with Dudley for 45 minutes in Dudley's office. I looked through some 460 pages of Dudley's schedule and he didn't always have such interesting meetings during the blackout periods. During the blackout period from Sept 15-23, 2009, for instance, there were no meetings or phone calls with Wall Street types — or, at least, none noted on Dudley's schedule. But there were enough at other times to make me wonder if Dudley was sensitive to the fact that his brain contained valuable information desired by the guys he was meeting. On Dec. 11, 2009, for instance, Dudley had a breakfast meeting with Goldman Chief Executive Lloyd Blankfein and that company's chief financial officer, David Viniar. The Fed's blackout period had begun three days earlier and lasted until Dec. 16. Goldman is a primary dealer in government securities, so lower-level discussions with the Fed probably occur frequently. But a breakfast meeting? At the Fed? At a time when Dudley was preparing for an FOMC meeting and wasn't supposed to be tipping his hand in public? Meredith Whitney, the influential bank analyst, was on Dudley's schedule on April 20, 2010 — the day another blackout period started. During this past September's blackout period, Dudley met with a principal of Woodbine Capital, a hedge fund. A source of mine who used to work at the Fed says private meetings like these during blackout periods have always been a matter of contention inside the Fed. And, quite frankly, I can't blame the folks who attended these meetings. If an influential member of the Fed like Dudley might have an indiscreet moment, why not listen? My view? If the Fed doesn't want its people tipping information to the public in speeches, why wouldn't it crack down on private conversations that can be used for huge profits by small Wall Street groups that just happen to have the right connections? How is this fair to the investing public? And how is this fair to every other investment firm that competes with the guys who lunched and breakfasted with Dudley during these periods when he is supposed to keep his mouth shut and his thoughts to himself? Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit:
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| Gold in Canadian Dollars: The Impact of Interest Rates Posted: 09 Jan 2011 09:01 AM PST Zecco submits: By Richard Bloch There was a comment left by Papli at Seeking Alpha on my post about the price of gold in euros and other currencies:
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| Outlook 2011: Fear and Love Driving Gold Demand Posted: 09 Jan 2011 09:01 AM PST Frank Holmes submits:
Interestingly, despite gold’s latest run, it was still a laggard compared to many other commodities. In the commodity world, gold didn’t even place in the top half in 2010. Against a basket of 14 commodities that includes everything from aluminum to wheat, gold’s 29.52 percent return places it eighth. Palladium took the top spot with a 96.6 percent return, followed by silver with an 83.21 percent return. Natural gas continued its cellar-dwelling ways, dropping 21.28 percent to become the worst-performing commodity of the basket.
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| Does Breaching Its 50 DMA Spell Gloom for Gold? Posted: 09 Jan 2011 08:59 AM PST
I reported in a post on Wednesday that the price of gold had breached trend-line support and its 50-day moving average and appeared set for more downside. A bearish “triple top” formation also looked ominous. The subsequent few days witnessed roller-coaster swings with gold trading between $1,378 and $1,353 Friday, but closing at $1,369 to remain below its 50 DMA ($1,381) for a third consecutive day. Click to enlarge:
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| How to Escape from Debt Slavery Posted: 09 Jan 2011 08:58 AM PST If you have poor, if you have net negative worth, there is hope. Once you have the bare necessities covered, buy silver. Don't expect inflation to bale you out. When we get a new currency system, your debt will likely still be there. What is coming is a dollar devaluation, not a hyperinflation with wages being adjusted. Dollar debt will be wiped out, but primarily with respect to gold, not with respect to wages.
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| $250 Silver – Chris has some ideas Posted: 09 Jan 2011 08:01 AM PST Share this:
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| Posted: 09 Jan 2011 07:48 AM PST Facebook Shutting Down Rumor Goes Viral: Site Said To Be Ending March 15, 2011 MK: I wonder if in the offering memorandum circulating for new Facebook investors if this potential risk is disclosed. It's an interesting concept, several hundred million users could hit, 'delete my account' on that day and the valuation of the company [...]
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| Posted: 09 Jan 2011 07:18 AM PST MK: I find it a bit disingenuous for this blogger to resort to summer blockbuster comic book narratives to conjure up a boogeyman to throw mud at. I am willing to bet 1,000 oz's of Silver that this guy has not seen a single one of our documentaries – going back to 2005 – when [...]
