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Gold Has Trashed a Key Support

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[We’ll finish out the week with the commentary below, since it has generated such a lively response.  If you’re interested in Bitcoins, a popular form of digital currency, be sure to click on the link beneath forum remarks from ‘Robert’ on the subject. It will take you to Max Keiser‘s web site, where the discussion really took flight.  Regarding gold, this week’s price action has left me quite confident that the Comex June contract is on its way down to at least $1487. However, although I have plenty of company in the bearish camp, I don’t see this selloff getting much worse than that, at least for now. A detailed technical assessment is contained in a trading ‘tout’ for June Gold that I have made publicly accessible below. RA]

With a scary bank crisis in Cyprus driving the headlines a couple of weeks ago, gold could barely muster a rally. Notice in the chart below that the high of the move failed to clear a minor peak at 1619.70.  Had it done so, we would have given bulls a fighting chance, since it would have created a bullish “impulse leg” with the potential to power quotes as much as $120 higher in just a few weeks.  Instead, buyers showed themselves to be gutless, allowing the April contract to relapse down to within inches of the lower trendline. It could hold, but we doubt it. [Note:  I have updated the chart to show that the breakdown we’d expected has in fact occurred, and decisively.]

Still worse is that a breakdown is likely to send the futures down to at least 1553.50, a Hidden Pivot support identified here a couple of weeks ago when the futures were trading above 1600. If that “hidden” support should fail as well, look out below, since the next stop would be a more important one at 1487.00 that was flagged at the same time.  That would represent a 5.5% fall from current levels, which would hardly be disastrous.  But it would also turn a trendline that has provided support since July of 2011 into resistance, opening a path to significantly lower prices into autumn.

Three Scenarios

Because the trendline is so clear, it seems all but certain to be tested. It comes in at around 1570 this week, and you should expect it to be breached. Once that has occurred, things could play out in a few different ways. Most bullish of them would be a sharp rebound that vaults the 1619.70 peak by mid-April. That’s what we should expect to happen if the smart money is planning to shake out the weak sisters in order to run gold steeply higher without being burdened by nervous profit taking. But if gold proves unable to get serious loft within a week or two, be prepared for a downdraft to 1487.00. Another possibility is a tedious game of footsies on and around the trendline. Beware, however, if settlement occurs below the trendline for two consecutive weeks, since that would imply distribution.

Because the long-term trend in gold is bullish, we should be willing to give it the benefit of the doubt under any circumstances. Technically speaking, it would take an “impulsive” rally on the hourly chart to turn us bullish again. At present, that would imply a swift thrust hitting 1612.90 within three or four days of any fleeting dip below the trendline. We’d lay three-to-one odds against it at the moment, but stranger things have happened.

Please do not ask trading questions!

  • BigTom April 6, 2013, 5:08 pm

    To TC above – yes, I am sure even at todays prices the physical metal can be found, thanx. I was just relaying what I was told from a fairly large bric/mortars local dealer on the west coast. 9 to 1 buyers over sellers, preimums had risen some and actually, I believe, 90% silver was difficult to find. So the take away here IMHO is these prices have not yet at these levels dampened many spirits….actually seems contrary. Usually in the past it was mostly the ‘buy high & sell low’ mentality moving in mass in and out of his shop on ‘the panic mode’. Buy on the panic up and sell on the panic down…..I have actually seen that theory in practice for several decades and there was some general truth to it. Perhaps something is different this time…..

  • markz April 5, 2013, 3:20 pm

    to be honest whether this system works or not…

    &&&&&

    Talking about being honest, when you start posting here with an honest e-mail address and your real name, I’ll consider publishing your comments. Meanwhile, taunting me from the sidelines under a pseudonym, as you’ve been doing for some time, you are not just a horse’s ass, you are a coward. RA

  • Mac April 5, 2013, 11:15 am
  • Mac April 5, 2013, 11:14 am

    Here, read what former Assistant Secretary of the US Treasury , PC Roberts said today:
    “The fact that the Federal Reserve is short selling bullion means that there is something desperate going on…”
    “The manipulation of the bullion market is illegal, but as government is doing it the law will not be enforced. It is an act of desperation. If bullion were not a threat, the government would not be attacking it.”

    • gary leibowitz April 5, 2013, 8:01 pm

      And that’s why we had a nice spike today? Kind of strange how gold is being manipulated along with oil, food, and all other metals. Perhaps every time gold doesn’t go your way it might just be normal market behavior. Nah, never mind, my mistake. Gold started at 400 and went to 1900 but I haven’t heard it was because of manipulation. Strange how the metal can go up 5 fold without any talk of manipulation but the moment it corrects or goes against the doom/gloom crowd there is a conspiracy going on.

      Today’s job report was a shock, sort of. I guess the ADP report of 2 days ago didn’t quite prepare this market. If I am guessing we should see a small rise on Monday followed by another drop Tuesday, which should be the low for April.

    • gary leibowitz April 5, 2013, 10:22 pm

      Since the market refused to fall below any support/resistance line I had bought 6,000 SPXU (SPX 3x bear) at 28.33. Not convinced the current correction is over. I believe this is my 3rd and final bet that announced I would post. Only looking for a short term bet. If SPX hits anywhere near 1535 – 1542 and holds I will exit position. If it falls thru that number I might hold on till 1478. The timing would suggest a much needed correction is due.

      I am sure most here are wishing me luck.

    • Cam Fitzgerald April 6, 2013, 7:05 am

      Good call, Gary. I think you may have just timed this to perfection (and good luck!).

    • gary leibowitz April 7, 2013, 4:13 am

      My recent streak of good luck might end here. I just might be premature on the next correction. Strange how I am now looking to catch the falling knife when my focus for a long while was to catch the rising tide.
      I believe I have been too cautious and should have let my long bets ride further. Can’t complain though.

      We live in a time where individual complaints can be heard by millions. Where people making outrageous accusations against this government have become filthy rich. Where the so called government criminality is so transparent anyone can follow the money trail. Yes in all this we still want a total abolishment of the system. The sad part is everyone thinks they will come out the better. Be careful what you wish for. Capitalism is a sloppy system. It will always have an extreme cyclical nature. I wonder how many White Americans wanted the collapse of this system in the 50’s, when we were on the glorious swinging arc higher. Not pleasant when it accelerates during the downward pitch.

