Hat Trick Letter – červenec 2010

Přecenění dluhů bank pomáhá růstu jejich zisků – Debt valuation adjustments help to boost banks profits

A HUGE AMOUNT OF GOLD SWAPS WERE CONDUCTED BY THE B.I.S. TO BAIL OUT PRIVATE BULLION BANKS.

THE BIG B.I.S. GOLD SWAP HAS BEEN AVERTING A DEFAULT OR SOME OTHER HORRIBLE EVENT. THE TRIPWIRE EVENT IS A MOVE TO $1300 IN THE GOLD PRICE. THE CREDIBILITY AND FAITH IN THE USFED HAS SLOWLY VANISHED. BEWARE OF GRESHAM’S LAW, WHERE BAD MONEY PUSHES OUT GOOD MONEY.

Gold investor and respected analyst John Brimelow reported, „The news of the day, of course, was the discovery by the Virtual Metals analyst (Matthew Turner) that the BIS engaged in what appears to have been the biggest Gold Swap in history prior to the end of their fiscal yearend on March 31st.“ The Bullion Desk broke the story. They reported, „In its 2010 annual report, the BIS said that ‚Gold, which the bank held in connection with Gold Swap operations, under which the bank exchanges currencies for physical gold,‘ stands at 8160.1 million in Special Drawing Rights [basket currency], equivalent to 346 tonnes this year, up from nil in 2009. While the data is relevant to the end of BIS 2010 financial year in March, data posted to the Intl Monetary Fund and carried by Bloomberg show the swap still growing in April, analyst Andy Smith of Bache Commodities noted. To now, this implies a swap of about 380 tonnes from the end of 2009, he said in a report.“

THE BIG B.I.S. GOLD SWAP CONTRACTS WERE PROBABLY DESIGNED TO BAIL OUT A MAJOR BULLION BANK ON THE VERGE OF A HIGH PROFILE DEFAULT EVENT. JULIAN PHILLIPS REVEALS A LIE, AS NO PRIVATE BANK HAS THE STATED VOLUME OF GOLD. THINK SEVERAL PRIVATE BANKS, AND AT LEAST ONE SMALLER CENTRAL BANK.

Julian Phillips adds his viewpoint. He said, „Gold Swaps are usually undertaken when the cash taking central bank may want foreign exchange but does not wish to sell outright its gold holdings. The Wall Street Journal informs us that the Bank For International Settlements did these swaps with commercial banks. We know of no commercial bank that has 382 tonnes of gold on their books. It is likely then that should these commercial banks have been in the deal, they would have been acting for a central bank [or several over time] who wished to remain anonymous.“ Phillips reveals the lie. It was a central bank in trouble, or a group of private banks, and at least one smaller central bank!!

One can easily interpret the sequence to reveal three important facts:

• central banks are short on gold bullion
• central banks are unwilling to give up what they have as a core hoard
• central banks can no longer provide critical assistance to the struggling bullion banks.

Coincidentally, Portugal was listed as having 382 tonnes of gold in reserve in its central bank vaults. A tad of confusion has arisen since some reports cite 349 tonnes being the size of the BIS Gold Swap contracts. Yet amount of gold inventoried by the BIS recently for a swap deal was 380 tonnes….The nation of Portugal is probably involved in a direct deal to the BIS, which then leased gold to numerous private bullion banks, maybe even some smaller central banks, in complex three-way deals. Portugal probably is not the party pawning the national jewels at the BIS, even some have suggested as such. The cobbling gradually of 380 tonnes from smaller gold deals with commercial banks around Europe might be smokescreen cover, easily made from of the financial crisis. However, Portugal has been identified as the next European nations in deep financial trouble. Actually it is a race between Portugal and Spain for the next crisis news focus of attention, the disaster of the month.

TAX HIKES ARE SOON TO KICK IN FOR AMERICANS. PEOPLE WILL BE SLAMMED AND SHOCKED.

After nearly a decade of federal tax cuts treated by the Republican wing of the political cabal, Americans could awaken New Year’s Day with a nasty hangover treat from the Democrat wing of the political cabal. Numerous tax breaks linked to child tax credits and the death tax are due to expire then. Higher tax bills will be the new norm for nearly every American citizen. Scott Hodge is president of The Tax Foundation. He said, „We have never in history seen anything quite like this, where such a major portion of the tax code is set to expire on a single date and affect so many Americans all at once.

Some summary items:

• Across the board income tax increases of 3% to 5% for every bracket
• The so-called death tax on estates would return after a one-year hiatus, at 55% on estates over $1 million
• Capital gains tax would rise to 20% from 15%, and dividends tax would rise to 39.6% from 15%
• The child tax credit would be cut in half to $500 per child

HOUSING PRICES HAVE BEGUN A POWERFUL SECOND MOVE DOWN IN PRICE. MOMENTUM HAD BEEN SUSPENDED FOR A FEW MONTHS, BUT NOW RESUMES THE DOWNWARD PATH. IMPACT WILL BE ENORMOUS. THE APPRAISAL PROCESS IS KEY TO PUSHING DOWN PRICES, AS IT RESPONDS TO THE FORECLOSED PROPERTIES NEARBY.

CONDO PRICES IN MANY MARKETS HAVE BEEN CUT IN HALF, LEAVING MANY CONDO OWNERS FROZEN SOLID. THE CONDO NEIGHBOR SALES DETERMINE LOWER PRICES FOR ALL, ESPECIALLY WHEN GROUPS OF UNITS ARE SOLD AT DISCOUNT. A CASCADE OF LOST VALUE IS BEING REALIZED.

COMMERCIAL PROPERTY DEFAULTS ARE HORRENDOUS AND GROWING EXPONENTIALLY, DRAGGED DOWN BY THE ECONOMIC RECESSION AND NATURAL REJECTION OF THE CONSUMPTION MODEL. WHILE RESIDENTIAL HOMEOWNERS ARE UNDERWATER AND GROWING WORSE.

As long as bankers delay the credit asset liquidations, the property market decline will remain firmly in place and stuck. So if bankers never force the cleansing of their impaired assets and distressed portfolios, the housing bear market will continue, even permanently.

OFFICE VACANCY SURGED IN THE LAST THREE YEARS, AND HAS NOT RELENTED. RECORD HIGHS ARE SET SEQUENTIALLY. THE 2003 PEAK HAS BEEN BREACHED.