Hat Trick Letter – říjen 2009

Globální trhy vládních obligací – Global Bond markets

DOUBTS ABOUT BOND MARKET INTEGRITY PERSIST. THE CONTROL PLACED UPON IT REVEALS TOO MUCH CONSISTENCY. THE EVIDENCE IS UNIFORMITY AND SAMENESS, TOTALLY OUTSIDE THE REALM OF CHANCE POSSIBILITY. THESE ARE MANAGED MARKETS. $$$ The HSBC Bond Chief Stephen Major has major doubts on the economy. He wrote, „Even more importantly, why is the yield curve THE SAME across all government bond markets? Why is the UKGilt curve the same as the Canadian or Swedish curve, even though these countries have not indulged in QE? Why is it the same as the US yield curve, when it has a completely different QE going on?“ . The answer is simple. All central banks are working desperately to manage with coordination, hoping to avoid a collapse.

Budou dluhy USA financovány přes fondy penežního trhu? – Will money market funds finance US deficits?

Next comes word that the US Federal Reserve is studying the concept of borrowing from money market mutual funds as part of eventual steps to withdraw stimulus. The big new development is the trial balloon plan, whereby the central bank would raid money market funds because it does not believe the primary dealers have the balance sheet capacity to provide more than about $100 billion. Notice that London press networks provide better coverage than the American. Money market mutual funds in the United States contain about $2.5 trillion under management. Officials regard them to possibly provide between $400 billion and $500 billion in a formal raid. They reported that officials saw no urgent need to drain liquidity all the way to where it was before the crisis, because it was confident it could raise interest rates even with a much larger amount of reserves in the system than existed before the crisis. WE ARE WITNESSING A BLACK HOLE THAT COULD SOON SUCK MONEY MARKET FUNDS AND ACTUAL US SAVINGS.

Ropa ne za dolary – Oil not for dollars

The Saudis, with Russians, Chinese, and Japanese at their sides, announced the eventual end of the Petro-Dollar. Germans were involved, but remained in the shadows of control. Sales of Persian Gulf crude oil will be consummated no longer in USDollars after a certain date. Payment for oil will be made in the IMF basket currency. The USDollar must stand on its own merit, meaning at Third World levels. Implications to the USEconomy are enormous, as the cost structure will rise markedly. Implications to the banks worldwide are enormous, as they will no longer need to hold vast sums of USTreasury Bonds. Implications geopolitically are enormous, as the United States will step back from the front of the global stage of control, respect, and prestige. Clearly the Saudis reached a military protection accord with Russia. The new global cops are soon to be the Russians and Chinese, starting with the Persian Gulf.

COMEX + LBMA

Several large gold futures contract holders are demanding physical delivery in London. The LBMA does not have the metal in inventory. The officials have offered the futures contract holders cash plus 25% dividend for settlement without gold delivery. The contract holders refused. They want their fuchn gold (using a French term by the source, my unique palatable spelling)!!! There was very high volume involved in the contracts. The standoff is not settled. It could go to court. The London authorities are trying desperately to keep the story from hitting the press. It helps to have the syndicate in control of the press networks. The Bank of England and one other European member central bank are working feverishly to fill the contract order, but unfortunately they are using very old gold bars that are reportedly only 90% gold. That invites a new potential challenge.

The gold market could soon explode and possibly work toward a convergent fair market. My hint is that it is Germans and Swiss with other Europeans are working diligently and pointedly to kill off the US-UK bank nazis. A LBMA and COMEX bust and default is visible on the horizon. See the Jackass article entitled „Hitman Contracts to Bust Comex“ (CLICK HERE) dated in May 27. It would include big bank ruin and legal prosecution. The same source hinted that the ruin of commodity exchanges could coincide with the bust of JPMorgan. So, based upon the London incident, gold has a real price of near $1300.

Budou americké banky izolovány? – Will be US banks isolated?

BASEL RULES MARCH ON, LARGELY IGNORED BY ROGUE US BANKS. THE US BANKS RISK GLOBAL ISOLATION AT A TIME OF DEPENDENCE UPON MONETIZATION (A.K.A. PRINTING PRESS) FOR CREDIT SUPPLY. $$$

A final comment about Basel 2 and Basel 3 Rules, issued by the Bank For Intl Settlements (BIS). Admittedly this is not an area of great knowledge. My understanding is that Basel Rules are to global banking, what Financial Accounting Standards Board rules are to the United States banks. Basel 2 Rules required that banks bring impaired assets to the balance sheet, record their value, declare their losses, and move forward. The US banks thumbed their nose at such rules, in order to raise stock valuation and invite investors to secondary stock issuance. The US stock rally is founded on absurd corrupted FASB Rules that permit the US banks to state their own asset values, utterly ridiculous. Basel 2 is not enforced at all inside the United States. The US banks in the process earned the anger of the BIS. The Basel 3 Rules go further, in an attempt to isolate banks that refuse compliance. On October 1st all banks doing business outside of their country must meet Basel 2 and Basel 3 certification and compliance. The big banks on Wall Street do not meet Basel 3 Rules due to their Wild West derivatives, which not only have been responsible for keeping the US banks afloat for a full decade, but remain a chief arena for deep corruption. These banks can not do business with other Basel 2&3 compliant banks in their own country. Watch the US continue their defiance and become isolated further.