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| Using John Williams (shadowstats) numbers to get the real inflation adjusted price for Gold Posted: 09 Jan 2011 06:12 AM PST The Real "Inflation-Adjusted" Gold Price Share this:
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| Posted: 09 Jan 2011 04:33 AM PST (snippet) Resolution #1: I will buy gold until it doesn't matter how much money Ben Bernanke prints.Even if the statements from your bank or stockbroker show an increase every month, inflation is eating away at your capital. To insure the real value your assets, include a meaningful amount of gold and silver. How much? When the next announcement of quantitative easing doesn't make you flinch, you're getting close. Yes, the government says inflation is low, but the full effects of all the money the Fed has printed have not yet hit the system. They will. As the saying goes, it wasn't raining when Noah built the ark. Resolution #2: I will purchase gold coins for personal storage. Even if you buy precious metal ETFs, pool accounts, or other "paper" forms of gold, keep some coins under your direct physical control, because sometime in the next few years you may need them to buy Cheerios or gasoline or fix your roof or have your appendix removed. I suggest Eagles, Maple Leafs, Philharmonics, Krugerrands, and Buffalos because they are the most widely recognized and hence easier to trade than even small gold bars. You don't want a potential buyer questioning the authenticity of your gold if you need quick cash. How much should you put into coins? There's no magic number, but don't stop until you have at least three months of living expenses stored away. And then continue adding as your assets increase. If you don't have any, start by buying at least one. Today. Resolution #3: I will not get emotional about gold's volatility. News flash: gold will have a correction in 2011, probably more than one, and maybe a big one. Consider these facts: Gold's average decline in the current bull market is 12.8%; there have been at least two corrections greater than 5% every year since 2001; and we've had two 27.7% sell-offs just since 2006. How you react to the next pullback could mean the difference between taking a loss and doubling your gain. Will you panic and sell, or hold tight and perhaps even buy more? No one adds to his success by fretting about daily ups and downs. This leads to too much trading and the self-defeating costs of commissions and bid-ask spreads. Watch your investments, of course, but with some emotional distance. I believe we're in the middle of a long-term trend for precious metals. So give it time to deliver the profits you're seeking. Your precious metal investments are like a cake in the oven; you'll ruin them if you keep opening the door. Resolution #4: I will learn to buy on the dips and average down. Are you happy when gold or silver fall in price? If not, why? Unless you're already fully invested, treat the decline as a gift that lets you buy more at a better price. The most profitable way to add to a position is to "buy on the dips" when you'll get more for your money. This means you'll be buying on days when the price is dropping. By averaging down, you lower your overall cost and increase your profit when you eventually sell. For me, the bigger the sell-off, the bigger the buying opportunity. Resolution #5: I will not continually buy and sell, or try to time the market. How are traders and male college freshmen alike? They chase tops and bottoms, and they don't always get what they want. This is how most people lose money during a bull market – by attempting to time tops and bottoms. This rarely leads to success over the long run. Just buy on pullbacks and hold until the reasons for the bull market go away. This is exactly how Doug Casey made a fortune in this industry. Resolution #6: I will save every month. You want savings not just for an emergency – lost job, major repair, unexpected surgery – but also for bargain hunting. As the troubles in the world mount, the market will become littered with bargains of all kinds. Only habitual savers will have the wherewithal to take advantage of the opportunity. 
