30 June 2010

Gold Daily Chart

The bullion banks are trying to make 'a goal line stand.'

SP Daily Chart Into End of Second Quarter: Not With a Bang But a Whimper

US equities went out of the second quarter on new lows.

There was a surprising amount of tape painting in individual stocks, that was almost funny at times. It is hard to hide behind the tape in these thin markets. I suppose that if I were fund manager carrying a large short position, I might want to artificially drive the price down to make things look better as I closed my books on the quarter.

The junior miners in particular are a real hoot to watch with their wide spreads, large short interests, openly aggressive naked short selling, and thin volumes. It takes a special kind of masochism to trade anything on the pink sheets, much less Canadian listed stocks.

Unemployment report out tomorrow, after which time the adults will be heading out to the Hamptons for the long holiday weekend, leaving the underclass of traders in charge with strict instructions and most likely a short leash.

The Non-Farm Payrolls report will be out on Friday, July 2. The consensus is for a loss of 100,000 jobs. The ADP report came in this week with a gain of 13,000 jobs, which was well below expectations of 61,000. A recovery in the US economy is an illusion.

It is typical Wall Street arrogance when they say that 'no one will be there to even hear the number, much less trade it.' As I recall, Asia and Europe will be open for business on Friday and Monday. But some might imagine them to be junior traders, taking their orders and queues from New York and London as well.

I am still running the long gold / short stocks hedge, with the add of a slight short in the long Bond which is probably anticapatory of a decline in July unless we get another leg down in equities that has legs.

Class War and the Decline of the West

Before he rediscovered his self interest, ignoring the outrageous financial frauds perpetrated by his own ratings agency, Warren Buffett famously said, “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.”

I find it remarkable that there is so little meaningful discussion of this in mainstream circles. Well perhaps not, considering that most of them are now owned by a few major corporations.

The key to stopping this theft of your freedom is purging the political system of the corruption of paid influence, campaign contributions by non-persons like corporations, special interest groups, and unions, the breaking up of the media conglomerates that seek to control the news, and the implementation of a system of sound money for international trade at least, using a standard that resists the manipulation of the financial system as outlined in Hugo Salinas-Price's quietly brilliant and remarkably insightful essay, Gold Standard: Protector and Generator of Jobs.

The powers that be will fight reform every step of the way, using propaganda and your prejudices and emotions against you. The best way to conquer a people is to persuade them to enslave themselves using slogans and simplistic views of the world that play on their fears and hatreds. The neo-liberal economic fraud that was scripted by the monied interests is played out daily to vast audiences using actors and actresses masquerading as politicians, analysts, and commentators.

I receive at least ten emails per day from the self-enslaving, sadly to say mostly older men like myself, that repeat the slogans and urban myths like faithful party members, seasoned with hateful prejudice and mindless propaganda, so I know that the influence peddlers and indoctrinators are doing a good job of it, subverting the middle class.

It is a little remembered fact that the greatest boost in support for the rise of the National Socialist party came not from the underclasses which had always been a minority player on the political stage, but from the more influential professional class, the petit-bourgeois: doctors, dentists, accountants, shop owners, and small business owners. They added their force to the earliest supporters , the industrialists and the monied interests, the bankers and the industrialists.

This is how the National Socialists were able to so easily co-opt the medical profession and educated classes into the early horrors of euthanasia, sterilization, and then finally extermination of whole categories of 'undesirables.' The middle class thought they could ride the wave, the will to power, in their greed and hate and revenge, but they soon learned that madness has no master, consuming all with fire.

This is how your freedom, your wealth, will be taken from you and your children, their futures devastated. So it is something with which you might wish to be familiar, so you can at least explain it to them when they are homeless in the land their forefathers gave you.

"For we wrestle not against flesh and blood, but against principalities, against powers, against the rulers of the darkness of this world, against spiritual wickedness in high places." Ephesians 6:12
Here is a recent essay by Professor Ismael Hossein-zadeh that is worth reading.
"Never before has so much debt been imposed on so many people by so few financial operatives--operatives who work from Wall Street, the largest casino in history, and a handful of its junior counterparts around the world, especially Europe.

