David Stockman on Jobs and the Economy

David Stockman points out that how the jobs number does not reflect reality and how we are printing our way into oblivion.  David points out the .5 million jobs that were lost in the past 30 days.   It would seem that their are some funny numbers going on in the jobs numbers these days.

FED POMO Purchase Last 2 Days

The FED performed 2 POMO (Permanent Open Market Operations) purchases in the last 2 days.  On February 3rd in the amount of $8.870 billion and then on February 4th for $7.272 billion.  This brings the total since November 3rd 2010 (when the FED announced the printing of $600/900 billion dollars by June 2010) to $310.874 billion and since August 17th 2010 to $375.334.

OPERATION 1 - RESULTS

Operation Date:	02/04/2011
Operation Type:	Outright Coupon Purchase
Release Time:	10:15 AM
Close Time:	11:00 AM
Settlement Date:	02/07/2011
Maturity/Call Date Range:	08/15/2013 - 01/31/2015
Total Par Amt Accepted (mlns) :	$7,272
Total Par Amt Submitted (mlns) :	$28,809

OPERATION 2 - RESULTS

Operation Date:	02/03/2011
Operation Type:	Outright Coupon Purchase
Release Time:	10:15 AM
Close Time:	11:00 AM
Settlement Date:	02/04/2011
Maturity/Call Date Range:	08/15/2016 - 01/31/2018
Total Par Amt Accepted (mlns) :	$8,870
Total Par Amt Submitted (mlns) :	$23,519

Weekly Fund Flows

The weekly fund flows showed billions flowing into domestic stocks for the 3rd week in a row.  Domestic stocks showed in-flows of $3.248 billion dollars, foreign stocks saw an in-flow of $1.875 billion dollars.  The bond market saw in-flows of $3.509 billion dollars, while municipal bonds saw out-flows of $2.678 billion dollars.

FED POMO Update

The FED performed another POMO (Permanent Open Market Operation) purchase of $2.205 billion dollars.  This brings the total since November 3rd 2010 (when the FED announced the printing of $600/900 billion dollars by June 2011) to $294.732 billion dollars and $359.192 billion by August 17th 2010.

OPERATION 1 - RESULTS

Operation Date:	02/02/2011
Operation Type:	Outright Coupon Purchase
Release Time:	10:15 AM
Close Time:	11:00 AM
Settlement Date:	02/03/2011
Maturity/Call Date Range:	02/15/2021 - 11/15/2027
Total Par Amt Accepted (mlns) :	$2,205
Total Par Amt Submitted (mlns) :	$14,311

FED POMO Purchase

The FED performed another POMO (Permanent Open Market Operation) purchase in the amount of $1.735 billion dollars.  This brings the total since November 3rd 2010 (when the FED announced the printing of $600/900 billion dollars by June 2011) to $292.527 billion dollars and $356.987 billion dollars since August 8th 2010.

OPERATION 1 - RESULTS

Operation Date:	02/01/2011
Operation Type:	Outright TIPS Purchase
Release Time:	10:15 AM
Close Time:	11:00 AM
Settlement Date:	02/02/2011
Maturity/Call Date Range:	04/15/2013 - 02/15/2040
Total Par Amt Accepted (mlns) :	$1,735
Total Par Amt Submitted (mlns) :	$4,043

Gold and the GLD ETF

I don't normally discuss gold much on this blog, but I ran across an article recently, entitled "Who is Draining GLD?", that I think is worth mentioning as it raises some very important questions in my mind.  The article highlights some interesting data points about the ETF (Exchange Traded Fund) GLD that make you wonder, what was its original intended reason for being formed.  GLD is an ETF that is supposed to be backed by gold, as a matter a fact GLD is one of the larger holders of gold and tracks the price of gold.  This means that if the gold price goes down then GLD goes down as well.  This is not the only contributing factor as the NAV is calculated based on price of gold and the amount of gold held by the trust divided by the number of outstanding shares.  

Having said that, one more thing you should know is that its prospectus says that you can redeem shares of GLD for physical delivery of gold with one caveat, you must have at a minimum 100,000 shares to redeem.  Which means you have to have about $13 million dollars invested to create one basket for redemption.  This leaves a majority of the people out as they don't have $13 million to spend or at least not all in one place.  If you read the report by FOFOA.blogspot.com you'll see graphs that show the NAV price roughly running the same amount, while inventory of gold has been going down considerably in the last few months.  So very wealthy people have been taking physical delivery of gold from the trust, since July 2010 roughly 86 tonnes have been removed with the majority of that in the last 2 months.  