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| Posted: 09 Jan 2011 04:04 AM PST
Janet Yellen (Vice-Chair FRB) gave a speech in Denver on Saturday. She did her level best at defending QE. I think she lied to us. This chart was central to her defense of the busted policy:  Isn’t this graph nice. It shows that there is direct causality to an increase in FRB holdings and jobs creation. For every $1mm purchase of average life 5-year T-Notes that Brian Sack (NY Fed) makes, a new job is created. Magical. Actually it is just self-serving bunk. Ms. Yellen should be ashamed at using this. There is no evidence that there is a direct relationship between QE2 and an increase in employment. I hope some economists rip her apart. I am not going to deny the relationship between low interest rates and higher economic activity. That link has been proven. For example, ZIRP can have beneficial affects. Similarly, a drop in long-term interest rates is a pro-growth force. What the folks at the Fed have done is assume that QE lowers LT rates and therefore promotes job creation. But all of the evidence confirms that QE2 has had the effect of increasing interest rates. If Yellen wanted to be fair to the US citizens she would have prepared a different set of slides. She would have shown a graph that proved the relationship to lower (or higher) LT interest rates and economic activity (employment). If she had shown (for example) that a 1% drop in the 10-year bond DIRECTLY contributed to the creation of 600K jobs I would have accepted that. I believe that most economists would have agreed as well. But that is not what is going on at all. LT interest rates are not falling because Mr. Sack is doing POMO buy-ins of bonds three days a week. LT interest rates are rising BECAUSE he is buying. How can that be? Is the market ignoring the laws of supply and demand? Not really. -QE2 is ending in 4 ½ months from today. (The last month will be small amounts, totally discounted by then). There are only 87 trading days till the (functional) end of this experiment. The market is already looking beyond the corner on this one. -QE2 is creating an opportunity for large holders of Treasuries to lighten up. There is no certainty that they will return when QE2 ends. If "they" do return, what price will “they” demand? -QE has created uncertainty for investors. The Fed balance sheet is a ticking time bomb that is going to blow up on them one day. How do bond investors know this? Because the Fed has repeatedly told them so. They have said in the press and to the public through speeches like Ms. Yellen’s and even to Congress that they are 100% certain they can reverse the impacts of QE. How are they going to do this? Easy, Yellen said it (again) in her speech: raise short-term interest rates and drain large volumes of reserves sell our holdings of MBS, agency debt, and Treasury securities The bond market (collectively) reads these words and craps in its pants. This is the worst possible scenario for the bond market. The largest single holder of fixed rate paper in the world is going to become a massive seller at some point in the future? Lovely prospect. Think of it differently. What would happen to our capital market if someday we got an announcement from China that they were selling their ~900b of holdings? The bond market would collapse of course. That will (hopefully) never happen. But the Fed is now bigger than China and they have said again and again that they are going to be a seller. No wonder interest rates have risen in anticipation. Who would want to own low yield, long duration paper when you are staring into a double-barreled shotgun (Fed & Treasury selling at once). I think the stock market looks out about six months. The bond market looks out about a year. What is the message that Janet Yellen, Ben Bernanke and all the others telling the bond market? The answer to that is in the chart that Yellen used to defend QE. Notice that she has a 600b ramp up in assets. That is followed by a run off of the portfolio less than one year after program completion. In the Fed’s own models they are assuming that QE2 unwinds starting in 2012. Just around the corner, so to speak.  There are three possible outcomes that I can see at this point. I) QE2 will be extended and expanded. The Fed will buy an additional 600b of bonds. I give this a 5% chance at this point. The policy is disgraced. The Fed already regrets the timing of QE2. Heat from Congress will tie their hands. The economy will be muddling along and no additional “emergency measures” are justified. This is not a strong bond market scenario. II) Before June 30 the Fed announces that it will not extend QE2. They confirm that they will hold the existing portfolio at the then current level. The proceeds of any maturities of existing holdings will be used to acquire more bonds (similar to QE-1-lite). This would immediately make a lie of all the prior statements by the Fed that QE2 was a temporary measure. That it’s affects would be removed in due course. This would be very unsettling to the bond market. The Fed would be changing the rules to suit them. No one would trust any future promises they made if they reverse course like this. This outcome is not bond friendly either. III)QE they will do that. If inflation picks up they will reverse QE, raise rates and sell bonds. I think the outcome will be #III. I see this as the worst possible outcome for the bond market. The reason? This “preferred” alternative translates into the greatest uncertainty. Consider what the backdrop of economic news is likely to be in the future. In 2010 the (phoney) calculations that the Fed uses to measure inflation showed a YoY change of only 1%. It is impossible for this to be repeated. While inflation may not get “hot” it will be on the rise. When the monthly numbers prove that out the bond market will shudder. As the inflation numbers move back up and pass the “desired” 2% the market will worry every day, “When are they going to start selling” will be the only debate. Here’s the bottom line Ms. Yellen. QE2 has added to uncertainly and thereby increased LT interest rates since the policy has been introduced. Increases in LT interest rates are a factor that would tend to slow job creation. Ergo QE2 will prove to be a policy that creates a drag (not a stimulus) on the economy/employment. Man up Ms. Yellen. You folks have made a mistake. Don’t try to prove what can’t be proven. Your own graphs show the lie. Your skewed presentation is obviously flawed. You know that, the bond market knows it. When you bluff like this it just scares the bond market more.   