External sovereign debt, as well as occasional default on such debt, is not unprecedented [1]. What is rather unique in the case of the current global sovereign debt is that it is largely private debt billed as public debt; that is, debt that was accumulated by financial speculators and, then, offloaded onto governments to be paid by taxpayers as national debt. Having thus bailed out the insolvent banksters, many governments have now become insolvent or nearly insolvent themselves, and are asking the public to skimp on their bread and butter in order to service the debt that is not their responsibility.

After transferring trillions of dollars of bad debt or toxic assets from the books of financial speculators to those of governments, global financial moguls, their representatives in the State apparatus and corporate media are now blaming social spending (in effect, the people) as responsible for debt and deficit!

President Obama's recent motto of "fiscal responsibility" and his frequent grumbles about "out of control government spending" are reflections of this insidious strategy of blaming victims for the crimes of perpetrators. They also reflect the fact that the powerful financial interests that received trillions of taxpayers' dollars, which saved them from bankruptcy, are now dictating debt-collecting strategies through which governments can recoup those dollars from taxpayers. In effect, governments and multilateral institutions such as the IMF are acting as bailiffs or tax collectors on behalf of banksters and other financial wizards.

Not only is this unfair (it is, indeed, tantamount to robbery, and therefore criminal), it is also recessionary as it can increase unemployment and undermine economic growth. It is reminiscent of President Herbert Hoover's notorious economic policy of cutting spending during a recession, a contractionary fiscal policy that is bound to worsen the recession. It is, indeed, a recipe for a vicious circle of debt and depression: as spending is cut to pay debt, the economy and (therefore) tax revenues will shrink, which would then increase debt and deficit, and call for more spending cuts.

Spending on national infrastructure, both physical (such as roads and schools) and social infrastructure (such as health and education) is key to the long-term socioeconomic developments. Cutting public spending to pay for the sins of Wall Street gamblers is bound to undermine the long-term health of a society in terms of productivity enhancement and sustained growth.

But the powerful financial interests and their debt collectors seem to be more interested in collecting debt claims than investing in economic recovery, job creation or long-term socioeconomic development. Like most debt-collecting agencies, the IMF and the states serving as banksters' bailiffs through their austerity programs may shed a few crocodile tears in sympathy with the victims' of their belt-tightening policies; but, again like any other debt-collecting agents, they seem to be saying: "sorry for the loss of your job or your house, but debt must be collected--regardless."

A most outrageous aspect of the debt burden that is placed on the taxpayers' shoulders since 2008 is that most of the underlying debt claims are fictitious and illegitimate: they are largely due to manipulated asset price bubbles, dubious or illegal financial speculations, and scandalous conversion of financial gamblers' losses into public liability.

As noted earlier, onerous austerity measures to force the public to pay the largely fraudulent external debt is not new. Benignly calling such oppressive measures "Structural Adjustment Programs," the International Monetary Fund and the World Bank have for decades imposed them on many less developed countries to collect debt on behalf of international financial titans.

To "help" the indebted nations craft debt-servicing arrangements with external creditors, the IMF imposed severe conditions on the way they managed their economies--just as it is now imposing (in collaboration with the European and American bankers) those austerity policies on the debtor nations in Europe. The primary purpose of such restrictive conditions is to divert or transfer national resources from domestic use to external creditors. These include not only belt-tightening measures to cut social spending and/or raise taxes, but also selling-off public enterprises, national industries, and future tax revenues.

Calling such fire-sale privatization deals "briberization," the ex-World Bank chief economist Joseph Stiglitz revealed (in an interview with the renowned investigative reporter Greg Palast) how finance ministers and other bureaucratic authorities in the debtor countries often carried out the Bank's demand to sell off their electricity, water, transportation and communication companies in return for some apparently irresistible sweetener. "You could see their eyes widen" at the prospect of 10% commissions paid to Swiss bank accounts for simply shaving a few billions off the sale price of national assets..."

Ismael Hossein-zadeh, The Vicious Circle of Debt and Depression: It Is a Class War

Here is a lengthier history of the undermining of the US political system using financial fraud from Renaissance 2.0.

The bailout of AIG is near the core of the great fraud. Crack that nut, and we may learn something about financial fascism and the Fed. That is why they may dance around it, but they will never take down the principals and bring the truth out into the light of day.

Le monde est sourd. The world is deaf, and the truth has no place to lay his head in their hearts.

