UK banks may need new bailout in 2011: thinktank

Where did the money go? It when through the highly-publicized front door, then quickly (and quietly) out the back to pay the OTC derivative winners. Flexibly accounting allows financial institutions to recapitalize their balance sheets over night. The flexibility created phantom profits and produced the illusion of “health” despite a collapse in credit demand across the board. The tinktank is right, another round of infusion is likely necessary because credit demand continues to contract sharply. Recapitalization via through Treasury purchases and OTC mark ups will drive earnings for only so long.

British banks may need another state bailout next year and their borrowing requirements could hit 25 billion pounds ($39.5 billion) a month, a thinktank said, although the UK finance minister dismissed any such scenario.

The independent New Economics Foundation (NEF) thinktank said it had examined Bank of England data and concluded that many UK banks appeared to face a funding cliff, as it published a report on Britain's banks entitled "Where Did Our Money Go?"

Source: finance.yahoo.com

Money Flow Footprint For Silver Has Changed

The "normal" money flow footprint has been smashed as silver pushes to new highs. Connected money has been buying rather than shorting strength.

The footprint of control for silver reveals a pattern of shorting strength and buying weakness since 2001. Buffett better have another secret supply of silver to introduce to the market or the subtle change could portend a significant shift of control.

Keep an eye on this one.

Silver London P.M Fixed and the Commercial Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest:

Follow the Leaders

IBM has been a stock market leader since 2006. This is illustrated in the IBM to S&P 500 ratio below.

IBM to S&P 500 Ratio (Relative Strength):


There's a simple rule when following secular trends - Follow the Leaders. IBM's trend energy has already broken out to new highs. While price is still lagging, it will likely follow the surge. This classic setup, surging trend energy relative to price, has been illustrated numerous time in the gold stock sector.

IBM


Those playing the "chess game" are certain to begin the process of pushing the pieces around in their mind. Gold and the various capital markets do not trade in a vacuum.

Bank of America delays foreclosures in 23 states

Bank of America is delaying foreclosures in 23 states as it examines whether it rushed the foreclosure process for thousands of homeowners without reading the documents.

Hi Eric:

Question as to your opinion on the fall out of foreclosure suspension due to faulty paperwork. Will this ultimately lead to reduced mortgage amounts to borrowers and what will happen to the secured bonds issued by Wall Street in which these properties were collateral? Will this ramp up bank failures?

Question #2 is somewhat related. If widespread bank failures increase where would you feel we should keep our cash for daily living transactions such as groceries and doctor visits. I know you don’t make recommendations but could you give us some options?

Thanks,
Daniel

Daniel,

Securitization of mortgages allowed risk and reward to be sliced and diced into packages to the global investment community. This opened the door to the "breathe on a mirror" application process. That is, anyone able to breathe on a mirror was able to secure a loan. Faulty paperwork was inherent byproduct of this greed-driven process. When the musical of the credit game of musical chairs finally stopped in 2008, the faulty paper, began seeping to the surface through the legal process.

What does it mean? It means quantitative easing part 1 and 2 to infinity, possibly in the form of government sponsored or supported mortgages through the now defunct GSEs - Fannie Mae and Freddie Mac. Why? The problem is simply too large and corrupted to permit a through examination as far as the US dollar is concerned.

Any ‘official solution’ will be designed to allow an acceptable and manageable bank failure rate. A similar rate we see today.

Smart investors know that quantitative easing (part 1 and 2) to infinity means global currency devaluation. Those seeking to maintain purchasing power during periods of aggressive currency devaluation seek refuge in gold and silver. The faster confidence deteriorates, the stronger the push for a new currency. History clearly suggests that gold (and lesser degree silver) have always filled the void during transitions.

RY,Eric

Source: news.yahoo.com

Fed's Dudley says more economic aid likely

History reveals that wages are much stickier than goods, services, homes and stocks. Investment, not inflation, creates jobs, so the logical question becomes deflation is a dangerous for whom? The answer reveals why inflation is not a threat.

William Dudley, president of the Federal Reserve Bank of New York, said the pace of economic growth has been disappointing. And he worries that if the economy doesn't strengthen, the risk of an outbreak of deflation rises. Deflation is a dangerous and widespread decline in goods and services, wages and in the values of homes and stocks.

Source: finance.yahoo.com

SEC, CFTC blame algorithm for flash crash

Perception management is more important than reality. At first it was suggested that a sticky key or fat finger caused the crash. A 'thorough' investigation reveals that black boxes trading programs, the one's that retail money fears rigs the market, caused the crash. The basic interpretation, regardless of the blame, remains the same as it was in May 2010. Up is good and down is bad.

As long as no one pays attention to stable currency returns (performance), up is easy. Devaluation will drive the stock market higher. Up is good.

The report comes in the wake of the Dow Jones Industrial Average's sudden drop of nearly 1,000 points on May 6 before swiftly recovering to end at a 348-point loss, rattling U.S. investor confidence in the stock market

Source: marketwatch.com

Thousands show up in LA for free mortgage help

Mortgage lines soon to be replaced by bread lines? Quantitative easing part 2 (QE2) may renegotiate all mortgages and send nearly all asset prices higher, but it won’t create many jobs for Americans living within an economic power shift.

The nonprofit Neighborhood Assistance Corporation of America, which is offering homeowners the chance to restructure their loans at lower rates, said about 5,000 people were in line when the doors opened at 8:30 a.m.

Thousands more were expected over the next five days, during which counselors will be helping people at risk of foreclosure around the clock.

Source: google.com

From Bob