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| Massive Silver Withdrawals From The Comex Posted: 09 Jan 2011 03:49 AM PST It will be interesting to see how the CFTC, the Obama Administration and the Comex deal with this situation with silver, including massive paper short positions.
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| Posted: 09 Jan 2011 03:31 AM PST It seems that gold puts on a rally of sorts at the end of the year. The big question always is “will it last?” It seems that this year it may not last but the action is still not all that bearish so there is hope that the down side will be short.
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| Posted: 09 Jan 2011 03:28 AM PST Legislation proposes Utah adopt a gold-based system Share this:
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| “On The Edge” with David Morgan of silver-investor.com Posted: 09 Jan 2011 03:24 AM PST Share this:
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| Posted: 09 Jan 2011 12:51 AM PST This past week we saw gold have its biggest two-day drop since February of last year ending the third longest streak of trading above its 50-day that the yellow metal has had since 2000. The first streak ended in 2002 with 124 trading days and the second in 2008 with 143 trading days. No bull market goes up in a straight line.
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| Central Banks are Acquiring Gold, Dumping US Dollars Posted: 08 Jan 2011 11:07 PM PST There is evidence that central banks in several regions of the World are building up their gold reserves. What is published are the official purchases. A large part of these Central Bank purchases of gold bullion are not disclosed. They are undertaken through third party contracting companies, with utmost discretion.
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| Posted: 08 Jan 2011 10:57 PM PST Rock a bye baby in the treetop, When the wind blows the cradle will rock, When the bough breaks the cradle will fall, And down will come baby, cradle and all.
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| Posted: 08 Jan 2011 09:37 PM PST
This is a fairly detailed review of Dine Equity (DIN), pre-refinancing. BackgroundEarly in 2010 we performed a comprehensive scan of retail companies, believing that much of the market actually bought into the hype that was labeled “recovery”. If we were right, than profitable short plays were available. As it turned out, we were right on point, and profitably so. I broke the retail scans into two posts with the first one detailing methodology and reasoning and the second one containing the actual initial scans:
We created a list of 141 retail companies whose market cap is greater than$500 million and share price is over $10 that we used to create a universe of potential retail shorts. From that list we:
One of the companies from the shortlist, Dine Equity, garnered further attention. I took two views of the company with two different analysts, each with a unique perspective. I will share the first view publicly, and the second will be offered for download to all subscribers at the end of this post. Dine Equity Forensic OverviewThis opinion was derived in September, BEFORE Dine Equity successfully refinanced its debt. Company Description DIN owns, operates and franchises two restaurant concepts in the casual dining and family dining categories: Applebee’s Neighborhood Grill and Bar® and IHOP (International House of Pancakes). With over 3,400 franchised or company&inus;operated restaurants combined, DIN is the largest full&inus;service restaurant company in the world. In November 2007, the company completed the acquisition of Applebee’s International, Inc. (“Applebee’s”). The company reports its operations under four segments including: franchise operations, company restaurant operations, rental operations and financing operations. Within each segment, as applicable, the company operates under two distinct restaurant concepts: Applebee’s and IHOP. As of December 2009, the company had 1,609 restaurants operated by Applebee’s franchisees in the United States, one U.S. territory and 15 countries outside of the United States. While under the restaurant operations segment, Applebee had 398 company&inus;operated restaurants in the United States and one company&inus;operated restaurant in China. Under its IHOP segment the company had 1,443 restaurants operated by IHOP franchisees and area licensees in the United States, two U.S. territories and two countries outside of the U.S, and 12 company&inus;operated restaurants in the United States and one restaurant reacquired from a franchisee that was operated by IHOP on a temporary basis until refranchised on January 4, 2010. Key Concerns: &iddot; High Debt is the key concern for the company: The Company has a high net-debt to equity ratio 14.3x and Debt-to-ttm FCF of 12.2x at the end of 2Q10. Moreover, based on the company’s debt maturity schedule at the end of December 2009, we have estimated that 98.4% of total debt which is nearly $1.6 billion is due for repayment over the next two years (i.e 2011 and 2012), this excludes the current portion of $25.2 million which is due for payment in the 2H10.