I am a citizen of the world, and nothing is alien to me except sin.

Passcode: Israel

Never waste a crisis.

By the way, I learned yesterday that my site is now banned in mainland China with a few exceptions. I saw a short list of blogs that were banned, and those that were not, and it was telling an interesting story. As Bill Gates said, the PRC are his kind of capitalists.


Benjamin Netanyahu's Meeting with President Obama

President Barack Obama and Israeli Prime Minister Benjamin Netanyahu will meet in Washington on July 6 to discuss the Gaza blockade and the U.S.-Israeli relationship. CFR's new fellow Robert Danin will discuss the implications of the prime minister's visit in a media conference call.

Date: Thursday, July 1, 2010
Call Time: 3:00 p.m. - 4:00 p.m. ET

Dial-in Information:
U.S. callers: 1.800.351.6805
International callers: 1.334.323.7224
Passcode: ISRAEL

The on-the-record discussions are not so nearly as interesting as the long term private discussions that take place, often in picturesque places, that feature great skiing, good food, and fine wines. Trust me on this one.

29 June 2010

Gold: Chart Updates - Gold is a Counter Trade to Currency Risk

Although the gold bulls took a severe 'gut check' today, the cup and handle formation ultimately proved too powerful for the bears and bullion banks to break. It is an epic struggle, with much broader, perhaps even historic, implications than most of us can now realize, being too close to the event to see its true dimensions.

The weekly chart shows that gold is in a bull market. Anyone who does not acknowledge this, especially any metals analysts, are talking their books and private agendas. I can think of no other profession that allows for such blatant deceptions as the US financial sector.

The hysteria that accompanies every minor, albeit somewhat sharp, pullback in the price of gold borders on the ridiculous. It is often a 'psych job' by hedge funds, and unfortunately a mass of the deluded who simply do not understand currency markets and money. They think they do, but they don't, and in this case a little knowledge is a dangerous thing for their accounts.

Gold is a counter trade to currency risks. Monetary inflation is only one example of that risk. So the simplistic model is bewildered when gold rockets in the face of deflation caused by credit destruction and weak aggregate demand. What it fails to account for is the dramatic deterioration in the backing for the currency due to the corrosive decay of its underlying assets, the degraded ability to tax and service debt, and the actual assets held by the central bank.

And this is why at times some governments seek to control rival currencies such as gold. It is the economic equivalent of rolling back the odometer, or putting sawdust in the crankcase of a car which you wish to sell to the unsuspecting. It is a means to a control fraud, the deliberate hiding of the dilution of your currency to support a set of political and personal objectives. And this is why the citizenry, if they are wise, will insist on transparency in the metals markets and the asset holdings of their country.

The miners are doing reasonably well all things considered, but may not stand up well IF there is a sell off in the general equity markets.

You may as well hear it all now, because in the event of war, the truth will be the first victim.

US Equity Markets At a Key Juncture Ahead of Jobs Report and Holiday Weekend

SP 500 September Futures Daily Chart

At least a dead cat bounce after a drop such as this to key support. But heading into a holiday weekend with an important non-Farm Payrolls Report and wavering confidence, anything can happen after that.

The SP 500 Cash Weekly Chart give a better perspective on how important a test of support the market is facing.

VIX is approaching levels where one would either expect the market to stabilize and begin to recover its footing, or quickly break down and fall apart.

The Nasdaq Composite is in the same situation, so it is clearly a macroeconomic statement, and not something particular to one index.

Currency Wars: Jim Rickards on Financial Warfare

This is likely to be the spin:

The problem is not that an irresponsible Fed and a corrupt Congress ruined the US dollar through a failure in stewardship, crony capitalism, and a series of control frauds culminating in a financial collapse that caused great harm to other countries, particularly in Europe. The dollar is a 'victim' of the evil empire that is jealous of our success and who hates freedom. (Let me have some 'freedom dressing' on my sandwich, please.) Markets are only useful when they do what we wish them to do, when they support our agenda and serve our will to power. The rest of the world is required to obey our enlightened rule, and serve their proper roles in the New World Order."