  • Marc Authier April 5, 2013, 3:27 am

    That’s paper gold electronic gold. Physical gold is hard to find if you want it in your hands.

    • mario cavolo April 5, 2013, 4:00 am

      …physical can be purchased freely here in China, just walk into one of the banks and buy some…perhaps worth a $1000 airplane ride and Asian holiday just for that coupled with an ultra complete head to toe health check which will set you back a whopping $150, come for a visit look me up, I’ll take you to the hospital up the block 🙂 ….Americans really need to more open their minds to what’s easy and possible overseas…

    • Dave April 5, 2013, 6:42 am

      Does Mario mean that China reserves their best, highest quality and well made products for themselves while exporting cheaper crap, like deadly drywall, lead painted toys, dishes, cups, chemical filled toothpastes, pet food, tread separating tires, etc? Hopefully, Mario avails himself of TCM Traditional Chinese Medicine, where there are herbal masters in mainland China instead of relying on cheaper versions of westernized medicine and drugs.

      Any visit to a Chinese buffet in America shows how resourceful the Chinese are in making real looking shrimp, scallops and crab from non-fish sources.

    • mario cavolo April 5, 2013, 9:00 am

      Hi Dave, China makes both cheap crap and high quality crap. What they may send out to a company overseas who orders it is made to the quality level at which it was ordered by that company. If you want cheap silk, they’ll send it. If you want higher quality silk, threadcount, dye, etc, they’ll send it.

      Vincent hi end audio hybrid tube preamp products are a German brand in Europe. 1500euros for the amp and 1500euros for the matching cd player, they are superb and at that price should be; they are manufactured according to Vincent’s engineering specs at the Shengya factory here in China. I bought them locally with the Shengya label on them for 1/3 rd the price, and I’ll never sell them.

      Of course there is the problem that it is very important to only deal with known,referenced reputable manufacturers in the supply/logistics/export chain, otherwise, much higher risk of receiving products that are substandard to the specs you’ve ordered.

      I lived for one year in 1999 on the campus of the Chengdu TCM Medical University, and have found over the years a variety of TCM therapines to be a highly effective way of treating health problems and know quite a few TCM masters, though its a bit inconsistent in comparison to taking many western prescription drugs.

      In China there are over a dozen variety of tofu, often used in vegetarian restaurants as faux chicken, beef, pork, fish…of course everyone uses imitation crab cakes.

      Cheers, Mario

    • Cam Fitzgerald April 5, 2013, 8:07 pm

      So true Mario. The best boots I ever bought are made in China. Been wearing them almost 4 years and they are just getting the soles done now for the first time. Worst boots I ever owned also came from China. Cheap pieces of crap were ruined in just a few months. They looked so enticing in the shop though. Turns out that factory produces them by the millions at 12 bucks a pop even though they set me back a hundred here. I have become a very discerning shoe shopper over the years as a result.

  • Robert April 5, 2013, 3:05 am

    Remind me again…

    How does that whole “buy low, sell high” thing work again…?

    Should I be shorting physical gold to zero and selling mom’s silverware…?

    🙂

  • dst April 4, 2013, 9:46 pm

    jeff kahn, your way of thinking will drive you to bankruptcy. What is the price action telling you the past 18-19 months? Cannot you not read it? Why fight it, got to be long AU/products.

  • jeff kahn April 4, 2013, 9:16 pm

    Actually, gold tends to do very well under deflationary scenarios caused by bursting credit bubbles. EG. Gold did well in the 30’s here; and during the deflation in France after John Law’s Louisiana bubble, gold soared.

    But anyone who thinks deflation is a problem here and now clearly doesn’t have kids. Education and Health Care alone will bankrupt a family with three kids and two solid income earners. And if they’re also renting and driving a car, and want to take their kids to a ballgame a couple of times a year – my goodness, this is quickly becoming the country of the lower middle class millionaire.

  • Robert April 4, 2013, 8:48 pm

    The urge to go 100% Martingale must be be eating at the psyche of the London physical traders right now…

    The New York futures market is speculative – it can easily and readily go to zero. Profits are made at the margin, and the futures margins ANYWAYS move inverse to retail premiums on “real” products.

    Anyone taken a solid look at retail premiums on bullion products lately?

    You find me JUST ONE Silver product anywhere on Earth that can be had for less than $30 per ounce, and I’ll show you a product that is “out of stock”

    I fully expect the Wall Street hyenas to start feasting on each other (ala late 2008) real soon here…

    • BigTom April 4, 2013, 10:39 pm

      yep – in fact was just talking this a.m. about the physical silver premiums going up…..they are! And one retailer just told me there are 9 buyers for every 1 seller right now…..

    • TC April 5, 2013, 4:50 am

      Silver rounds are selling in the mid-28’s right now on the major sites and they are in stock. Agreed that American Eagles are still $30 but silver can be had for much less than 30 an ounce right now.

  • RM April 4, 2013, 8:30 pm

    Big Tom: The 14 week RSI on XAU is 26.49, not 31.31.

    • BigTom April 4, 2013, 11:01 pm

      RM – you are right, I was looking at a longer term chart. You are also correct in “….something truly wicked this way comes….” if in fact we do get a fishing line chart from these levels!

  • RM April 4, 2013, 5:24 pm

    Goodness gracious. Thanks. The weekly RSI on XAU / GDX is already at a level only matched in Dec 97, Sept 98, and 2008. Those levels led to rippers, though there were big down candles first. Starting a waterfall from this weekly RSI (25.2) which matches the low from 2008, means that something truly wicked this way comes.

    • BigTom April 4, 2013, 6:30 pm

      RM – wow! – the rsi on xau right now is 31.31. thanx for pointing that out…but there is a cross over on the macd to the downside and the exact same thing on the hui. I pulled up a few mining stocks and it is all the same same same…this week is a real lololol…..
      And to Jeff above – yep it all depends on when one got on this horse….I feel for those late comers when it was all going wild with $50 silver approaching, though by now I would think most of them are long gone out of this stuff…..

  • KeivnR April 4, 2013, 2:21 pm

    So is GDXJ still going to be a “back up the truck” buy at 13.15 as you indicated again in one of your commentaries a couple of weeks ago or is it likely to completely implode? I guess near zero is a possibility at this point. Or does that pivot point need to be re-examined once that number is breached?