At the end of 2Q10 the company had an interest coverage ratio of 1.6x which has remained stable over the last five quarters and is higher compared to 2008. However, it could become a concern for the company if it is unable to maintain its current level of sales and margins in the coming quarters. &iddot; Declining Sales owing to poor sector outlook: Company’s sales declined 12.4% in 2009, and based on Bloomberg’s consensus estimates this decline is expected to continue in 2010 and 2011 at 4.5% and 9.0%, as the casual dining industry in the US (which is the major area of operation for DIN) is not expected to witness a significant recovery at-least in the near-term. Though, company’s margin have improved to 19.6% in 2009, it is still below the pre-crisis and pre-acquisition level of 20.0% in 2007, 24.4% in 2006 and 24.3% in 2005. &iddot; Based on relative valuation the company is marginally overvalued: As of September 30, 2010 the company was trading at an EV/EBITDA of 7.7X its 2011 estimates, while its competitors BOBE (Bob Evans Farms, Inc.), DENN (Denny’s Corporation) and CBRL (Cracker Barrel Old Country Store, Inc) were trading at an EV-to-EBITDA of 4.8x, 6.3x and 7.7x, respectively. However, there is a safeguard to the company’s weak financial position, i.e the company has already started looking for refinancing its debt, and if the company is successful in doing the same at some favorable terms (which looks extremely difficult), it may be able to temporarily postpone its problem for the time being. Moreover, if the company is unable to refinance its debt, it has the option of extending its maturity by 6 months for December 2007 debt and 2 years for March 2007 debt, although at a higher interest rates, which will adversely impact the already low interest coverage ratio of the company. As per the company’s 2009 10K, “As described in Note 8 of the Notes to the Consolidated Financial Statements, the Fixed Rate Notes (the “Notes”) issued as part of the Applebee’s and IHOP November 2007 securitization transactions have a legal maturity of December 2037; however, the indentures under which the Notes were issued includes provisions which may require the early repayment, in whole or in part, of the Notes which, if not met, would require the Company to use all or part of the excess cash flow that would otherwise be available for general business purposes to fund a reserve account for the Notes or to begin to pay down the Notes. As of December 31, 2009, the conditions that would require an early repayment date for the Notes had not occurred. Irrespective of covenant compliance, the accelerated payment date for the Applebee’s and IHOP November 2007 securitization debt is December 2012, subject to extensions as discussed below. In the event that we are unable to refinance the Applebee’s and IHOP November 2007 securitization debt by December 2012, we will have the ability to extend the scheduled payment date for six months if we are in compliance with applicable covenant ratios at that time. The interest rate on this debt will increase by 0.50%, and any unpaid amount will accrue interest at such increased rate. Similarly, if we are unable to refinance the IHOP March 2007 securitization debt by March 2012, we will have the ability to extend the scheduled repayment date for up to two years with a 0.25% annual increase in the interest rate each year. However, if the IHOP November 2007 securitization debt goes into rapid amortization, the IHOP March 2007 securitization debt will go into rapid amortization as well. We intend to refinance all of the Applebee’s and IHOP indebtedness prior to the expiration of such extension periods that are available.” Though, the company has started looking for refinancing options it looks as if it will be difficult for the company to refinance its debt. Therefore, the company is trying various ways to raise cash to meet its requirement for the already announced debt under offer discussed below: &iddot; On September 10, 2010, the company announced a cash tender offer for any and all of the outstanding principal amount of the following notes :
