"Unhappy people are better off living in the city. A person can live in the city for a hundred years and not even realize that they are already dead and rotting. They don't have time to realize this on their own; they are too busy."
Leo Tolstoy, The Kreutzer Sonata, 1889
The news had a significant impact on the market because of the parties involved in 'pressuring' Bank of America. The loans were originated by CountryWide, which had been acquired by BofA. It is ironic that Countrywide CEO Angelo Mozilo just settled with the SEC admitting no wrongdoing and merely paid a fine which was a small percentage of his financial gains.
It is nothing new for bondholders and the common people to sue some of the big Wall Street Banks for fraud.
But when the plaintiffs include some of the most important financial institutions in the country the market has to sit up and take notice.
It's nice to see some outrage being expressed, even if it is among the privileged few. Watching Bloomberg television was particularly difficult today as the apologetics and cheerleading for the financial sector among its guests and newspeople is almost shameless.
And the band played on...
Bloomberg Pimco, NY Fed Said to Seek BofA Repurchase of Mortgages By Jody Shenn
Oct 19, 2010 2:53 PM ET
Pacific Investment Management Co., BlackRock Inc. and the Federal Reserve Bank of New York are seeking to force Bank of America Corp. to repurchase soured mortgages packaged into $47 billion of bonds by its Countrywide Financial Corp. unit, people familiar with the matter said.
A group of bondholders wrote a letter to Bank of America and Bank of New York Mellon Corp., the debt’s trustee, citing alleged failures by Countrywide to service loans properly, their lawyer said yesterday in a statement that didn’t name the firms. The New York Fed acquired mortgage debt through its 2008 rescues of Bear Stearns Cos. and American International Group Inc.
Investors are stepping up efforts to recoup losses on mortgage bonds, which plummeted in value amid the worst slump in home prices since the 1930s. Last month, BNY Mellon declined to investigate mortgage files in response to a demand from the bondholder group, which has since expanded. Countrywide’s servicing failures, including insufficient record keeping, may open the door for investors to seek repurchases by bypassing the trustee, said Kathy Patrick, their lawyer at Gibbs & Bruns LLP.
“We now are in a position where we have to start a clock ticking,” Patrick, who is based in Houston, said today in a telephone interview. Recoveries for her clients, who own at least 25 percent of so-called voting rights in the deals, may reach “many billions of dollars,” she said....
If you are a patron of this cafe, you cannot say that the breakout and rally to 1375, and the retracement currently underway, were not prominently placed on the menu for some time.
So now what? Gold will retrace back to a more sustainable trend, consolidate, and then resume its bull market rally to the minimum measuring objective of 1455 and probably higher.
If there is a general liquidity panic gold will overshoot to the downside, perhaps considerably, and then gather itself and rally sharply back to the trend. I doubt that it would break the 1280 level except for an intra-week plunge, but that is always possible.
There will be the usual displays of human emotion, but this is a natural and healthy correction in a bull market. I was becoming very concerned that gold might continue on this new, more aggressive trajectory all the way to 1455. This would have resulted in a more damaging correction. The green trendlines are the 'safest path' for a sustained bull market.
This rally in gold and silver is an artifact of the crumbling of the post WW II US dollar reserve currency regime and its replacement with something else. Gold and other commodities were influenced, if not controlled outright, by an Anglo-American financial cartel for their own advantage, and far too often the personal advantage of a few powerful men. This is changing. What comes next, no one can say for sure.
As some have suggested in their bitterness there is the possibility that an authoritarian new world order can dictate prices of gold or anything else for that matter. This is not probable. But if that happens the price of gold may be the least of our problems. The propensity of people to say and do stupid things rather than admit their own errors and mistaken beliefs is sometimes remarkable. This is one of the themes in the movie classic Bridge Over the River Kwai. Some say that art imitates life. I would say that life on the internet imitates high school.
The trend will remain in place until the global currency regime evolves into something sustainable that supports balanced economic trade and activity. Once that level of systemic repair is reached, gold will stabilize at whatever level it 'fits' within the global scheme.
The tech futures NDX were selling off hard after hours as AAPL and IBM failed to delight investors with their earnings reports, after having gone to new parabolic highs during regular trading hours. This could be an instance of Buy the Rumour and Sell the News.