    I really should join to understand how this system works because it seems to be quite accurate A LOT of the time. My question is, how easy is it for the layman to understand/comprehend?

    &&&&&&

    I was an English major, Kevin, so how hard can it be? Concerning backing up the truck to buy GDXJ at 13.15, we can attempt to do so almost risklessly using a ‘camouflage’ entry strategy. Stop by the chat room sometime and ask how this works — how we could actually make money on the trade even if we are wrong.

    And here’s a link to a free seven-day trial to Rick’s Picks, including the chat room and daily trading ‘touts’ that are updated round-the-clock:

    http://www.rickackerman.com/lp/RicksPicks/?utm_source=site&utm_medium=link&utm_campaign=free-trial

    • Mustafa April 4, 2013, 10:11 pm

      Hey Kevin,
      I’ve never taken Rick’s course, but I’ve followed his free daily touts and website for two-three years. I would’ve have long ago taken the course it’s just that I don’t have enough capital at the moment. I’m working on rectifying this currently. Rick has done some free demos where he gets into the basics of the course and it looks easy enough. He himself always says anyone can learn the course. Hopefully within a year I hope to take the course.

    • Dave April 5, 2013, 6:24 am

      It seems you need some options knowledge because most of the trades done via the chatroom are Puts and Calls.

    • Dale April 5, 2013, 6:21 pm

      Dave, as a looong time subscriber and HP graduate, I can assure you that you need “zero” options trading knowledge. Those trades amount to less than 5% (est) of what goes on in the trading/chat room. When Rick does advise one, he gives explicit advice and practically holds your hand from start to finish.

  • Andrew Gutterman April 4, 2013, 2:00 pm

    My target price is the middle $1100’s. Both the descending triangle and the symmetrical triangle point to that price range if the price drops below $1530 convincingly.

    Why is gold falling in the face of so many bullish arguments to the contrary?

    One word: Deflation

    If deflation is what we are about to get then it makes perfect sense that gold would be falling. Bonds argue strongly for deflation, as does the zero short term interest rates. (Do keep in mind that the market leads the FED, not the other way around as most people believe. The market dwarfs the FED)

    That $16 billion of current government debt? Chicken feed compared to the $38 trillion in private debt, most of which is going to default.

    And that’s what the market expects, ergo, the price of gold is falling.

    More later……

    • Bam_Man April 4, 2013, 5:07 pm

      I agree with you Andrew.
      Commodities dropping, Treasuries rallying and the PM’s collapsing are all indications of imminent deflation.
      I expect the PM’s to continue to move with commodities and Treasury yields until the wave of defaults (sovereign & corporate) begins. Then it’s off to the races. Many will be shaken out in the meantime.

    • Cam Fitzgerald April 4, 2013, 7:09 pm

      Just one other way of looking at it Bam man. I have been pondering if the bottom approaching in miners will not also signal the top in stocks. Just a theory right now but there could be fireworks a few weeks out if I am correct.

    • mario cavolo April 5, 2013, 3:54 am

      I’ll keep it simple here, no matter how it may continue to occur, be manipulated, implemented, etc….we’re in for cheap money low interest rates for a lllllooooonnnnggggg time…the old rules and the old game of economics are done across the globe…

    • Cam Fitzgerald April 5, 2013, 10:10 pm

      Looks like my view just got a quick confirmation. A bottom in miners (and gold) timed to match a top in stocks. We may just be headed for that correction you were all waiting for. Not that I think it is the “Mother of all tops” that is being busted up. Nothing of the sort. But it sure could be rewarding for those who who just jumped on the mining complex if we get confirmations again this coming week.

  • RM April 4, 2013, 12:44 pm

    Rick (RA), do you still have the $30 target for GDX? That is the April 2009 level. ABX is already there by the way. Many thanks.

    &&&&&&

    It has been a long while since I looked in on GDX, although I recently had subscribers dabble briefly with a speculative long position in GDXJ, the junior miner ETF. In GDX, there looks to be a clear and compelling target at 30.64. I’d suggest using it as a minimum downside target, and bidding aggressively (albeit with a tight stop) if and when GDX gets there. RA

  • jeff kahn April 4, 2013, 11:01 am

    And yes, if you bought gold last week, or even last year you might be wiped out. But if you bought gold 10 years ago at 350 dollars, this is damned annoying, but hardly cause for concern. It may fall into a “Bear market” about 400 percent higher than you bought it. But the fundamentals are more solid than ever. And if you think the sentiment in the relatively tiny US paper gold market will rule the price longer term, I suggest you’ll find out the US is not as powerful as you think. China, India, Russia and Brazil will have something to say before this is all over. Maybe not today. Maybe not this year. But soon enough.

  • BigTom April 4, 2013, 7:49 am

    Cam – I agree. I would not step in front of this freight train either and it does look like a rout is on for the PM’s. My hat goes off to RA, his method and how he executes it. Though I will disagree with you and say this PM market has nothing to do with free market movement, and everything to do with manipulation. The trap door for the moment has been sprung. But knowing this and trading this is also part of the gig as RA seems to know well. “Trading was fairly heavy. No way in hell that could be organized….’ You surely must know how sell stops are triggered and hedge funds massaged to move in mass. That said, it still looks to be a rout in the making and touche for not getting caught in the stampede….it is a great f%$#*@g ride! As good as the craps tables when they use to get hot! It is not over by a long shot…. Good luck with your trades…..

  • Cam Fitzgerald April 4, 2013, 6:14 am

    And just to add one more small note…..it is looking like even a double bottom in GDXJ can now be ruled out. It only remains to be seen how far down it will fall in the coming months but the word bloodbath surely comes to mind. I wonder how strong insider buying will be now with these latest developments.

    &&&&&&

    My downside target since around Thanksgiving has been 13.15, Cam. We blew out a briefly held long position last week at 16.25. It had been initiated speculatively, though, and with no great expectations. RA

    • Cam Fitzgerald April 4, 2013, 6:54 am

      An amazing call Rick. I mean that as a compliment to you and your method. Nobody would have ever believed it either. And yet here we are, just an 11% drop away from that target which is little more than a squiggle on the big charts. A call like that should finally leave the last of the doubters gasping for air because they simply cannot explain how you got it right except to admit your method works and the usual fundamental analysis was a mugs game for metals.