Time will tell if the rogue Wall Street banks and other big US banks are indeed isolated in global banking processes. The USDept Treasury and USFed are saying ‚FU‘ to the entire world, in particular to the Top Bank Cop with grotesque monetization of USTreasurys, and with non-compliance with banking accounting rules. The world will soon start pulling the cords, yanking the levers, disrupting the US bank gears, and if that fails, order some kills in a literal sense. A murder spree has begun. The BIS is likely not involved in violence, since their ranks are made up of choir boys. Most big billionaire bankers attend church.

Bank of America

AN OHIO LAWSUIT AGAINST BANK OF AMERICA COULD FESTER, EVEN TO FORCE DISCLOSURE OF SYNDICATE ACTIONS. SHAREHOLDERS IN B.O.A. HAVE RIGHTS, AND THEY WILL BE DEMONSTRATED. CONSIDER A DISTANT HAND IS DIRECTING TRAFFIC TOWARD THE CLIFF, JUST LIKE LAST SEPTEMBER.

In my view, the walls are collapsing on Bank of America while the floor is crumbling and the barbarians are at the gates. The visible response is the resignation of CEO Ken Lewis. Many banker sources report to me that Bank of America has so many problems, in addition to its insolvency, that it might be the next big bank to fail. It is a tight race to the failure cliff with Citigroup, but they have stronger syndicate ties. Be sure to know BOA has fewer Wall Street ties.

Following the Boyko decision, in December 2007, attorney Sean Olender suggested in an article in the San Francisco Chronicle that the real reason for the top-down bailout schemes proposed by Treasury Secy Henry Paulson was to stave off a string of major lawsuits against the banks. Successful lawsuits would have cost Wall Street firms well over $2 trillion. Paulson had no interest in protecting homeowners, and keeping them in their homes, as he stated and pled publically. He was a liar of high order, a syndicate head, who betrayed the American people.

Wells Fargo

THE WELLS FARGO MORTGAGE PORTFOLIO IS A TICKING TIME BOMB. THIS IS THE COMMERCIAL MORTGAGE ARENA KILL ZONE TO MAKE HEADLINES SOON. THEIR PORTFOLIO IS LACED WITH TOXIC LEVERAGED CONTRACTS OBTAINED FROM WACHOVIA.

To say Wachovia lost control of its commercial property portfolio before its collapse is a gross understatement. They routinely underwrote ridiculously cheap Credit Default Swaps against the same securitized mortgage bonds they sold to clients. In doing so, they accepted risk beyond huge that was transferred to Wells Fargo (WF) in the acquisition buyout. Now the festering pit of CDSwaps sits in the Wells Fargo balance sheet, ready to explode. They induced the new bond investors to leverage their brains out, since the yield on the bond was roughly equal to the cost of the CDSwap. The hedging went haywire. WF still owns a large collection of the commercial loans within its acquired portfolio. Instead of selling the loans, or taking writedown losses against them, they decided to alter the interest rate on many modified loans, without loan balance reduction, and without lengthened maturity dates. The practice is widely called ‚Extend & Pretend‘ so as to avoid stated accounting losses. The game is done with both the Wachovia and their own portfolio. They are virtually assuring substantial future losses. As the commercial mortgages begin to fail, WF will realize staggering additional losses.

The majority of large banks are engaged in the same practice of holding reams of CDSwaps off their balance sheets, of extending loans destined to default in the near future. The Wells Fargo example is perhaps the most visible, which can safely be extrapolated to the entire banking industry. The commercial shoe has yet to fall and cause extreme widespread damage. IT WILL IN TIME. Wells Fargo has buried the Wachovia toxic waste, but it is seeping to the surface. Here is another glimpse, offered anonymously. One senior member of the WF commercial loan business segment must deal directly with the dilemma. He spoke on details, and said „One third of this commercial portfolio we took on from Wachovia is impaired and needs to be completely rewritten. I have just hired five more guys and we cannot keep up with the volume of defaults. Southeast Florida and Tampa are serious trouble spots.“ The macrocosm of FDIC handling of dead insolvent banks is identical to the microcosm like with WF in handling dead delinquent loans. Not enough staff, not enough money, and denial of the reality that losses must be taken. One can be assured that a delayed day of reckoning comes, cited numerous times over the past several months in the Hat Trick Letter.