I am not quite sure where Rickards is coming from on this, but read the entire paper and judge for yourselves. What seems ironic is that the US has been the dominant user of economic warfare, economic hitmen if you will, since WW II. For example, US Banks Financing Mexican Drug Cartels. This is in part the natural outcome of its being the clear financial superpower, supplanting the City of London and the British Empire of private corporations against which the US had itself rebelled successfully, an event which it will commemorate in a few days on 4 July. But it has also gotten much worse in the past twenty years because of the erosion of regulation and the capture and corruption of key political processes.

You should also be aware that one of the financials bestsellers in mainland China is a book, with a recently published sequel, titled 'Currency Wars.' The author is said to fall into the old memes of scheming international bankers, which has been used by some to issue a blanket condemnation and discredit his premise in the West. I confess I have not read it, since it is not available in translation. What is most important is that the book has a wide readership and influence in the Chinese intelligentsia.

"Worse even than the long, slow grind along the bottom described in the foregoing section is a sudden catastrophic collapse. In that context, the greatest threat to U.S. national security is the destruction of the U.S. dollar as an international medium of exchange. By destruction we do not mean total elimination but rather a devaluation of 50 percent or more versus broad-based indices of purchasing power for goods, services, and commodities and the dollar’s displacement globally by a more widely accepted medium.

The intention of Central Bank of Russia would be to cause a 50 percent overnight devaluation of the U.S. dollar and displace the U.S. dollar as the leading global reserve currency. The expected market value of gold resulting from this exchange offer is $4,000 per ounce, i.e., the market clearing price for gold as money on a one-for-one basis. Russia could begin buying gold “at the market” (i.e., perhaps $1,000 per ounce initially); however, over time its persistent buying would push gold-as-money to the clearing price of $4,000 per ounce. However, gold selling would stop long before Russia was out of cash as market participants came to realize that they preferred holding gold at the new higher dollar-denominated level. Gold will actually be constant, e.g., at one ounce = 25 barrels of oil; it is the dollar that depreciates.

Another important concept is the idea of setting the global price by using the marginal price. Russia does not have to buy all the gold in the world. It just has to buy the marginal ounce and credibly stand ready to buy more. At that point, all of the gold in the world will reprice automatically to the level offered by the highest bidder, i.e., Russia.

Basically, the mechanism is to switch the numeraire from dollars to gold; then things start to look different and the dollar looks like just another repudiated currency as happened in Weimar and Zimbabwe. Russia's paper losses on its dollar securities are more than compensated for by (a) getting paid in gold for its oil, (b) the increase in the value of its gold holdings (in dollars), and (c) watching the dollar collapse worldwide."

Jim Rickards, Economics and Financial Attacks

Robert Rubin Runs Obama, SP 500 Futures, and Gold

The June Non-Farm Payrolls Report will be released on Friday, July 2. Tomorrow June 30 is the end of the quarter.

The 234th anniversary of the US Declaration of Independence is this weekend.

"I am well aware of the toil and blood and treasure it will cost us to maintain this declaration, and support and defend these states. Yet through all the gloom I see the rays of ravishing light and glory. I can see that the end is worth all the means. This is our day of deliverance." John Adams
The equity market feels somewhat artificial, if not contrived. Indeed, I think we are in a period of intensified disinformation running ahead of the fog of war, whether it is between countries, or classes, or both. It is customary to neutralize pre-emptively the moral standing of the friends and allies of something which you intend to attack and destroy.

Bear raids were coming hot and heavy as Gold attempted to break out through overhead resistance. HSBC was spreading talk of Central Bank selling of bullion that did not seem to be apparent in the physical market. As you know, HSBC is one of the banks most heavily short the paper metals markets.

Chris Whalen of the highly respected Institutional Risk Analyst sees Robert Rubin as still pulling the strings in US financial policy and is virtually running the economic policy in the Obama Administration from behind the scenes, through surrogates.
"t comes as a surprise to many people that, despite the fiasco at Citigroup (C) and his role in causing the subprime mess (See "The Subprime Three: Rubin, Summers and Greenspan," The Institutional Risk Analyst, April 28, 2008), Rubin remains inside the circle at the White House. Nearly two decades after first migrating to Washington, he apparently is still calling the shots of U.S. financial and economic policy with the full support of President Barrack Obama. Working through his favorite marionettes, Treasury Secretary Tim Geithner and Economic Policy Czar Larry Summers, most recently Rubin managed the defense of Wall Street following the great crisis. No matter what Secretary Geithner says or when he says it in public, you can be sure that those utterances have the full knowledge and approval of his handler Larry Summers and their common political owner and sponsor, Robert Rubin.