  • Propaganda April 4, 2013, 6:12 am

    What a bunch of total propaganda.
    What about $16 trillion debt.
    $16 trillion in off book bailouts.
    $1 trillion per year QE and deficits.
    0.4% GDP.
    Lowest labor participation rates on record.

    Ongoing National backruptcies like Cyprus, which recently passed the joke of a ‘Stress Test’ that in fact does not test using real world conditions and is meant to calm the public.

    $1,200 Trillion (20 times world GDP) unregulated derivatives that will wipe out the financial system with just a 5% default.

    China increasing gold physical purchases for 100 tons to over 1,000 tons per year.

    The US losing its gold holdings to eastern central banks over the next 5 to 8 years at current levels of paper shorting.

    Everything written in this article is either a distraction from the real long term drivers of gold prices, or a lie.

    &&&&&&

    Oh geez, you’ve found me out: I’m an inveterate liar. Not to jerk your chain or anything, but I have no problem with your bullet points — just that gold happens to be falling in spite of them. Do check in again when Comex Gold hits my 1487 target. RA

    • Andrew Chu April 4, 2013, 11:10 am

      Markets can remain irrational longer than you can remain solvent – John Maynard Keynes

      fundamentals may rule in the long run, but it’s not about being right, it’s about making money

    • Dave April 5, 2013, 11:47 pm

      Well, could be worse if you’re a chronic masturbator too. Oops, just giddy, after using Liu Wei Di Huang Wan – Six Ingredient Pill with Rehmannia – a TCM Herbal Formula, another Chinese import product not working as described. It’s supposed to tonify my yin but my yang got a boost!

  • Cam Fitzgerald April 4, 2013, 6:08 am

    So yes, another gap down for GLD tomorrow morning and resistance is solidly broken from the May 2012 lows while DUST takes another giddy launch higher. Gold only needs to drop 24 dollars to officially be in a bear market from here. I would argue it is headed there at this stage. I really have to hand it to the guys who had the guts to buy and hold DUST against all the odds though. The bull camp for gold has always been so convincing with their 1001 arguements in defence of precious metals. Incredible how they got this one so wrong. They are one determined lot though to keep buying all the way down and dollar cost averaging into a heavy loss. But pity the poor saps who went heavily leveraged and would not back out. Some have been wiped out almost overnight proving that logic is no match at all against the bearishness that now prevails throughout the gold community. This sentiment driven collapse cannot be attributed to conspiracy either as is so often avowed. Trading was fairly heavy. No way in hell that could be organized and so the conspiracy theorists will just have to accept that the trend has truly turned bearish. I would not step in front of these kinds of declines and start buying that is for sure.

    • jeff kahn April 4, 2013, 10:50 am

      Everyone agrees the largest market in the world, the bond market is heavily manipulated. Most agree the stock market is heavily manipulated. But the tiny tiny gold market could not possibly be manipulated because it’s falling on relatively heavy volume (though a tiny fraction of the volume of the bond and stock markets). I’m not sure I follow the argument.

    • Cam Fitzgerald April 4, 2013, 7:16 pm

      Sure Jeff. What I meant to say was that I think we could be seeing a genuine capitulation taking place right now. My sense is that even the die hards are starting to throw in the towel. I had been reading SilverDoctors and was just picking up the vibe from the comments thread. There seems to be a sense of resignation that I have not seen before.

  • Cam Fitzgerald April 4, 2013, 5:52 am

    We will be watching for your lower targets now Rick. Gold has been taken to the woodshed the past two days and now that it has dropped as low as 1541 tonight expectations should not be high for a swift recovery. Interesting how so many were insisting that a short covering rally would send gold explosively to the moon (any day now…). That hypothesis has now gone swimming with the fishies. The record number of gold shorts was supposed to be the energy for a big fat rally although I have never bought into the theory seriously as the trend look pretty solidly down to me. My contention has been that since the Hedges were the ones mainly on the short side that it was more likely that they would succeed than fail. That community is just so small that all they needed do was collectively hold their positions and wait as others capitulated. Looks to me like that trade was profitable as hell. DUST is up 21% in just two days and the liklihood of a climb back to its all time high of 77 dollars is now in the cards. This last blitz of selling though was just so fierce I have become convinced the Paulson Fund is in the process of bailing out of GLD.

  • wayne siggard April 4, 2013, 4:57 am

    The PMI is a % of the payment. Therefore, it is a % of the entire loan amount. FHA just raised the rate 10 basis points to 1.35%.
    On June 1, FHA will charge the PMI for the entire term of the loan, instead of its current term of 5 years or until the underlying property has 20% equity.

  • John Jay April 3, 2013, 9:34 pm

    Bam_Man,
    Do you mean the PMI is 2% of the unpaid balance on the loan split up into the monthly mortgage payment?
    Or is it 2% of the monthly payment added on?

    • Oregon April 3, 2013, 10:02 pm

      Gary, the federal reserve has been giving Fannie and Freddie more than 28 billion per month, for months, with no end in sight. Can anyone worth their salt really state that as profit… with a straight face.

    • gary leibowitz April 3, 2013, 10:32 pm

      The outstanding debt for both firms is 10 times the profit so far. I’ll take 28 billion away from the 265 billion owed any day. It is a great start. I myself don’t believe they will take in profits much longer, but my views are meaningless. Let the future decide. In the meantime it is a great start.

      As for the idea that 16 trillion was used to bailout the banks and it is a total loss, I suggest you read this article.

      =====================================
      Even before the latest AIG sale, the bank bailouts portion of TARP had already turned a profit. $245.2 billion of taxpayer funds went to bail out the banks (that’s right, not $700 billion, as screechers on political extremes keep repeating), and as of October, with interest, the taxpayers had made $266.2 billion. This is not just a turnaround from the time when the crisis began and we thought we’d lose every penny of taxpayer dollar in TARP. This is a stunning miracle. It’s one that was made possible by steadfast leadership of, yes, the much scorned Tim Geithner.