Vývoj ohledně nemovitostí- Housing development

HOUSING PRICES IN THE U.S. WILL CONTINUE TO LANGUISH. PROSPECTS FOR A RECOVERY ARE WORST IN REGIONS THAT ABUSED THE MORTGAGE PROCESS THE MOST, AND WHERE THE ECONOMIC FALLOUT IS GREATEST.

A SHADOW HOUSING INVENTORY IS HUGE AND GROWING, MAINTAINED BY BANKERS RELUCTANT TO DUMP AN AVALANCHE ON A WEAK HOUSING MARKET. THE R.E.O. PROPERTY LISTS ARE ROTATED ITEMS ON BANK BALANCE SHEETS, HIDING INEFFECTIVELY THE MASSIVE GLUT. THE EFFECT IS A CONSTANT SURPLUS OF SUPPLY WEIGHING DOWN THE MARKET, MAKING HOME PRICE RISES IMPOSSIBLE FOR STILL MORE YEARS. THIS HIDDEN INVENTORY GLUT IS A HUGE EXTREMELY IMPORTANT FACTOR, A HEEL ON THE NECK OF ANY U.S. RECOVERY.

THE SHADOW HOUSING INVENTORY CONTAINS COUNTLESS HOMES STUCK IN PROCESS, OVER A YEAR DELINQUENT. THE OVERHANG IS ACTUALLY BACKED UP.

ANOTHER EXPLOSION OF MORTGAGE LOSSES IS SOON TO ARRIVE, IF NOT ALREADY. IOWA FROM THE HEARTLAND AND ARIZONA FROM THE SAND BUBBLES REPORT IMMINENT BREAKDOWNS.

LIKE MATCHING BOOKENDS, THE COMMERCIAL MORTGAGE MARKET CONTINUES ITS COLLAPSE, WITH EXTREME BANK LOSSES SOON TO HIT. PRICES ARE WAY DOWN, AND SALES VOLUME IS WAY DOWN. THE LOSSES ARE INEVITABLE SINCE LOAN REFINANCE IS IMPOSSIBLE. TOO MUCH VALUE HAS BEEN LOST. REBOUND TO EQUITY IS NOT OCCURRING.

Co by znamenalo omezení / zastavení používání USD při mezinárodních transakcích – End of USD in transaction settlement

AN IMPORTANT BENCHMARK FOR COMMODITY PRICING IS SOON TO BE LOST. THE CRUDE OIL PRICED IN USDOLLARS WILL DESTABILIZE THE ENTIRE COMMODITY PRICE SYSTEM.

A COST SHOCK TO THE USECONOMY COMES. LOST PRICING OF CRUDE OIL AND OTHER COMMODITIES WILL ASSURE THEIR HIGHER PRICES. THIS WILL COME AS A SHOCK OF HIGHER COSTS IN A UNIVERSAL BLOW TO THE USECONOMY. SOME WILL CALL IT AN INFLATION EVENT, BUT IT IS NOT. IT WILL BE A MAJOR SQUEEZE FROM RISING COSTS WITHOUT BENEFIT FROM HIGHER WAGES OR STRONGER PRICING POWER FOR PRODUCTS AND SERVICES. CREDIT SUPPLY WILL DIMINISH FROM LOUSY CONDITIONS FOR CREDITORS GENERALLY. THE UNITED STATES WILL LAPSE INTO CHRONIC RECESSION.

The most immediate effect of a serious and sudden decline in a national currency for the United States is fast rising costs for everything imaginable. The current economic climate is NOT favorable to general price increases. THE RESULT WILL BE A MASSIVE SQUEEZE ON PROFITS, resulting in further rounds of job cuts and business shutdowns.

The borrower benefits from inflating the debt down, but the creditor loses from the same inflation, and is thus less willing to lend. The profit squeeze occurs at the same time that available credit shrinks. The foreign world outside the US walls will soon not accept the USDollars in transactions, just like with crude oil. The domestic world inside the US wall will be forced to accept the freshly printed USDollars. THIS IS THE ESSENCE OF HYPER-INFLATION.

WHAT SPARKED THE GLOBAL BUZZ ABOUT THE ENDING PETRO-DOLLAR WAS A PAIR OF ROBERT FISK ARTICLES. HIS ESTABLISHED INTEGRITY HAS NOT BEEN ATTACKED. HIS REVELATION HAS BEEN DENIED BY THE SAUDIS AND FRENCH, WHICH SERVES AS CONFIRMATION. The Saudis, with Russians, Chinese, Japanese, and French at their sides, announced the eventual end of the Petro-Dollar. Germans were involved, but remained in the shadows of control.

The lack of viable alternatives to the USDollar is not a reason for the continued life of the USDollar itself. To say that the Euro or Yen offer no workable alternative is not a reason for the USDollar to continue in its current status. The system is broken and will urgently demand a solution. The Competing Currency War will assure that all major currencies will be destroyed by their governments and central banks. The beneficiary will be Gold, and Silver too.