The Tender Offers and the Consent Solicitation are scheduled to expire at 5:00 p.m., Eastern Daylight Time, on October 8, 2010, unless extended or earlier terminated by DineEquity. (Source: http://www.marketwatch.com/story/dineequity-inc-announces-preliminary-results-of-tender-offers-and-consent-solicitation-2010-09-24?reflink=MW_news_stmp) &iddot; Moreover, to finance these notes the company has already announced that it plans to offer, up to $825 million aggregate principal amount of its senior unsecured notes due 2018. No other material detail has been provided by the company on its progress after that. (Source: http://www.marketwire.com/press-release/DineEquity-Inc-Announces-Proposed-Private-Offering-of-Senior-Notes-NYSE-DIN-1316843.htm). &iddot; Based on another press release as of September 20, 2010, the company is planning to raise debt through speculative-grade debt as Junk Bond Investor Inflows Surge in the market. Source: http://www.bloomberg.com/news/2010-09-20/dineequity-plans-debt-as-junk-bond-investor-inflows-surge-new-issue-alert.html) &iddot; Recently, on September 29, 2010, the company announced it has reached three preliminary deals to refranchise a combined 86 company-owned Applebee’s restaurants, continuing its effort to move to a franchisee operating model. And we believe that the proceeds from this deal if completed will be used to repay debt. Another pending deal to sell 63 in Minnesota and Wisconsin and is slated to close in the fourth quarter of 2010. But as per the company if the deal is terminated by mid-November, the company won’t be able to carry out plans to redeem $28 million of preferred stock. Overall, though the company has announced the cash tender offer (for repayment of debt), it still remains unclear how the company will finance the payments for its tender offer, which is a key concern in our view, as refinancing still remains difficult in the current market conditions. Further, we expect to get more clarity on companies’ operating performance and refinancing plans once the company releases its 3Q10 results in the last week of October 2010. Certain key facts related to Dine Equity’s (DIN US) debt refinancing efforts.
Most analysts believe that company is being proactive and does not want to reach a condition where it ends up breaching any of its covenants. The most significant covenants related to the company’s securitized debt require the maintenance of a consolidated leverage ratio and certain debt service coverage ratios: o The consolidated leverage ratio which is defined as (a) the sum of (i) all securitized debt (assuming all variable funding facilities are fully drawn); (ii) all other debt of the Company; and (iii) current monthly operating lease expense multiplied by 96; divided by (b) the sum of (i) the Company’s EBITDA (as defined) for the preceding 12 months; and (ii) annualized operating lease expense, has the maximum limit of 7.25x (for the Applebee’s Notes) and 7.0x (for the IHOP Notes). As of June 2010, the company had a consolidated leverage ratio was 5.96x. o Debt service coverage ratios (DSCR), which is the ratio of restaurant net cash flow divided by total debt service payments, which include, interest payments, insurance premiums and administrative expenses. As per the covenants the company has to maintain a minimum DSCR of 1.85x, failing which the company can face a Cash Trapping Event, a Rapid Amortization Event, or a Default Event. At June 30, 2010, the Applebee’s three&inus;month DSCR was 3.70x and the IHOP three&inus;month DSCR was 3.48x. o Another DSCR covenant that became effective under the Applebee’s Notes starting fiscal quarter January 2010, and will continue till fiscal quarter of October 2012, sets the minimum limit for twelve-month DSCR described in the table below:
As of June 2010, Applebee’s 12&inus;month DSCR as of June 30, 2010 was 3.33x. If the restaurant cash flow components of the calculation had been $82.5 million, or 32.3%, lower, the Company would have fallen below the current 2.25x minimum threshold.
