By Russ Nelson, on April 8th, 2010
Apparently some Democrats object to the idea that Jamestown was run as a socialist enterprise, as Dick Armey pointed out. They say “Oh, no Jamestown was established as a capitalist venture to make a profit.” Well, that’s true, but internally (which is the only thing that matters) it was run in the same way as any socialist venture. There was no money, no market, everyone got free food and housing, and — this is key — there was no incentive to work because only the corporation made profits. Individuals who wanted to work harder than others had no incentive to do so. So naturally, the enterprise foundered, as any socialist venture does.
Before you object by pointing to Sweden, do please consider that Sweden is nothing like a socialist country. It has high taxation and generous social benefits, but it has a vibrant and free market. Socialist countries don’t have free markets. They have government-controlled markets. The idea that socialist countries can have free markets is a recent and ignorant one. Go read up on the history of socialism, and you will see that their first goal was to eliminate the marketplace, preferring instead government allocation of profits.
Okay, now you can object with Sweden, but at least now you’ll know in advance that I think you’re wrong. And crazy, but mostly wrong.
By Eldon Mast, on April 8th, 2010
 The last week of economic news has been quite notably positive.
Last Wednesday, March 31, started with the Mortgage Bankers Association reporting that its purchase index was up a very sharp 6.8 percent for the fourth gain in the last five weeks.
A few hours later Chicago’s arm of the Institute of Supply Management reported that business activity in the Chicago region remains robust. According to according to Chicago area purchasers the ISM index came in at a very strong 58.8 — a signal of significant economic growth relative to February.
A few minutes later, the government reported that factories are cranking it up right now with strong orders in February that followed even stronger orders in January and December. Factory orders rose 0.6 percent in February reflecting an upward revised 0.9 percent month-to-month rise in durable goods orders and a 0.3 percent rise in non-durable goods.
On Thursday April 1, Monster Worldwide reported that its index rose to 125 and is now up 11 points compared to January. Their report said the improvement is signaling that companies are starting to hiring again. Their index is a comprehensive monthly analysis of U.S. online job demand and is based on a real-time review of a large, representative selection of career sites and job boards, including Monster’s own postings.
Subsequently, the auto sales in March proved much stronger than February. Sales of domestic-made cars and light trucks rose to an annual unit rate of 8.8M, up more than 15 percent vs. February’s 7.6M rate.
In additional labor news on Thursday, fewer Americans filed jobless claims in the March 27 week. Initial claims for that week came in at 439,000 vs. 445,000 in the prior week. The four-week average fell 6,750 to 447,250 and is down roughly 20,000 from levels in February.
Shortly thereafter, the ISM released its March Manufacturing report on business which offered very convincing evidence of continued recovery. Their PMI index jumped 3.1 points to 59.6 well above all economists expectations. All the major components of the index showed strength and new orders continue to be particularly strong. Inventories — which are a very key positive, soared to a very surprising 55.3 level which is indicative of a broad restocking effort in the sector.
And the big news on Friday was the positive jobs report. Private payrolls (which discount Census hiring and other government changes) jumped 123,000 in March, following an 8,000 rise in February and a 16,000 gain in January.
This week continued to post positive economic news.
On Monday, the ISM published its the non-manufacturing index. It came in at 55.4 for a solid month-to-month acceleration in March and the third month of growth in a row. The the manufacturing report, new orders again led the sub-indexes with a sizzling 62.3 reading — the sharpest month-to-month acceleration in five years.
Co-incident with the ISM report release, the National Association of Realtors reported that pending sales for existing homes jumped 8.2%. The Realtor’s Group, which compiles the data, also reported an increase in multiple offers in some markets. Further they reported that the Midwest was the strongest market in February, jumping 21.8%, with both the South, the biggest region, and the Northeast showing solid month-to-month gains.
And Tuesday the ICSC-Goldman reported a major increase in retail sales in both the April 3 week and for the month of March. Week-on-week, sales jumped 2.1% and year-on-year, sales surged 4.7% These rates are well beyond anything posted by Goldman so far during the recovery. ICSC-Goldman then sharply revised its full-month March sales from a year-on-year plus 3.0 to 3.5 percent to an 8 to 10 percent increase!
These results indicate enormous strength, beyond seasonal adjustments, for the Commerce Department’s ex-auto ex-gas retail category. They continue to underscore our assertion that Q1 2010 GDP growth will come in much stronger than that of an already strong 2009 Q4.
By B.P.T., on April 8th, 2010
At 8:30 AM EDT, the U.S. government will release its weekly Jobless Claims report. The consensus is that there were 436,000 new jobless claims last week, which would be slightly less than the previous week, and would continue the trend of improving employment numbers.
At 4:30 PM EDT, the Federal Reserve will release its Balance Sheet report, showing the amount of liquidity the Fed has injected into the economy by adding or removing reserves.
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By Rok Spruk, on April 7th, 2010
The Economist published a fascinating overview (link) of the macroeconomic indicators in Europe’s most vulnerable economies in the current debt crisis (Portugal, Italy, Ireland, Greece, Spain).
