25 October 2014

Yellen's Trickle Down Dilemma

Why is the economy so sluggish?

Even if real wages are stagnant, and consumers are tapped, the Banks have been saved and stand ready to loan from an abundance of freshly created money (that they can obtain for almost nothing).

Why won't consumers make a leap of faith and borrow more, betting their last assets on an indifferent Congress and an elusive recovery?  
It's heads we win and tails you lose for the bailout Banks. 
And from a Banker's perspective it probably makes sense.


24 October 2014

The Reason There Has Been No Sustainable Recovery

“When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done”

John Maynard Keynes  

How can an economy based on printing money and financial repression for a broken financial system achieve self-sustaining organic growth?

Where is the growth in aggregate demand fueled by a growth in employment and an increase in median wages?

Is the great mass of the public thriving, or barely surviving?

Why do we insist on blaming and denigrating the victims of a massive and ongoing financial fraud that after six years is still largely intact?
There is only one thesis that needs to be nailed to this door...

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.

Shanghai Posts 51.5 Tonnes of Gold For the Week: How Long Can the Gold Pool Be Sustained

"For 'tis the sport to have the engineer
Hoist with his own petard: and it shall go hard
But I will delve one yard below their mines,
And blow them at the moon."

William Shakespeare, Hamlet

The Shanghai Gold Exchange, where investors actually take their bullion rather than just play liar's poker with multiple paper claims for the same ounces, saw 51.5 tonnes of gold bullion taken in the latest week.

The trend of deliveries has been rising the last 12 weeks.
To put this in perspective, if there are 32,150.75 troy ounces of gold in a metric tonne, then the Comex has a total of just under 28 tonnes of registered (deliverable) gold in all of its warehouses.  

What is that, about three days supply in Shanghai?  Not to mention the other gold bullion markets around the world.
Sounds more symbolic, than practical.  Well, there can be great power in symbols— until long abused belief begins to falter, and confidence frays.  And then one risks the danger of using too much force one too many times, and losing the faithful obedience of the public.  And with it everything that allows a minority to govern.
There are another 239 tonnes in storage in all the Comex vaults, in the proper bullion eligible format, but not listed as deliverable at these prices.  Sometimes owners feel comfortable keeping the bullion there for storage, eliminating the need to have the bullion assayed if they ever wish to sell it.

So what does this all mean?    It means that the unsustainable will not be sustained. 
Some day the price of gold will likely be whatever China, Russia and like minded bullion markets say it is, the paper pushers in New York and London notwithstanding.   The tangled web of free trade and globalization, ain't it a bitch? 
It would already be so, except for the tired efforts of Wall Street's central banking friends and their access to leasing other people's bullion in a misguided effort to influence markets and rig their prices.
China and the rest of the world are apparently not yet tired of buying gold on the cheap. 
But make no mistake: Shanghai talks, and Wall Street walks.
This chart from the data wrangler Nick Laird at Sharelynx.com.

Gold Daily and Silver Weekly Charts - Plus C'est la Même Chose - Mandatory Quarantines

Gold and silver were stopped in their tracks, as the price dominant Comex continues to exert its inordinate influence over the real world economies.

There was apparently little activity in the Comex delivery and so they did not bother to issue a report yet today. In silver there was a rather large deposit of silver bullion of about 2,258,516 ounces into the HSBC warehouse as you can see below.

Next week is a Tuesday precious metal option expiration on the Comex. There is also an FOMC rate decision on Wednesday.

The big changes always take longer than we expect. And once they start, they come much more quickly than we had imagined. 

So the most fruitful perspective for the precious metals is that of a long term investor.  Short term traders may find little to interest them here.  And when they do, it may be too late to climb on board.

So we must take the markets as they are. There is no sense to criticize a lifeboat for not being a motorcycle.

Do we need lifeboats? Do you trust the central banks and the politicians to safeguard your wealth and the integrity of the money and the financial system?

Only you can provide the answers for your own peace of mind. But it is hard to think back to the overwhelming wave of global goodwill that the States were riding in the aftermath of 9/11, and compare that with how things are now. How are the mighty fallen.