o According to industry sources, the company started marketing it’s a $900 million term loan (7 years) through Barclays and Goldman Sachs in the last week of September 2010. Pricing terms of the loans have been established at LIBOR plus 475 bps, with an initial discount of 1.5 cents on a dollar, a 1.75% LIBOR floor and a one-year, 101 soft call protection. In addition t
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| On The Four Year Anniversary Of The Paulson-ACA Meeting That Conceived Abacus Posted: 08 Jan 2011 07:27 PM PST
Four years ago to the day from Saturday, a team of "experts" from ACA Management took the elevators to the 29th floor of 590 Madison, the then address of Paulson & Co., and sat down to discuss the structuring of a CDO. For both firms, this was supposed to be a by the numbers transaction: ACA, which had the financial acumen of any borderline retarded rating agency, was going to provide the wraparound insurance and be the portfolio selection agent in a synthetic CDO, while Paulson & Co. would be the transaction sponsor, and which, through Goldman Sachs, would indicate on various occasions, that it was a beneficially interested party, and represent direct and indirectly that it was long the equity tranche: an indication that it was beneficially inclined for the success of the portfolio. Little did ACA know that Goldman would assist Paulson in lying to investors about the fund's orientation, and the numbers in question would be one billion for Paulson and a comparable loss for everyone else. The CDO in question is of course Abacus, and has since resulted in the biggest ever SEC settlement with an investment bank, pardon, governmentally subsidized hedge fund. And while Goldman may have thought that the settlement put the embarrassing Abacus situation to rest, ACA certainly harbored no such intentions, and on January 6 filed a lawsuit against Goldman seeking monetary and punitive damages. The reason: ACA claims, and has evidence, that despite Lloyd Blankfein's representation to Congress that it was merely making markets, and did in fact nothing illegal, the reality was far different. In fact, as ACA demonstrates in the attached filing, Goldman repeatedly represented that Paulson was long the equity tranche, and neither Goldman nor Paulson did anything to debunk such an assumption. In fact, in solicitation materials Goldman misrepresented outright the economic interest of the transaction sponsor. We are confident that as many other firms that loathed doing their own due diligence (of which ACA is most certainly guilty) realize that Abacus is still a mini goldmine, we will see other such copycat lawsuits, as banks, primarily those out of Europe (and preferably still in business), attempt to collect a few hundred million here and there. Below we recreate the most damning sections from the ACA lawsuit:
Just as bad is that Goldman most clearly committed fraud in its marketing materials:
And how can any recount of Abacus be complete without a Fab Fab mention. In this particular case, Tourre exposes that fact that Goldman was well aware of the misrepresentation that Paulson was committing with Goldman as an accomplice through his "surreal" email:
In summary, ACA believes that "Goldman Sachs engaged in intentional, willful and malicious misconduct in utter disregard for the severe economic consequences for ACA and other investors in ABACUS, as well as the United States financial markets, evincing a high degree of mural turpitude and wanton dishonesty." And it certainly has the evidence. But at the end of the day, it doesn't matter: in America, a country in which every gross criminal act is met with merely a wristslap, and the grosser the malfeasance, the smaller the relative penalty. Of course, ACA is not without fault: if the firm actually knew anything about finance, presumably the reason for its business model, it would have conducted its own due diligence instead of relying on the bullish (or bearish) alignment of the portfolio sponsor. After all, it is paid money to represent the portfolio was stable, and received cash to provide the wrap, which it should not have provided had it actually conducted its own analysis on the underlying RMBS. If anything, this example more vividly than anything presents exactly the key forces in play during the peak of the credit crisis (and certainly since): immense greed (on behalf of the likes of Paulson), criminal laziness and a profound lack of any actual diligence (thank you ACA... and all those addicted to the rating agency model), and of course outright criminal fraud, by none other than Goldman, which from its position as master of the universe and god's only spokesperson on earth, believed it could get away with anything, all the while making hundreds of millions of dollars courtesy of its massive monopolistic scale in the financial "over the counter" industry. None of these have changed in the four years since the original Paulson-ACA meeting. The only addition to the trio: infinite moral hazard, now that none other than the US government is doing all it can to backstop the financial system for a few more months/years until everything comes crumbling down in one final greed, laziness and fraud inspired collapse. Full ACA filing.
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| Posted: 08 Jan 2011 07:00 AM PST www.preciousmetalstockreview.com January 8, 2011 It’s great to be back after the holiday season. Things are as exciting as ever in the markets and around the world politically. Silver rose 83% for the year while Gold rose 29.7%. Not too bad at all. I’m very happy with the way the year played out and the trading and investing decisions I made. I really couldn’t imagine it to be much better than last year, but it will be. The mania phase is a ways off still. Tables of Gold and Silver’s performance in different currencies can be found here courtesy of a favourite of mine Mr. James Turk. A sign of how far off the mania is is evidenced by the lack of new mining IPO’s in 2010. There were many Chinese IPIO’s who did very well right out of the gate initially. The mining IPO mania is coming down the road and will surpass the speculative frenzy we saw in the late 1990’s at the height of the tech...
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Wall Street has been calling gold a bubble since 2005 when it hit $500. Some media naysayers remained negative even as they wrote the headlines proclaiming record highs and saw gold rise almost 30 percent in the past 12 months.
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