However the pattern seems to be a sell off at night, with a steady short squeeze starting in the first hour of trade lasting all day. Let's see if the pattern of market manipulation is finally broken tomorrow.
The market is playing around with these consolidation patterns that start off with a dire overnight trade, that gives way to an intra-day rally and a squeezing of the shorts.
Artificial to be sure, but likely to continue until something happens to stop it. It is unlikely that the government will intervene ahead of an election and in a fragile economy to stop the inflation of an obvious bubble. To the contrary, they are most likely deeply complicit.
This provides emphasis to our caution of waiting for a downturn to develop rather than trying to get in ahead of it. You will just feed the speculative increase.
The more the Fed and Treasury debase the global fiat currency, the higher gold and silver will rise.
"The world will soon wake up to the reality that everyone is broke and can collect nothing from the bankrupt, who are owed unlimited amounts by the insolvent, who are attempting to make late payments on a bank holiday in the wrong country, with an unacceptable currency, against defaulted collateral, of which nobody is sure who holds title."
If the model of the former Soviet Union (empire) holds, at some point the oligarchs will start seizing hard and income producing assets for themselves using their command of fraudulent paper and a corrupt system of governance. This may already be underway when the Congress gave in to the Bankers' threats and passed TARP. I have heard that Wall Street will be taking about 8 percent of M1 as its bonus this year, despite being bailed out at enormous costs, both explicit and hidden, to the American public. Bernanke is transferring over a trillion dollars in interest earnings from savers, institutions, and retirees to Wall Street through this quantitative easing without reform and restructuring.
At some point this may erupt into a crisis with a resolution, but in the meantime it will continue to spread slowly like a wasting disease, concentrating more real wealth and assets in the hands of the politically well-connected few.
Obama is more like a business friendly Herbert Hoover than a reforming Franklin Roosevelt, and this lack of will and a vision forged by determined accomplishment against suffering, moral courage and certitude if you will, is his tragic flaw and America's misfortune.
"Today I am taking the same stand regarding the gold bull market. The gold bull market will not end with a fizzle and a whimper. It will end with intense speculation and widespread interest from the funds and the public. We haven't seen that kind of activity yet, but I'm convinced that a period of wild speculation in gold lies somewhere ahead.
This is why I continue to beg my subscribers to load up with gold. As I see it, we are nearing a period of intense speculation that will be beyond anything seen before by the last three generations of Americans. Ironically, more money made in the final explosion in gold than was made during the first two phases combined.
Great bull market are seen maybe once or twice in a lifetime. The current "stealth" gold bull market has sneaked up on most Americans. The very phrase, "gold bull market" is sneered at by most analysts today. In fact, most of the comments on gold today come in the form of warnings; "Gold is too high." "Gold is in a bubble." "Gold will sink back below 1000." "Gold is a fool's play."
Nonsense. Gold is moving ever-closer to it's climactic speculative third phase. The negative comments about gold will only serve to make the gold bull market that much stronger. In this business, there is nothing more powerful than a primary bull market that has been denigrated, spat at, and held back for years.
And that's the end of my "lecture" about the fabulous gold bull market…"
"...the world will soon wake up to the reality that everyone is broke and can collect nothing from the bankrupt, who are owed unlimited amounts by the insolvent, who are attempting to make late payment on a bank holiday in the wrong country, with an unacceptable currency, against defaulted collateral, of which nobody is sure who holds title."
John Travolta ................ Bill Dudley, Governor, NY Fed
Eric Stoltz ..................... Ben S. Bernanke
Uma Thurman ................TBTF Wall Street Bank
Rosanna Arquette ............Timmy
If US based readers have spare time and four dollars it might be worth the effort to read this book. Its a fun read for the gold bugs, and is what I used to call 'airplane and waiting room' reading. Not strenuous but a good divert and an engaging story. Not to give it away, but I thought his gambit with the bags of silver coins was clever but somewhat implausible.
If you are up for something more intellectually engaged and you can find them read When Money Dies by Adam Fergusson and Debt and Delusion by Peter Warburton.
I was in Moscow doing business when the rouble was dying after the collapse of the Soviet Empire. It made a lasting impression especially to see how the common person was reacting to it, each in their own way. A true vignette of human nature.