A modern day colossus, Rubin effortlessly bestrides the worlds of political and finance, and mostly without leaving a trail of slime that often betrays the average political operator. Rubin stood at the right hand of Alan Greenspan on the famous February 1999 Time cover entitled: "The Committee to Save the World." Not an entrepreneur like Pierpont Morgan, Rubin is a mixture of banker, politician and global technocrat, a super fixer of sorts, but with a proper sense for public-private partnership. Case in point: The famous letter from Rubin to Goldman Sachs clients when he first went to the Clinton White House saying that just because he was in Washington didn't mean he wouldn't be looking after them...

The end result of financial reform is inconvenience for the financial services industry and more expense for the taxpayer and the consumer. But it should be noted that, once again, Wall Street has managed to blunt the worst effects of public anger at the industry's collective malfeasance. The banks can now start to focus their financial firepower on winning back hearts and minds on Capitol Hill. All it takes is money.

Notwithstanding anything said or done by the Congress this year, operating through trained surrogates such as Geithner, Summers and others, Robert Rubin is still pulling the economic and financial strings in Washington. The fact that there is a Democrat in the White House almost does not seem to matter. President Obama arguably has a subordinate position to Rubin because of considerations of money. If you differ, then ask yourself if Barack Obama could seek the presidency in 2012 without the support of Bob Rubin and the folks at Goldman Sachs. Case closed.

For America's creditors and allies, the key question is whether the Democrats around Rubin are willing to embrace fiscal discipline at a time when deflation in the US is accelerating. That roaring sound you hear is the approaching waterfall of the double dip. With the US at the moment eschewing anything remotely like fiscal restraint and the rest of the world going in the opposite direction, to us the next crisis probably involves U.S. interest rates and the dollar.

Judging by Rubin's performance in the past, when he talked first of a strong dollar, then a weak dollar policy, and fudged the issue regarding fiscal deficits, we could be in for quite a ride. But at some point the Obama Administration should acknowledge that this particular former CEO of Goldman Sachs is still driving the policy bus. If the Republicans are in control of the Congress come next January, maybe they should subpoena Rubin to appear periodically. At least then we all can hear directly to the person who is actually making national economic policy."

The World According to Robert Rubin, Chris Whalen, IRA

One has to wonder, of course, who is running economic policy for the Republicans? It seems to be more of a case of competing crime families, than a simple good vs. evil.

If Rubin does indeed run Obama, the question remains, who runs Rubin, and where do his loyalties lie? Whom does he serve?

28 June 2010

The Need for Financial Reform as a Pre-requisite in the Recovery Process

Apparently I am not alone in concluding that significant financial reform, including the restructuring of the financial sector to serve, rather than to tax and depress, the real economy is a vital necessity and an integral part of the recovery process.

This is not to say that the BIS General Manager and I would agree on all the details of the program. But it does speak to the notion that the size and structure of the financial sector was a contributing cause of the financial collapse, rather than an innocent bystander to some improbable accident or act of God.

So if one believes this, that the financial sector had become an integral part of the problem, it becomes rather obvious to conclude that policies based on simplistic slogans like 'less debt' or 'more spending' alone are not going to be effective in changing a systemic distortion that was over twenty years in the making, involving an orgy of moral hazard, financial fraud, and regulatory capture that became the cornerstone of the developed nations' economies.

Indeed from my vantage point, it appears that the various policy proposals being discussed are indicative of special interest groups arguing over a dying man as they consider how best to strip the corpse.

My own concern is that the various parties, being in a feeding frenzy of self-interest, will ignore the warning signs of public dissatisfaction and fading confidence, until it is too late to pursue conventional methods of reforming the system.

"Let me conclude. The lingering structural deficiencies in the financial sector and the longer-term drawbacks of very expansionary macroeconomic policies continue to put enormous demands on our ability to steer the best course through hazardous terrain.

When markets and the public start to lose confidence, it is an illusion to suppose that delaying the adoption of the policies we know are needed would smooth the adjustment process. We cannot wait for the resumption of strong growth to begin the process of policy correction. In particular, delaying fiscal policy adjustment would only risk renewed financial volatility, market disruptions and funding stress. A much better strategy is to set out credible front-loaded actions for meaningful fiscal adjustment and for restructuring the financial system.