      But but but. BUT! What about the Federal Reserve’s handouts to the banks during the financial crisis??? There was $16 trillion of it, they tell me! Compared to that, the Treasury program is just chump change! See, the American people had the wool pulled over their eyes!!!Except, that’s not really true. The $16 trillion number comes from some funny accounting of its own. You get there if, and only if, you combine all the emergency short-term loans the Federal Reserve gave out to the largest banks between December 1, 2007 (a considerable amount of time before the financial disaster hit, but the beginning of the Bush recession), through July 21, 2010, a 32-month period. These loans are paid back quickly to the Fed. According to the same audit of the Federal Reserve conducted by the Government Accountability Office (GAO) used by many to cite the $16 trillion number, there was never an outstanding balance anywhere near $16 trillion for the Fed’s part in the rescue at any one time. In fact, the audit shows that the largest outstanding balance at any one time was slightly over $1 trillion. That fact is staring you right in the face in the opening paragraph of the audit report:

      On numerous occasions in 2008 and 2009, the Federal Reserve Board invoked emergency authority under the Federal Reserve Act of 1913 to authorize new broad-based programs and financial assistance to individual institutions to stabilize financial markets. Loans outstanding for the emergency programs peaked at more than $1 trillion in late 2008.

      =====================================

      Full article below. Conclusion was that Tim Geithner did an outstanding job! I am sure everyone here will discard this article conclusions since it doesn’t fit in with the doom/gloom worse case scenario.

      http://www.thepeoplesview.net/2013/01/the-unqualified-success-of-financial.html

    • Oregon April 4, 2013, 3:58 am

      Gary, I wish I still thought that gov’t/corporate accounting was as simple and honest as my checkbook… but alas that’s not the case. I would suggest that debt in the form of bad mortgages and guaranteed MBS’s owned by Fannie/Freddie are not carried on the balance sheet and I would further suggest that the 265 billion owed on the balance sheet is a drop in the cesspool when compared to the mountain of toxic crap that is being held off the books until…

      At the end of ’07 their total book of business was almost 5 trillion dollars, almost equivalent to total publicly held debt of the US Gov’t. Can you imagine what that book would look like if interest rates were allowed to climb even slightly? It is a derivatives bomb waiting to go off, and you call it a good start.

      Fannie and Freddie are the golden conduit for all the major banks to rid their books of toxic non-performing mortgages, and therefore they must show a profit to keep the public sedated long enough to complete the task.

      &&&&&&

      Great post, Oregon. I could not have responded to Gary’s delusional ideas nearly as succinctly as you have. RA

    • gary leibowitz April 4, 2013, 6:02 am

      The Bailout Scorecard
      1 – TARP – total allocated 475 billion, disbursed 418 billion, returned 362 billion, revenue 50.3 billion, still outstanding 6.39 billion.

      2 – Freddie and Fannie – total allocated – unlimited, disbursed 187 billion, revenue 86.2 billion, net outstanding 122 billion

      Please look at the articles detailed breakdown. Concerning the toxic asset purchases, they amount to only 16.7 billion

      http://projects.propublica.org/bailout/

      If these numbers are wrong or misleading show me where. I rely on hard data and explanations, not someone’s notion that it is all hidden.

      Are you actually telling me that 4 years after the bulk of the crisis money was spent nothing has been returned? gee, I guess banks must be rolling in the money. Too bad I keep hearing how they are still cutting jobs, raising fees, and being forced to pay back Uncle Sam at the same time. Just look at the outflows and inflows. What am I missing?

    • gary leibowitz April 4, 2013, 6:05 am

      If you are talking about “potential” loss “if” rates go up, housing falters, economy goes into a tailspin, etc.. than no one can estimate the damage. I am talking about the here-and-now. Not some doomsday scenario where everyone and everything gets wiped out.

    • gary leibowitz April 4, 2013, 6:46 am

      Oregon, as far as off-balance-sheet losses, the financial world has already estimated this and placed a low price to book multiple on these banks. I will bet the low stock price of these banks are justified and current “hidden losses” understood. The accountants and number crunchers can derive a fairly good picture of current risk. Please note I stated “current” risk. As everything in life, it can change tomorrow.

      &&&&&

      Enough of your insufferable blather already! Every bank in the world is 10 feet underwater if you give them back the bad paper that the central banks have taken off their slimy hands. Go ahead and argue that the “central” banks are somehow separate from the banks whose bidding they do. The only distinction is that the Fed et al. were chartered to propagate and perpetuate the epic money-fraud that you seem to believe in with every fiber of your heart and brain. RA

    • DK April 4, 2013, 1:11 pm

      Rick, GREAT article and follow up commentary by the board. I’m not sure I can count how many times we’ve all said that.

      Right on, Oregon. Simply stated, the delusions ensue.

      Perhaps Gary should take his own advice and read the many articles/reports that have been left for his edification. I’d do the same as him but as the saying goes “ignorance is bliss.”

    • redwilldanaher April 5, 2013, 4:41 pm

      “Perhaps Gary should take his own advice and read the many articles/reports that have been left for his edification. I’d do the same as him but as the saying goes “ignorance is bliss.” –

      Well put DK. But that’s just it, Gary is too lazy. He won’t even read the information served up to him silver platter style let alone search for the truth on his own. I’m realizing that many are like him. They fear the truth. They don’t want to confront it. They need the delusion to keep on keepin’ on. It’s their drug…

    • gary leibowitz April 6, 2013, 4:17 am

      Rick, money fraud would be allowing bankrupt individuals and companies to walk away from their obligation. We have always allowed that. You’re solution would be to punish the top world banks, allow them to go under, and destroy any semblance of currency stability. Throw away any faith that lenders will be paid back. Punish the people running those institutions since justice should be above all other consideration. After all our anger must be satisfied. As far as our government taking the worthless debt off banks hands, I would like you to give me some sort of accounting estimate as to what that amounts to. I am a show me the proof type of guy. Have someone somewhere break down and categorize the toxic debt for me. I might be naïve, but no one has shown me what they are. For instance, Citibank, the third largest bank has 2 trillion in assets and 2 billion in illiquid assets, according to many sources. Is that a phony assessment? This is a serious question. To learn is to grow. I am open minded.

      &&&&&&&

      We don’t escape debt or “walk away from it”. Virtually every penny of it will be paid, if not by borrowers, then by lenders. This is occurring now — unacknowleged by you and most others, it would seem — in, to take just one example, the precipitous collapse of the Baby Boomers’ retirement plans.