As a reminder today is stock option expiration in the States.
Precious metals options expiration for November will be next week.
The US 2010 elections will be held on the first Tuesday in November which is the 2nd.
The Federal Reserve will be meeting on Wednesday 3 November, and is widely expected to be announcing a new quantitative easing program, particularly after the preface which Mr. Bernanke delivered today.
As an aside October 2010 is unusual in that it contains five full weekends, a welcome rest before the great events to come.
This is among my favorite times of the year, as the heat of summer gives way to the pleasant warm days and cool nights of autumn, and expectations of the harvest holidays and family gatherings rise, culminating in Christmas week and the beginning of a new year. The cycle of nature cares little for the comings and goings of men.
And finally, an interesting graph showing the percentage of gold as an investment in global portfolios.
ChrisMartenson.com Future Chaos: There Is No "Plan B" By Chris Martenson
October 13, 2010
Note: This article builds on my recent report, Prediction: Things Will Unravel Faster Than You Think. It explores the coming energy crunch in more detail by looking at existing government planning and awareness, and the implications of what international recognition of Peak Oil as early as 2012 might mean.
The hard news is that there is no "Plan B." The future is likely to be more chaotic than you probably think. This was the primary conclusion that I came to after attending the most recent Association for the Study of Peak Oil & Gas (ASPO) in Washington, DC in October, 2010.
The impact of Peak Oil on markets, lifestyles, and even national solvency deserves our very highest attention - but, it turns out, some important players seem to be paying no attention at all.
ASPO conferences tend to start early, end late, and be packed with more data and information than should be consumed in one sitting. Despite all this, I was riveted to my seat. This year's usual constellation of excellent region-by-region analyses confirmed what past participants already knew: Peak Conventional Oil arrived a few years ago, and new fields, enhanced recovery techniques, and unconventional oil plays are barely going to keep up with demand over the next few years.
But there were two reports that really stood out for me. The first was given by Rear Admiral Lawrence Rice, who presented the findings of the 2010 Joint Operating Environment (a forward-looking document examining the trends, contexts, and implications for future joint force commanders in the US military), which spends 76 pages summarizing the key trends and threats of the world. "Energy" occupies six of those pages, and Peak Oil dominates the discussion. Among the conclusions (on page 29), we find this hidden gem, which uses numbers and timing that are eerily similar to those that I put forth in my April 2009 report, Oil - The Coming Supply Crunch:
By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 MBD.
While there are two "coulds" in that statement, the mere possibility that such an imminent arrival and massive shortfall could be true should give every prudent adult a few second thoughts about what the future may hold. If surplus production capacity disappears in just a couple of years, there is an entire world of planning that should take place beforehand at the international, national, community, and personal levels.
More on the JOE report in a minute. Next I want to turn to a presentation given by Rick Munroe, who did his best to discover where within the civilian governmental departments lie the plans for what to do in a liquid-fuel-starved future.
To cut to the chase, it turns out that virtually every department that he contacted in both the US and Canada denied having any such reports. In one humorous exchange by email, Natural Resources Canada stated two things in the same email:
• “At this time the Department has no views on [Peak Oil].
• "There is no imminent Peak Oil challenge…."
It will be interesting to see how NRCan words their emails once they do develop a point of view.
The main conclusion from Rick's presentation was that Peak Oil is being examined closely and taken seriously by military analysts, but not civilian authorities. The few plans that do exist on the civilian side are decades old.
The implications of this are that North America "remains highly vulnerable to a liquid fuel emergency disruption" and, since because there are only a few dusty plans lying around, there will be greater chaos than necessary.
Now back to the JOE report.
OPEC: To meet climbing global requirements, OPEC will have to increase its output from 30 MBD to at least 50 MBD. Significantly, no OPEC nation, except perhaps Saudi Arabia, is investing sufficient sums in new technologies and recovery methods to achieve such growth. Some, like Venezuela and Russia, are actually exhausting their fields to cash in on the bonanza created by rapidly rising oil prices. (p. 26)
A severe energy crunch is inevitable without a massive expansion of production and refining capacity. While it is difficult to predict precisely what economic, political, and strategic effects such a shortfall might produce, it surely would reduce the prospects for growth in both the developing and developed worlds. (p. 28)
Well, the amounts needed from OPEC are quite, shall we say, 'ambitious,' as they amount to an additional two Saudia Arabias coming on line in order to make up the shortfall. A massive crunch is not otherwise avoidable. Let's be honest; there are no more Saudia Arabias to be found. Perhaps we could cobble one together out of thousands of smaller, less productive fields, but the likelihood of a few massive fields waiting to be found 1,100 feet underground is extremely remote. People in the business of actually producing oil know that producing from smaller wells takes more time, equipment, and manpower.