International cooperation is particularly important at the current difficult juncture, when confidence is fragile. In particular, finalising international agreements on regulatory reform on schedule will send the right signal - not only to financial markets but also to the public at large. The time has come to agree on major practical reforms to substantially increase the resilience of the financial industry. These reforms, combined with policies of fiscal adjustment and efforts to restructure the financial industry, will go a long way to putting the financial crisis behind us. We must seize this opportunity."

Jaime Caruana, General Manager of the BIS, on the occasion of the Bank's Annual General Meeting, Basel, 28 June 2010.
You may read the General Manager's entire speech here.

Gold Daily Chart and the Failure to Reform

Gold attempted to break out this morning hitting an intraday high around 1262, but was hit by concentrated selling designed to break the short term price trend. This is what is called a bear raid,

Each time gold attempts to break out, the shorts, in this case primarily the Wall Street banks and their associates, attempt to break the trend and push it lower. Each low is a little higher than the last, which is what gives the chart formation its shape of a rising triangle. As the energy behind the primary trend builds, the shorts must eventually give way and allow the price to rise, retreating to another line of resistance a bit higher.

Why is this happening? Why the preoccupation with gold and silver by the banks? Notice that gold and silver were exempted from proprietary trading restrictions for the big banks in the 'financial reform' legislation. The US government and its central bank view gold and silver as rivals to the US dollar, and 'the canary in the coal mine' that exposes their monetization efforts and threatens the Treasury bonds. It is characteristic of a culture that secretly abhors and dishonors the truth, paying lip service to whistleblowers while discouraging and ignoring them at every turn. "What is truth?" Whatever we permit to be discussed, whatever is published, and in the end, whatever we say it is.

There is a prevailing modern economic theory, probably best expressed in Larry Summer's paper on Gibson's Paradox, that by controlling the gold price one can favorably influence the interest rates paid on the long end of the yield curve. So as policy the US permits and even encourages the manipulation of key asset prices. Thus price manipulation of key commodities becomes a major plank in a program of 'extend and pretend.'

This to me typifies the policy errors and failures of Bernanke, Summers and Obama. They do not engage in honest discussion of the problems and genuine reform, preferring to attempt to band aid the problems, cut back room deals, and maintain the status quo to the extent that they feel the people will tolerate. They will be remembered in history as the high water mark in an era of corporatism, institutional dishonesty, and greed.

The parallels in the current situation with the Great Depression in the US are remarkable. FDR was a strong leader with a vision, and faced tremendous opposition to his reforms from a Republican minority and its appointees on the Supreme Court. He was considered a 'traitor to his class' and a champion of the common people.

Obama is also a traitor to 'his class,' all those who voted for change and reform which is what he had promised. But he lacks genuine leadership, vision, and moral courage, confusing leadership with empty words and gestures.

The Banks must be restrained, the financial system reformed, and the economy brought back into balance before there can be any sustained recovery.
Those well-to-do that promote cutbacks and austerity measures now without substantial reform merely wish to shift the burden to the many while feeding on the public's suffering. "Now that I've gotten mine, screw everyone else, to make mine all the sweeter." But when the shoe is on the other foot, they whine and cry and threaten until they gorge themselves on subsidies.

And those who promote stimulus without reform are merely seeking to maintain the status quo while transferring additional wealth to their own supporters and special interests, often in support of theories that they barely understand. Stimulus only serves to mitigate a slump, but cannot repair a systemic collapse.
"If you keep on gouging and devouring each other, watch out, you will be destroyed by each other. " Gal 5:13
No other forecast is necessary.

Net Asset Value of Certain Precious Metal Funds and Trusts

Note: About 30 minutes after I put this up, gold and silver were hit with concentrated selling designed to break the short term price trend in a very obvious bear raid.

You should be used to this by now. It will not change until the financial system is reformed. So do not hold your breath, or get angy or excited, at least as a trader. That is counterproductive. Instead use these pullbacks while the trend is intact.

25 June 2010

Gold Daily Chart: The Cup and Handle Is Now Fully Formed; Longer Term Projections

As the 'handle' of the cup and handle chart formation formed, it slowly yielded enough points to finally place 'the lid' on the cup and hand, and firmly label the rims.