      Citibank? Yes, your numbers are phony. After subtracting out liabilities and marking its “assets” to market, the bank owns nothing.

      If you don’t understand why, I’d recommend reading C.V. Myers’ ‘The Coming Deflation’. The book was written 35 years ago, but nothing hs changed. RA

    • gary leibowitz April 6, 2013, 4:44 am

      Concerning the unlimited loss to Fannie and Freddie, I took part of an article from the NY Times from this March. It states the following:

      “Let’s begin with the status quo. The taxpayer rescue of Fannie and Freddie in September 2008 has cost $137 billion so far. While this has been paid down from an initial $187.5 billion, taxpayers aren’t likely to get their money back anytime soon. Last fall, the regulator charged with overseeing Fannie and Freddie estimated that the taxpayer bill for the companies could be $200 billion by the end of 2015.”

      Not unlimited loss every month? To assume every dollar spent from Freddie and Fannie today will result in a huge loss is like stating once the dollar becomes worthless so will your bank account. In a worse case scenario a nuclear war will wipe everyone and everything out. That statement doesn’t make it a fact yet. We do have alternative future scenarios.

      All my arguments get blocked and discarded based on articles from some fringe blog that makes outrageous statements with no corroborating facts. There might be a huge following of Rush Limbaugh’s emotionally charged condemnations, but that in itself doesn’t make it factual.

  • Jill April 3, 2013, 7:05 pm

    “So who is in charge of mortgage insurance this time around?”

    You and I are– the taxpayers, through the FHA.

    http://www.housingwire.com/news/2012/11/15/review-finds-fha-mortgage-insurance-fund-short-135-billion

    • gary leibowitz April 3, 2013, 9:32 pm

      The good news is that Freddie and Fannie made a profit of over 28 billion this year. It took 6 years to show such a profit. Still not sure why the current home owners that purchased these last few years would cause another problem with defaults. They have to be putting up 20 percent and they have to be credit worthy.

      I also note that commodities are finally showing that
      the much anticipated big move seems to be down. Gold is dropping as oil and other commodities are also breaking down. It still is too early to tell if it is a complete breakdown or a bottoming pattern.

      The street was disappointed with the 158K job report. The current expectation is way above the last few years. Now anything below 200K will be viewed as a negative. Far cry from last year or the year before.

      While I agree that we are in a long drawn out bear market, I can’t understand why people would assume trillions spent by this government wouldn’t cause a stabilization and some traction on the economic front. I am at a loss when people on this board ignore or dismiss the economic data coming out unless it confirms a certain predetermined expectation. Clearly the world market hasn’t been wrong these last 5 years since profits have been nothing short of spectacular. It is sad that a good portion of these profits were a direct result of downsizing, but the fact remains that even with the loss of higher paying jobs people are spending, borrowing, and once again drawing out of savings. The fact that people become fiscally responsible these last 5 years as did corporations has allowed a new round of old habit draw downs and borrowing. How long this cycle lasts is anyone’s guess. I don’t think it can last out the whole year.

  • John Jay April 3, 2013, 6:21 pm

    So as the mortgage insurers went under, I assume the premiums were all paid out on defaulted mortgages until they went broke.
    The Government is back promoting the same NINJA type loans.
    So who is in charge of mortgage insurance this time around?
    I assume lessons were learned and this time the mortgage insurers are being held to much stricter standards!
    Ha! Ha! Ha!

    • Bam_Man April 3, 2013, 8:18 pm

      95% of today’s mortgages are sold to the FHA and include some pretty steep mortgage insurance charges. They advertise these loans at “low, low 3.50% APR”, but the PMI charges in many cases are almost 2%.

  • Jill April 3, 2013, 5:53 pm

    Am trying to research this myself.
    “FHA requirements include mortgage insurance primarily for borrowers making a down payment of less than 20 percent. ”
    http://www.fha.com/fha_requirements_mortgage_insurance

    Sounds like, from my reading, that the FHA mostly insures these mortgages. So, surprise, surprise. You & I & other taxpayers are on the hook for all of this.

    As ususal, profits are privatized & losses are socialized. Private industry gets to do everything where huge profits are likely– with any possible losses erased through government bailouts, contracts, subsidies etc. being financed by our tax money & being awarded to welfare queen crony capitalists like TBTF banks, who finance political campaigns. And everything that is likely to lose money– like insuring mortgages– is done by the taxpayers, rather than allowing private industry to take such risks.

    http://www.housingwire.com/news/2012/11/15/review-finds-fha-mortgage-insurance-fund-short-135-billion

  • Jill April 3, 2013, 5:15 pm

    Interesting question, John. Hope someone here knows the answer. Anyone know something about mortgage insurance, when it’s required, when/if it pays off, and if many mortgage insurers have gone bankrupt trying to pay off claims on more defaulted mortgages that they have funds to cover?

  • John Jay April 3, 2013, 2:29 pm

    All you can do is play along with the fraud our economy has become.
    Either that or disconnect from society and rehab a surplus Atlas missile silo and hunker down.
    The players can do whatever they want without fear of prosecution, so it’s their world we live in.
    That’s been proven countless times.
    Because they answer to no one at all.
    So they can sell short a year or ten years production of gold or silver with no physical behind it.
    Ben has their back financially, and Eric has their back legally.
    Checkmate, they win again!

    And speaking of fraud, someone brought up a very good point about the housing bubble that I never thought about.
    Was it not required that anyone with less than 20% or so to put down on a house pay for mortgage insurance?
    If that is true, then why were all the defaults a problem?
    The insurance should have paid off to all the lenders when the borrowers stopped paying, right?
    Can anyone out there tell me what actually happened to all the mortgage insurance policies?
    And is it still required in the housing boom Part II?
    Fraud on top of fraud!

    • Bam_Man April 3, 2013, 5:37 pm

      The big mortgage insurers went belly-up.
      Remember AMBAC and MBIA? Poof!!

    • Robert April 4, 2013, 6:24 pm

      and AIG…?

  • mario cavolo April 3, 2013, 2:03 pm

    Hi Buster, trying desperately to disagree with a sentence you’ve written,can’t find any!

    Recently read the Penguin Book of World History….a tough 1100 pages. Had never read such type of historical/academic book before and sincerely conclude it should be retitled Animal’s Book of World Slaughter and Control by Horrifying Mostly White Men.