Meanwhile, I also happen to agree with their assessment that the details of the effects are difficult to predict but that the general theme will be one of reduced growth, and that's under the best of circumstances. More likely we'll have to figure out how to operate on zero or even negative growth.
So I came away from the ASPO conference pondering two completely polar trends that combine to create lasting discomfort. On the one hand, we have more and more private and military organizations coming to the conclusion that Peak Oil is imminent and will change everything, possibly disruptively. On the other hand, there appear to be no plans within the civilian government to deal with a liquid fuels emergency.
While we can expect that such plans will be tossed together when necessary, I would hope that Katrina taught us a few lessons about developing plans on the fly after the disaster has already arrived. Sure, things got done, but they were certainly suboptimal and led to more confusion and more chaos than if they had been carefully developed, practiced, and debugged.
The way that I understand the lack of planning on the part of the civilian side is that Peak Oil does not present any easy political wins, if any at all. Given the two-year planning cycle in DC, it's never a good time to bring up such an unpleasant subject. Politics trump necessity.
What can be rather easily predicted here is that when the next fuel crisis arrives, there will be more chaos than necessary. Some areas will get completely stiffed on their fuel allotments, while other areas will be reasonably well supplied. The reason that this can be easily predicted is because it more or less already happened in Europe during a protest by French fishermen inspired by high fuel prices. They blockaded ports in late May of 2008, and by early June, the action had spread across Europe. Shelves were quickly stripped bare of essential goods, tensions mounted, and petrol stations ran dry in a hurry.
And these were just the effects of a port blockade and tanker truck strike. What would happen with a real and persistent shortage of fuel? Well, if it were perceived to be due to a structural and permanent inability of the global oil market to meet demand, prices would rise stratospherically until demand was cut off. The only problem is, letting prices determine which industries idle back may not be the best plan.
Consider the case of agriculture. If full 'pass-through pricing' is the mechanism of rationing, which it currently is, then less food will be grown. With world grain stocks at historic lows, this is one area where we might not want to let Mr. Market dictate the activities of farmers based on fuel price. To do otherwise would require a plan of some sort, and none appear to be in effect.
That's the source of my discomfort. It's not necessarily that large organizations are beginning to share my sense of timing and impact of Peak Oil, although that will hasten the tipping point of awareness. It's that somehow I always thought that because Admiral Hyman Rickover knew well that this day would come (in the 1950's!), 60 years would have been sufficient lead time to assemble some credible plans.
No plans = unnecessary chaos.
The lack of planning also betrays a very common attitude, which might be summarized as, “We’ll deal with that when we get there.” I detect this attitude in a wide range of individuals and market participants, so it’s not at all uncommon. However, I think it's a mistake to hold this view. When (not if, but when) full awareness of Peak Oil arrives on the international stock, bond, and commodity markets we will discover just how narrow the doorways really are. Only a few will manage to preserve their wealth by squeezing through the doorway early; most will not make it through. As mentioned frequently on this site, our What Should I Do? guide for developing personal resiliency against a Post-Peak future offers a valuable resource for those just getting started in their preparations.
This thinking is explored in greater depth in Part 2 of this report (enrollment required), in which I discuss strategies to fill the official vacuum by developing our own plans for what we should do in response.
Gold and Silver are in a relentless rally as the US dollar continues to drop. US equity indices continue to climb as well. This has the look and feel of a monetary reliquification rally such as we had seen in 2003-2007.
Let us pray for those whose hearts are hardened against His grace and loving kindness by greed, fear, and pride, and the seductive illusion and crushing isolation of evil.
We pray that we all may experience the three great gifts of our Lord's suffering and triumph: repentance, forgiveness, and thankfulness. And in so doing, may we obtain abundant life, and with it the peace that surpasses all understanding.
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