By Bron Suchecki, on April 7th, 2010
In this interview, Lenny Organ (son of Harvey Organ who was at CFTC hearing) recounts how at a recent visit to the vaults of ScotiaBank they saw little physical precious metals and had to go to some trouble to get physical.
I analysed Scotia’s annual report back in September 2009 after seeing a blog by ispeakofpeak on the issue. At that time the annual report revealed that Scotia only had 43% of its gold and silver certificate liabilities backed by physical metal. The table below updates that post with the most recent report (note: Scotia’s financial year end is 31 Oct, figures in millions of dollars).
Year Ending Liabilities Assets Physical cover
Oct 09 3,856 5,580 100%
Oct 08 5,619 2,426 43%
Oct 07 5,986 4,046 68%
Oct 06 3,434 3,362 98%
Oct 05 2,711 2,822 100%
Oct 04 2,018 2,302 100%
It appears that the physical backing was running down from 2006 but is now back to 100%+, with $5.58 billion of physical. This contrasts with Lenny Organ statement. Either Scotia have run down a lot of physical in 6 months or it is stored elsewhere.
I do find it interesting that the gold and silver certificate liability has declined from $5.619b to $3.856b in the past year, a year when most ETFs, GoldMoney and BullionVault and Perth Mint have shown increasing amounts of metal held.
I agree with Adrian Douglas’ statement in the interview that many storage providers “are very vague about what is backing their paper certificates and if they are vague I think you should not give them the benefit of the doubt”. Contrast this statement from Scotia about their unallocated:
“Scotiabank gold certificates are backed by the assets of The Bank of Nova Scotia. Unallocated gold is a claim on The Bank of Nova Scotia for the ounces entitlement to a specific quantity of gold bullion.”
with the Perth Mint’s:
“With unallocated storage, also known as a metal account, clients purchase an interest in a pool of precious metal held by The Perth Mint. The Mint purchases an ounce of precious metal from the spot market for every unallocated ounce it sells to clients. Accordingly every unallocated ounce is 100% backed. … The Perth Mint is not a bullion bank and does not provide project financing or bullion lending/derivative services to mining companies or other entities. It does not lend client’s unallocated metal to support short selling transactions or other derivative activities. The unallocated metal is utilised solely to fund the Mint’s operations.”
You should always read the fine print.
By B.P.T., on April 7th, 2010
The Mortgage Bankers’ purchase index was released at 7:00 AM EDT, and there was a week to week gain of of 0.2% last week. Also, mortgage rates were up 27 basis points in that week.
At 10:30 AM EDT, the weekly Energy Information Administration Petroleum Status Report will be released, giving investors an update on oil inventories as oil prices continue to move higher.
At 1:30 PM EDT, Federal Reserve Chairman Ben Bernanke will make a speech to the Dallas Regional Chamber on the topic of “Economic challenges: Past, Present and Future”, after the Fed minutes for March were released yesterday.
At 3:00 PM EDT, the Consumer Credit report will be released. The consensus estimate is that there will be no change in the amount of consumer credit available from January to February, after the first increase in 11 months in January.
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By Eldon Mast, on April 7th, 2010
Employers added 162,000 jobs in March. It was the biggest monthly gain in three years and continues a string of accelerated job growth that began last spring.
The latest report, which marks the third month since November in which payrolls registered a net increase, further punctuates that the labor market is pulling out of the deep downward spiral it was in early 2009.
We’ve continued to highlight the chart below in the later months of 2009. It details the abrupt turn in jobs trending since the government’s stimulus package last April. What is most apparent is that should the positive trend continue, this recovery will have netted over 4M jobs by the end of 2010.
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By Richard Daughty, on April 6th, 2010
There has been a lot of discussion around here lately about inflation, mostly about who is divided up into the “We’re freaking doomed!” camp (me), and who isn’t in that camp, but instead are over in the other camp, which is, apparently, mostly everybody else, all of whom I consider to be morons who think that because the government, which has every reason to lie and whose entire history is the deplorable story of one government lie and corruption after another, says that prices are only going up 2% or 3%, which is classically horrifying, when in reality prices are inflating by even more than that!
And even if they weren’t, the Ugly Economic Fact (UEF) is that 3% inflation in prices is, judging by all the rest of economic history, the actual “dividing line” between “intolerable inflation in prices” and “we’re freaking doomed!” At least, that is the way it has almost always worked out.
That is why the Mogambo Inflation Meter (MIF) has the red-line at precisely 3% inflation in prices, which is a terrifying inflation rate that, despite its qualities of terror, is but a dim memory now, as the reality is that the indicator needle is quivering at about 7%, and inching almost-imperceptibly higher.
If you have any idea of the horror of 7% inflation in prices over the course of a few years, or if you comprehend the idea of things getting evermore expensive (which they will because the Federal Reserve is creating the money necessary) at the rate that prices actually double in a short 10 years, and then to know that it will get worse and worse should send you screaming, screaming, screaming, frantically loading up on gold, silver and oil and constructing some kind of bunker in the back yard where you can lay down an unrestricted hail of raw firepower, but you first have to fight, fight, fight with the Building and Zoning people at City Hall about getting the required construction permits but spending most of your time arguing, arguing, arguing about minutia, like about how “gun port” is not in the building code and blah blah blah.