    I’m interested in anyone here’s take on “bitcoin”. I’ve just read up on it….? Thoughts boys and girls?

    Cheers, Mario

    • Buster April 3, 2013, 2:47 pm

      Yes, my question also, Mario. Max Kaiser talks about it in his latest episode & it’s an interesting idea in defiance of the Powerz solution, which is more of their fraudulent debt money forced on all the whole world with no opt out. I like the idea of Bitcoin but my gut feeling is that it will be crushed one way or another as another testament to our overall failure to defend ourselves from their fraud. The problem as I see it is that the fabricated debts & fees held against all human activity & property must be paid for in their currency, using their exchange mechanisms. They are the gate keepers holding all the keys in a cashless system. I really doubt Bitcoins ability to get round this strategy long term without their allowing it to, but we can hope.

    • Phil McKreviss April 4, 2013, 3:49 am

      can you stand in front of a pile of bitcoins and touch them ? ultimately that’s what it’ll come down to. however, if you need to re-locate some phyz gold to another country, then it seems that bitcoin is the way to go.

    • Lee Aaron April 4, 2013, 5:13 am

      One holds their smartphone with their Bitcoins in their right hand…each has its own mark and all transactions are logged.

    • Buster April 4, 2013, 9:31 am

      I believe the smartphone is the expected tool for implementation of the cashless central banks debt money system. I get the similarity between it & Bitcoin but the fact that Bitcoin is not a debt based currency & doesn’t belong (as far as I know) to either the ‘Empire of the City’ or any world government, seems to rule it out as a candidate for such an enslavement system.

    • Robert April 4, 2013, 7:58 pm

      Bitcoin is NOT the brainchild of some random, anonymous genius.

      Since Cyprus, Bitcoins have gained in value tremendously- this week they even surpassed the parabolic slope and reached toward a truly vertical (and infinite) trajectory.

      Do any of you find it counter-referential that the NSA is building the worlds largest/fastest cypher-cracking facility SPECIFICALLY in order to crack the AES cipher (which coincidentally underpins Bitcoin’s “unbreakable” security algorithm)?

      Ummmm….. the NSA actually INVENTED the AES cipher in the first place.

      And, is it not hysterical that they are going to spend 100 times more on this project than they spent on the project that originally delivered AES…?

      Doctor Frankenstien- frantically trying to find the method to kill the beast that he himself unleashed on the world – comical, if not pathetically sad.

      But, back to Bitcoins:

      Bitcoins are designed to be “mined” ever more efficiently as processing speeds and machine memory continue accelerating due to Moore’s law (that’s Gordon, not me…)

      So, The Bitcoin money supply is a function of how effectively computers do their work, just as the Gold money supply has always been a function of how effectively humans do their (real/honest) work.

      Here’s the monetary rub with Bitcoin, and consider this CAREFULLY:

      Governments each want their currency to rule all others – therefore, they inflate their own currency supply, and buy the others, creating currency strength that incapacitates the internal economy behind the competing currency.

      If I was a Central Banker who understood the destructive nature of currency bubbles, would I not use my powers of infinite currency issuance to buy the living hell out of the competing currency? By doing so, I draw in the suckers who see the path to immediate riches, and then pull the rug out from under them at some random top, and watch the whole thing crash and burn…

      Beware the Bitcoin.

      Mind your Aristotle, my young (and old) disciples:

      ALL real and valid money has inherent and intrinsic value (meaning it can never be regarded as totally “worthless” by society)

      Bitcoins are data. Data is inherently worthless, except when used as a constructor to true information.

      Money is information- it indicates that the holder produces more than they consume, and that they have generated an excess of production that they wish to trade for other forms of excess production.

      How can my smartphone full of Bitcoins demonstrate or prove that I am productive?

      &&&&&&

      Thanks for your illuminating post, Robert. I’ve re-posted it to Max Keiser’s site and KE [Al Korelin] Report. RA

      &&&&&&

      Update: Your post has elicited a fascinating response at Max Keiser’s site. Here’s the link:

      http://maxkeiser.com/2013/04/04/regarding-bitcoins/

    • Oregon April 4, 2013, 11:29 pm

      Robert, great post as usual. The bitcoin is very attractive on the surface, but gives me the same feeling as a car salesman… I am going to get screwed sooner, or later. Problem is, the future of exchange all points to the same place. And no matter which digital means of exchange (and there will probably be a dozen) comes out on top, it will be under the watchful eyes of the NSA/IRS.

      You can say the smartphone does not prove productivity, but neither does a million dollar trust fund held digitally at a bank.

      One might have hoarded cash and gold over the years to avoid the digital scrutiny, but the writing is on the wall… DEAD END AHEAD.

      One might have purchased gold sub $500/oz. enjoying the rare anonymity, liquidity, and portability and years later felt an imminent correction and would have liked to sell at $1800/oz. with the plan of buying again sub $1200/oz. The problem is that the anonymity that existed at the time of $500 is, or will be gone this time so one might think the potential for gain is overshadowed by the potential for audit.

      One might feel cornered…

    • gary leibowitz April 6, 2013, 3:51 am

      Bitcoin will never replace any currency. The ability for massive fraud is just too great a risk. The upside of a system like this, if full proof, is transaction transparency. That means a whole lot more money for taxes that currently slip away. I am pretty sure this idea of mine is another naïve notion of mine, but what the hey.

      The constant reference to an evil government oligarchy with the trillions spent as a result of this crisis is absurd. A capitalist society can’t exist without big government, and big corporate winners. You believe in entrepreneurship and fiscal survival of the fittest, yet when we talk about the federal government the rules change. I myself would prefer a socialist style government but that is not likely to happen. The other problem I constantly have is the notion that the xx trillions spent so far is just to line the pockets of a few. Do most really believe that is the impetus for this spending? Would you have had this government disband the system and allow havoc to prevail till it settles into another form of government?

      Why not construct a real life scenario from the time of the crisis and present your solutions here. Lets see if your utopian world doesn’t have massive bazooka style holes in it.

    • Buster April 6, 2013, 12:01 pm

      Gary, Gary, Oh Gary!

      The whole financial crisis is an inevitability of a debt based monetary system. So, only one solution is necessary & is the singularly possible successful one. That is the implementation of a non debt based monetary system. All other complicated reasonings, solutions & beliefs are just chit chatter for their understanding & insights.