This allows us to set the minimum measuring objectives. There will probably be a run higher to about 1375, with the usual back and forth noise, after the breakout is achieved with a firm close above 1260 that sticks for a week.

Then we will experience the first major pullback, most likely back down to the 1330 level. And then the market will continue to rally up to the 1455 level.

I cannot furnish time frames for these moves at this time. But I suspect the move to 1375 will be fairly expeditious once the breakout is clearly accomplished.

All forecasts are estimates assuming some 'steady state background conditions. If the fundamental conditions of markets change, then the forecast must change to accommodate that.

As an aside, I can see where some chartists might try to feature the handle of this cup as a bearish rising or ascending wedge. This is a weaker interpretation given the greater substance of the cup and handle. It should also be remembered that bearish wedges only resolve lower about 50-60% of the time, and really are not safe to play until there is a clear breakdown. I have paid dearly to learn that lesson when trading stocks from the bear side.

Gold Weekly Chart

I think we can safely assume that the next 24 months will be extremely interesting.

Here is a very long term gold chart showing the entire inception at the end of the twenty year bear market.

The next leg which we are now entering projects to about 2180 - 2200 before we would expect to see a major protracted pullback.

I do not think that this bull market will be limited to only 'four legs,' which is just a bit of anthropomorphism, but I do strongly suspect that it will continue until about 2020. So we seem to have almost ten more years of upside ahead of us, and could be considered to be at the halfway point.

Gold has been gaining, on average about 70% every three years. So what is the end point?

Just for grins, I would expect gold to hit $6,300 near the end of this steady bull run, but will the bull market will end in a parabolic intra-month spike towards $10,000. This is likely to occur around 2018-2020.

Long term forecasts are fun, but there are so many exogenous variables that it is very hard to say what will happen even a few years out. Let's see how this breakout goes, and where we are at then end of this year first. The charts will inform us of any major trend changes. Charts provide perspective more than prediction.

Why Are the Miners Underperforming The Metal?

Occasionally a reader asks, "Why are the miners lagging the performance of gold?"

My standard reply is that the mining stocks are both stocks and a store and source of the underlying bullion which is the basis of their business.

Past regression analysis which I had done a few years ago indicated that it was about a 50 - 50 split. Over time, an 'average' mining company will correlate roughly 50% to the SP 500 and 50% to the metal which is its predominant business. The lags due to anticipation and expectations are taken care of in the size your sample.

Just to do a quick check, since these things do sometimes change over time, I ran a quick comparison of the GDX Mining Index, GLD as a proxy for gold, and the SP 500.

I think the results since mid 2008 shown below seem to indicate that the miners, on average, are still a rough split between a stock and a store of wealth, with bullion exerting a bit more pull than in the past. This is probably an effect of the underperformance of the financials, and their heavy influence in the SP index. I would caution against using this in place of a genuine regression analysis. But its close enough to make the point that the mining stocks are, to some significant degree, a stock.

Note: Please read what I have said before snapping off a quick comment objecting to it on the basis of the stellar performance of your favorite junior or senior mining company.

I have done very excruciatingly details multivariate regression analysis of the price of bullion itself. and have published the results in the past on my 'old site' the Crossroads Cafe. That correlation does change. Perhaps I will find the time to take out the big spreadsheets and run them again.

Not So Much Deflation as the Decay of Value: SP 500 Futures and Gold Daily Charts Updated at Market Close

Wash and rinse. Best way to get that stubborn money out of the public through fees, commissions, and of course front running for those perfect trading profits at the faux banks.

Chart Updated at Market Close

Now that option expiration is over gold is back to where it was a week ago, trying to break out of its large cup and handle formation. Silver is on the cusp of activating a massive and bullish multi-year chart formation of its own. It is an open question whether gold or silver will lead the way.

But I have to say that the CFTC is a disgrace. Eventually they will clean up their markets, but the foot dragging and dissembling is a mark against them. Chairman Gary Gensler knows better, but he is a Goldman alumnus, so what else would we expect? There are always many frustrated people in every organization trying to do a good job, so we should not paint them all with the same brush. The boss sets the tone, and Gensler's tone seems to be the status quo and crony capitalism. But that is the overall flavor of the Obama economic team.

