Day End Notes From Jim
Publié le 06 janvier 2009
Re: Chairman's Corner - Monday, January 05, 2009
Title: Day End Notes From Jim
Dear Friends,
Today may set the record for emails sent to you on key subjects. So rather than send these pieces out to you individually, I am combining them for the sake of expediency.
I am writing to you from Africa and it is quite late here. In the now 50 years of my career, I have never seen so many subjects in one day demanding immediate clarification. It is my joy to serve you.
Below is a note I received from my good friend, Dan Norcini, a professional commodities trader based in Houston, Texas. Dan wrote to address the concerns I had about the Fed monetizing agency debt. I also want to bring your attention to another reason why gold was sold down today in addition to discussing the often misunderstood (and misused) term, "monetize."
Respectfully yours,
Jim
Dear Jim,
The reason they are being forced into buying the debt is because no one else wants it. I have been charting this for some time by monitoring the Custodial data from the US Federal Reserve system.
I am attaching the chart for you all to review so you can all once again see how foreign Central Banks are dumping Fannie and Freddie debt in large amounts onto the market. Without the Fed monetizing that debt, there would be a significant drop off in the amount of funds for mortgages. I expect this week's data to show no change in the liquidation of this agency debt which has now reached a total of $167 billion and is rising.
The Fed is going to need every bit of that $500 billion they are going to create out of thin air to acquire what the foreign Central Banks are unloading.
Best wishes from your pal,
Trader Dan
Click here to view today's Agency Debt chart in PDF format with commentary from Trader Dan Norcini...
Dear Friends,
Here is the other reason for gold being sold down today. (The truth will set you free of the manipulators).
$25,000,000,000 of index commodity funds follow the index readjustments made herein. Gold is REDUCED from 10.8 to 7.9 percent of the index which therein causes related selling by INDEX FUNDS.
Buying or selling by index funds is a yearly, onetime event. These adjustments are needless artificial buying and/or selling of specific commodities that skew market prices and produce opportunities both to buy and sell short.
You think reweighting is a product of a hands off process in today's rotten-to-the-core world? You probably also believe in Santa Clause.
Beware, commodity index rebalancing ahead
Posted by Izabella Kaminska on Jan 05 15:34.
The major commodity indices rebalance their respective asset weightings once a year (or occasionally more) - and with that comes a mass dose of buying and selling. The 2009 rebalancing is expected to start sometime this week.
Luckily, JP Morgan has produced its best guess of how the 2009 reweightings of the DJ AIGCI and the S&P GSCI indices will impact the market.
The weightings for both indices are released ahead of time, but begin to kick in the first few working days of the new year. In the case of the DJ-AIGCI - which JP Morgan estimates has $25bn in funds tracking it - the new weightings come into force during the roll period that begins January 9th. The S&P GSCI index weightings kick-in after its January roll which commences January 8th. JP Morgan estimates about $50 bn of investment into that index.
As the DJ weighting multipliers account for changes in US dollar-denominated values there is generally more potential for large changes there than in the GSCI, whose weightings are set in terms of ounces/tonnes (on the basis of liquidity and are weighted by their respective world production quantities).
Accordingly, JP Morgan see the most significant change coming in the DJ-AIGCI rebalance. Here the market weight of crude oil is expected to increase from 9.6 per cent to 13.8 per cent, gold from 10.8 per cent to 7.9 per cent, copper (COMEX) from 4.5 per cent to 7.3 per cent, live cattle from 6.4 per cent to 4.3 per cent and sugar from 4.7 per cent to 3.0 per cent. Meanwhile, S&P GSCI crude oil weight will go from 32 per cent to 33.8 per cent. Their analysis:
In financial terms, we expect the rebalancing to have the greatest impact in gold, COMEX copper, crude oil, gold, and live cattle. We estimate that the rebalancing of the two indices is expected to result in $877 million of selling in gold, $699 million of buying in COMEX copper, $528 million of selling in live cattle, and $523 million of buying in crude oil.
here
Dear Friends,
Monetization of market-less, bankrupt debt with no guarantee of recovery in value is the ULTIMATE ACT OF INFLATION, in this case, the US dollar.
Axiom: To monetize debt is to inflate currency
What Does Monetize Mean? Here is the definition:
1. To convert into money.
2. To convert from securities into currency that can be used to purchase goods and services.
Investopedia explains Monetize as follows:
For example, you'll often hear Internet marketers talk about "monetizing website visitors." This is another way of saying that the marketers are trying to figure out a way of making money from website visitors, such as through advertising, ecommerce, etc.
New York Fed Begins Purchases of Agency Mortgage Debt(Update1)
By Craig Torres
Jan. 5 (Bloomberg) - The Federal Reserve Bank of New York started buying mortgage-backed securities today as part of a $500 billion program to support the U.S. housing market.
The New York Fed "began purchasing fixed-rate mortgage- backed securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae," the Fed bank said in a statement released by e- mail. "Selected private investment managers are acting as agents of the New York Fed in these purchases."
The central bank didn't disclose the amount of the purchases, saying such details will be available on the New York Fed's website beginning Thursday, Jan. 8, and will be updated each Thursday.
The Fed chose BlackRock Inc., Goldman Sachs Asset Management, Pacific Investment Management Co. and Wellington Management Co. to manage the $500 billion purchase of mortgage- backed securities it plans to complete by June.
The collapse of U.S. mortgage finance last year led to the worst credit crisis in seven decades and triggered writedowns and losses at financial institutions exceeding $1 trillion.
The central bank has expanded credit by $1.3 trillion over the past year through programs extending liquidity to banks, bond dealers and other financial institutions. The Fed plans to create money to purchase the bonds, boosting bank reserves.
here
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Message sent on Mon Jan 5, 2009 at 6:22:25 PM Pacific Time
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