      Yes, of course the world is full of very nasty rulers & people who would seize any opportunity to gain more power. TPTB could even be seen as a counter to these.
      But still the right course is to condemn all what is bad, not justify one because of the other. The US could have been a torch for the world, but the imposition of debt money & the outlawing of colonial scrip put pay to that. Most everything else since is just the fallout.

    • Robert April 10, 2013, 10:44 pm

      OUCH….

      BTC takes a 40%+ dive-bomb in a matter of hours…

      too bad those BTC exchanges (inconveniently) did not come with circuit breakers and pre-determined trading haltation rules if the exchange just happened to be bombarded by a targetted denial of service attack…

      I’m sure that was just a matter of technical oversight by Mr. Nakamoto-random-genius-san.

      BEWARE the bitcoin.

  • Buster April 3, 2013, 12:23 pm

    I’ve heard these sorts of claims before, but according to Jeff Yastine, the final objective in the financial take over of the world is about to be announced, very soon, that of a new world order of a ‘cashless’ debt money system. Though this has been all but complete for some time in many countries, the talk is that this is now going to be absolute.
    If it’s true, I’m only a little surprised by the timing, as I expected it to come in a few years from now, but maybe we’re all closer to our ruin than I thought. Originally I’d half believed that towards 2023 would fit in better, though what with things getting pretty dirty, as in Cyprus, it does fit in well enough. My own experience of it in Spain, & also looking at one country that’s already running such a system, Nigeria, (http://www.vanguardngr.com/2012/03/cash-less-economy-its-a-threat-to-us-traders-artisans-speak/) it’s probably a good idea to start thinking seriously about how it’s going to affect us.
    I’m sure plenty of folks will say that it’ll never be accepted, but really!? Haven’t we all just sat through the most outrageous grand theft & corrupt few years & taken it on the chin? I mean, how much more blatantly do they need to screw us all out of $38 trillion before someone actually does something to stop them? A few riots in the streets around the world haven’t changed a darn thing. Millions upon millions of repossessions, foreclosures & unemployed but it’s all the same old rulers & rules running the show for their own agendas, even if the names on the managers office doors have changed. And please spare me the ‘conspiracy’ jibe for seeing that things aren’t done for the real economy’s interests or that of the Sheeple!
    Not that I’m surprised at any of this or even expected anything different, but rather that it proves my expectations entirely; that the takeover of the world by the Powerz will, rather than be hindered by the information age, run roughshod over it & exploit it to intensify their operation to achieve the logical conclusion of human social & economic evolution, which is totalitarianism & tyranny all forced down our necks with a smile & a catchy tune, whilst being justified ad nauseum by fools or crooks who’ve swallowed the blue pill!
    In the grand scheme of things, & in my estimations it will prove one very important thing. That the good in humanity, for all our great qualities & talents, & with all the knowledge available in our modern age to understand what’s going on, will have been found impotent against evil, leaving only one correct judicial option, that evil cannot be allowed to exist.
    I fully expect life to get even harder for most of us under a cashless debt system. This will allow the absolute control of the ‘real’ economy, in line with the Corporate Fascist model, as previously outlined, & leaving nothing free outside of it. There will be no escape from the powerz & from them dictating every action we make based on the illusion of choice that they will give. The only one benefit will be that eventually & in the near future, no liberal minded or libertarian, left, right, Democrat or Republican, Neo Christian or New Age Believer will have any doubt that the world is dominated & ruined by evil. The corrupt financial system aided & abetted by bought & paid for politicians will leave nothing out of their grasp, with a military industrial complex busily bulldozing the lives of millions, & with Monsanto & big Pharma mopping up the rest, it will testify to the absolute failure of humanity. Just like the Constitution, the righteous will be left defeated & clinging to hope.
    Finally, when all hope is lost & evil has conquered the world & humanity, it itself will likely be conquered by very strange & yet unfathomable forces…. a bizarre statement to some, but nonetheless a very likely one based on my less biased observations, but that’s another story for a later time, if any of us survive till then!

     “And it puts under compulsion all persons, the small and the great, and the rich and the poor, and the free and the slaves, that they should give these a mark in their right hand or upon their forehead, and that nobody might be able to buy or sell except a person having the mark, the name of the wild beast or the number of its name. Here is where wisdom comes in: Let the one that has intelligence calculate the number of the wild beast, for it is a man’s number; and its number is six hundred and sixty-six” (Revelation 13:16)

    • gary leibowitz April 3, 2013, 9:57 pm

      I suggest you look overseas for evil to dwell upon this land. We have a child running North Korea flexing his immature sadistic need to prove his manhood, and a more mature calculating ruler in Iran with no less evil intent.

    • Buster April 4, 2013, 9:43 am

      As I’m sure you’ll remember, Iran has been trying with some success to break free of the Petro$ debt structure, which seems to have been the real reason for it’s newfound pariah status. It certainly isn’t trying to install a compulsory debt straightjacket on the whole world, as my comment is describing. In fact, Muslims have a real problem with debt, which also makes it interesting that the Powerz are actively trying to use them as scapegoats for the sins of the world. It all very interesting & conspicuous, Gary, as I’m sure you’ve got the capacity to fathom.

    • Dako April 5, 2013, 5:19 am

      Gary this axis of evil bologne appearanty still works with people like you. Stop the BS. Who has Iran ever hurt and why shouldn’t the NKoreans be cautious after we demolished every major city of theirs in the 50’s?

    • gary leibowitz April 6, 2013, 3:18 am

      Dako, you can’t be serious? Didn’t Iran have it’s own little internal skirmish against this same regime recently? Do you know just how many citizens amassed for these demonstrations? The man at the top must have had a lobotomy when he suggests there was no holocaust. How about his single minded mission to plant and support terrorists around the world. As for North Korea their really isn’t much I need to say to defend their actions. What a mistake we made not committing an all out war on North Korea when we had the chance. I can’t believe there is another country as poor as that one with nuclear capabilities. Scary to think that this little mouse of a despot learnt nothing from his father. Imagine an immature sheltered megalomaniac thinking he can flex his muscles and think the world will shudder. I wonder what would happen when he loses face and must stand down. A megalomaniac might not stand down. Scary thought.


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