The advantages of having GLD shares is that theoretically you own gold or have exposure to gold without the storage costs that are incurred as the trust pays for that (or the individual share holders as a management cost). What are the advantages of taking physical delivery from GLD vs the futures exchange or buying from a bullion dealer.  Well if you buy gold on the futures exchange you move the price of gold making it more expensive (on-market), if you buy from a bullion dealer you have to pay fees/transaction cost per oz or something like that and getting it all may take more than one dealer for a large amount. 

After reviewing this information several questions popped into my head.  If the average Joe cannot take physical delivery and only the wealthy can, then who was this really set up for.  Also with storage fees and all being paid for by the trust is that just a way for wealthy to store gold and having average Joe pay for the storage costs as he has no way of actually taking physical delivery.  It is actually genius if this is really the case as a wealthy person I eliminate all the downside of owning gold and can take physical delivery of it when I want as much as I want (as long as it exists in the trust) without moving the price of gold or paying additional costs.  As a trading vehicle for average Joe it may make sense and a trader does not stay in very long and normally doesn't take physical delivery (and normally doesn't make a lot as that relies on market timing).  But for those who purchase it for long term safety (in an IRA or 401k or such) you have to wonder how protected they really are.  Now how protected they are really depends on if the trust could or would be drained of all of its gold (probability not very likely), but the question as to what the trusts true purpose still stands.  Was this just a side effect of how the trust was set up or was this created to protect those that can afford it?

FED POMO Purchase

Yesterday the FED performed another POMO (Permanent Open Market Operation) purchase in the amount of $7.72 billion dollars.  This brings the total since November 3rd 2010 (When the FED announced printing $600/900 billion dollars by June 2011) to $290.792 billion dollars and $355.252 billion dollars since August 17th 2010.  It makes you wonder, if we are on such a recovery as we have all been told, why are we still printing so much money.  It was good to see in the fund flows over the past 2 weeks inflows on domestic stocks, if this continues then the FED isn't single handedly holding up the stock market anymore.  It will be interesting to see what happens.

OPERATION 1 - RESULTS

Operation Date:	01/31/2011
Operation Type:	Outright Coupon Purchase
Release Time:	10:15 AM
Close Time:	11:00 AM
Settlement Date:	02/01/2011
Maturity/Call Date Range:	08/15/2013 - 12/31/2014
Total Par Amt Accepted (mlns) :	$7,720
Total Par Amt Submitted (mlns) :	$37,238

Weekly King World News Interviews

This week King World News interviews Jim Rickards, Michael Pento and Eric Sprott discuss various aspects of our ecnonomy, gold, Davos and other impacting subjects.  This is great information to listen to if your looking to be more informed and protect yourself.

Jim Rickards - Discusses the comments of the governor of the Bank of England, Mervin King that "households face the the most dramatic squeeze in living standards since the 1920's".  Jim agrees that this is the truth in the market vs the happy talk that is going on by all others.  Mervin says that there is no way out of the debt-crisis other than default, inflation or austerity in the UK and Jim believes this will come to roost in the US as well.  Jim discuses the announcement by Russia to acquire 100 tonnes of gold a year and how the IMF decided to stop selling gold early into their 400 tonne sales (after selling 200 tonnes).  Jim also points out that Iceland had unpayable debts, decided not to pay and they are doing quite well today.

Michael Pento - Discusses the fact that $100 trillion dollars of new debt over 10 years needs to be generated to get us back on track and that we may be forced back on a gold standard again.  He also mentions that President Obama state of the Union speech says that he will slash government debt $400 billion dollars over 10 years, the CBO says the annual deficit for 2011 will be $1.48 trillion dollars.  With this it brings the deficit over $1 trillion dollars just for 1 year.  Michael points out the only way forward will be to restructure the debt which will impact holders of that debt.  Michael points out that owning commodities (metals, agriculture and such), but don't keep closing your eyes and buying debt/bonds.

Eric Sprott - Discusses the food rioting due to rising prices globally.  He also discusses the turmoil in Egypt, how the stock market plummeted 20% and the Egyptian people are going to be pulling their money out of the banks which could be the start of a breakdown in a system.  Eric says that even though weather has been a factor, that the printing of money has been the real driver globally negatively impacting the have-nots.  The silver acquisition that he did of 50 million ounces took 10 weeks to get it from third parties which is a very long time and the silver market is very tight right now on physical delivery.  Eric discusses gold and the Bank of Englands comments as well.