I say this not because I am a paranoid, hateful little nut job, but as a guy who pays bills and who thus sees, first-hand, the way prices are rising, and as a guy who thus says that the government is lying about inflation, and not only that, but that everybody actually working in government, the schools and the media are lying about inflation, as I extrapolate from the few people I know who work in government, the schools and the media, who all deny any existence of inflation, and instead tell me that I am a loud, obnoxious idiot and that they regret the day they moved into a house that is so close to mine.
But real, in-your-face inflation is already reflected in the commodities index compiled by The Economist magazine, which is showing double-digit inflation in the dollar-prices of everything.
And then there is, if that is not enough for you, Javier Blas, in his “Short View” column in The Financial Times, who says that “the commodities market is screaming inflation” which seems about right the instant he says, “The price of crude is up 115 per cent since January 2009” and “spot iron ore prices have surged to more than $140 a tonne, up 95 per cent since January 2009.”
Then he quotes Julien Garran of UBS, who uses the Commodity Research Bureau Rind index, which tracks lesser-followed prices such as metal scrap, burlap, hides, tallow, gum rosin and wool tops, “for signs of raw materials inflation, free of the interference of speculative activity” because these commodities are not traded in the futures markets, and this index has, so he says, “risen more than 50 per cent since January 2009”.
About this time, as part of my Official Mogambo Duties (OMD) here on this planet you call Earth to improve the species by weeding out the unfit, I usually take the time to gently tell you that unless you prove your intelligence by buying gold, silver and oil to protect yourself against the massive, unstoppable, terrifying, bankrupting inflation in prices that is coming as a result of the massive, unstoppable, terrifying, bankrupting inflation in the money supply that is coming as a result of the loathsome Federal Reserve creating so much massive, unstoppable, terrifying, bankrupting money (so as to fund Obama’s massive, unstoppable, terrifying, bankrupting $1.6 trillion budget-deficit, with trillions more to come), then there is something very, very wrong with you and you should not have any children.
Inflation Meter Soars Over the Red Line originally appeared in the Daily Reckoning.
By Bron Suchecki, on April 6th, 2010
“Since criminal prosecution is only a remote threat, and since the fines and damages are generally paid by the companies, not by the individuals, the question is: what’s to keep a Sumitomo from happening again, perhaps in precious metals?” – Modern Market Manipulation by Mike Riess, International Precious Metals Institute 27th Annual Conference, 16 June 2003.
The recent statements by Mr Maguire may well prove Mr Riess right. It is well worth reading Mr Riess’ presentation. It is not long and neatly identifies the factors that contributed to the copper manipulation, factors that also apply to the metals markets.
For the young’uns, “a Sumitomo” refers to the case where, as the CFTC itself found: “the principal copper trader for Sumitomo engaged in a scheme, in conjunction with an entity operating in the United States, with the intent of manipulating the price of copper. In particular, during 1995 and 1996, Sumitomo, acting through its agent or agents, established and maintained large and dominating futures positions in copper metal on the London Metals Exchange (”LME”). In the fall of 1995, Sumitomo stood for delivery on a significant percentage of its maturing futures contracts. It thereby acquired a dominant and controlling cash and futures market position, which directly and predictably caused copper prices, including prices on the United States cash and futures markets, to reach artificially high levels. … Sumitomo intentionally exploited these artificially high prices in order to profit on the liquidation of its large portfolio of futures contracts and holdings of LME warrants.”
It is because of the Sumitomo case that I am not surprised by the revelations of Mr Maguire. However, the question for me is what sort of manipulation are we talking about? It is being spun as proof of GATA’s claim that the gold market is manipulated by the US Government via bullion banks in an attempt to support the dollar. While I don’t begrudge GATA some PR mileage, at this time all that Mr Maguire has is potentially another “rouge trader” case, only affecting the silver markets. He is not providing any evidence about gold market manipulations or Governmental involvement.
This may come in due time if the CFTC investigate further but that does beg the question of why rely on the Government. If they are ultimately party to the manipulation, will they not make the issue go away in a backroom deal? Alternatively, if the CFTC presses on and does find something initially in the silver markets, will it just be explained away as a rouge trader who will take the fall?
In this case it may be best to fight fire with fire. GATA would achieve more, and quicker, by doing a roadshow with Mr Maguire to hedge funds, sovereign wealth funds, etc and making its case that the market has been manipulated via the surreptitious leasing and selling of central bank gold that is now all used up and hence there is a large short position that can be squeezed. The standard of proof would be much lower, just enough to convince an investor that the odds are in their favour.
Would it not be better to use brawn rather than bureaucracy? Only if you’re sure the bet your pitching won’t turn bad, because then your buddies will be blue (to put it mildly).
By B.P.T., on April 6th, 2010
There are no major economic events today, but the weekly Redbook report on retail sales and the International Council of Shopping Centers report on comparable store sales in retail chains will be released this morning.
Also, there are a few Treasury auctions today, and with interest rates rising, demand for these notes could be lower than in past auctions.
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