In breaking news after the bell NY and NJ have announced mandatory quarantines for all health workers who may have been exposed to ebola in foreign countries.  This came on the heels of a new individual quarantined on arrival at Newark Airport this afternoon.

Have a pleasant weekend. See you on Sunday night.


SP 500 and NDX Futures Daily Charts - V Bottom Back To 50 DMA

“America is the wealthiest nation on Earth, but its people are mainly poor, and poor Americans are urged to hate themselves... Americans, like human beings everywhere, believe many things that are obviously untrue. Their most destructive untruth is that it is very easy for any American to make money. They will not acknowledge how in fact hard money is to come by, and, therefore, those who have no money blame and blame and blame themselves.

This inward blame has been a treasure for the rich and powerful, who have had to do less for their poor, publicly and privately, than any other ruling class since, say Napoleonic times. Many novelties have come from America. The most startling of these, a thing without precedent, is a mass of undignified poor. They do not love one another because they do not love themselves.”

Kurt Vonnegut, Slaughterhouse Five

The Fed and the ECB were able to reverse last week's market plunge to key support through the generous application of jawboning about stimulus.  

The Fed made happy talk about possibly extending QE. That will be tested in their announcement from their latest meeting next Wednesday.

And as for the ECB buying corporate debt, I will be interested to see the meetings between Signor Draghi and the stern German bankers.

The cash SP 500 has made it all the way back to its 50 DMA and some key resistance.  If they can break that and hold a couple daily closes above, they may have a shot at making a decent fourth quarter for their bonuses.  

The Banks and their minions care little for the real economy.  The poor results from consumer staples are a glaring alarm in the financialised economy. 

There will be more earnings reports and more geopolitical drama next week. Let's see if the Fed can deliver, and if traders' memories will last more than a week.  This is doubtful.

Have a pleasant weekend.

23 October 2014

Gold Daily and Silver Weekly Charts - Audacious Oligarchy - Ten Tonnes of Gold Taken Out of JPM

"When, O Catiline, do you mean to cease abusing our patience? How long is that madness of yours still to mock us? When is there to be an end of that unbridled audacity of yours, swaggering about as it does now?

Marcus Tullius Cicero,  In Catilinam I

There was little of note in the Comex delivery report but there was a sizable withdrawal of gold reported from storage at the JP Morgan warehouse, about a third of the total at ten tonnes.   Let's see if that turns up anywhere, or is another fat finger.   An individual event is of less matter than the significance of the trend.  And the trends are apparent.

Wall Street is drawing pictures on the Comex price charts, and there are those who will keep their heads down and continue to read them as if it is business as usual.  They will not look at the reports from the new markets in Asia.  They will ignore the uncomfortable and the unfamiliar.  They are oblivious to the approach of change.  Quite a few do not look at all.

They do not understand what is occurring in the world's financial and monetary structures. They only know what they have seen in their short lifetimes, and in their familiar places.  And they often do not respect what they do not understand.  Well, this is what makes a market interesting.

Gold is moving from West to East.  And therein lies both risks and opportunity, to those who will have an eye willing to see it.

There is a Comex option expiration next Tuesday the 28th, and an FOMC rate decision on the 29th.  It might be a hard week for the metals bulls. 

Let's see what happens.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Do HFT Algos Dream of Electronic Sheep?

Stocks were off to the races this morning as the short squeeze gathered some new momentum from the 'better than expected' results in global PMI overnight.

Stocks were interrupted in their ascent in the later afternoon on a flash report that a doctor who had been caring for the sick in Africa is being tested for ebola at Bellevue Hospital in NYC.

Stocks lost almost half their gains quickly as the algos saw the headline and triggered selling, and then recovered a bit into the close.

This is a thin, technically traded market. A simple headline such as this was able to knock it back on its heels. Be aware of this and take it into account if you are anything but a daytrader.

After the bell Microsoft posted better than expected earnings and revenues, while Amazon posted a horrendous miss, losing .95 per share versus an expected .74 per share. And their revenues missed badly as well.

It was a nice rally today, and it may continue tomorrow if nothing happens to scare the machine trading. Wall Street has a chance to post its best week in a year, and they may go for the headline if reality does not intrude.

Have a pleasant evening.