Chart Updated at Market Close

Most people have a profound misunderstanding about the function that gold, and to a somewhat lesser extent silver, perform in the currency markets and wealth preservation trade.

The meme is that gold is a hedge against inflation. Over the past 100 years or so in particular, the greatest threat to the US dollar, and indeed to most currencies, has been inflation, which is the debasement of the value of a currency through printing or expanding supply faster than real growth in productive economic activity.

But was it really inflation that drove the gold hedge, or something more properly called 'currency risk.' Inflation through expansion of supply is just one facet of currency risk.

The risk today is not a gradual inflation through an overexpansion of the broad money supply, but something insidiously different, not seen since the last Great Depression. It is the risk of the default and devaluation, and the erosion of the assets backing the currency itself, which is not yet showing up in the conventional inflation figures.

What backs the US currency? Often referred to simply as 'the full faith and credit of the government,' it is the ability to collect taxes and service the debt with real returns, and of course and importantly the Fed's and the Treasury's balance sheets. I should have to say no more about this to anyone who has been following recent developments. The erosion of the ability of the government to produce revenue by taxing real income, and the rapidly declining quality of the assets held by the Fed, are obvious. Yes the US dollar may look good when compared some of the other wretched alternatives, but that appearance is like the portrait of Dorian Gray, not capturing the rapid decline in its own worth and well being.

So perhaps this will prove to be some help to those who are expecting debt deterioration and monetary deflation to deliver to them a stronger dollar and stable wealth. They fail to notice that this did NOT happen in the 1930's, and in fact quite the opposite occurred. I am now *hoping* for stagflation as an outcome because it seems better than the alternatives where the US and Europe now appear to be heading.

Yes, it can do so in the short term, particularly if you own the world's reserve currency, and that largely an illusion. But the decay is there for any who care to see it, and the rush to gold by the smarter money is also there to see, for those who will not willfully blind themselves to it.

There is nothing more disheartening than to watch otherwise good people fighting the last war, or perhaps most properly the wrong war, painfully unaware that their tactics and assumptions are misconstrued and self-defeating, and that they are committed to following 'leaders' who are articulate, persuasive, often very loud, and wrong.

24 June 2010

Silver, the Shiva of the Trading Pits: Gold and the SP 500 Futures Daily Charts Updated at 5:30 PM

Once again gold is rising with stocks falling, strongly indicating that gold is riding on the crest of the risk trade, and an underlying slow but steady short squeeze on the physical offtake, most likely driven by foreign central banks and large investors. The paper trade is another thing altogether.

Gold is attempting to break out, but needs to clear 1250 and 'stick it.'

It would not surprise me to see a breakaway gap to the upside on some overnight or weekend.

Someone asked me why I have so much interest in gold at this time.

Simply put, it is because I think gold is on the verge of an historic move, and a shift in the geopolitical money structure that will be talked about for many years to come. But I could be wrong. It could just be another leg up in the bull market.

Silver is poised to break out of a very large inverse H&S formation perhaps. I think we will learn quite a bit of market insight, depending on which metal leads the way, silver or gold.

Then again, of course, the breakouts may not come. But I think they will.

The silver formation is so big and so powerful looking that the breakout, when it eventually comes, might well look like a shaped charge sending out a jet of hot plasma vaporizing a hole through stop losses and short positions.

"Now I am become death, Destroyer of Shorts, pinned on the wrong side of my trade. Lord of the cruel forces of nature."

JPM will get bailed out by the CFTC / Fed most likely, but they will be burning specs and tossing hedge funds onto the bonfire of the vanities.

Watch for a surprise trading house that slithers out of the dark pools to vampirically feed on the trapped shorts when the time comes. They won't be able to use stretchers to haul them out of the pits; they will have to use dust pans.

The actual timing of the event will be tough to forecast precisely. But we are getting closer.

What I find particularly fascinating about this chart is that it is such a good visual representation of the tension between the capping of price by paper shorting, the big line of resistance, and the steady rise in price driven by physical offtake, and the shrinking pool of physical supply against a growing demand for 'the real thing.' The shorts like JPM and HSBC can only push the price down so far using their paper tricks, but the metal keeps coming back.

23 June 2010

Gold: Cup and Handle Formation Update

This chart formation has been well behaved so far.

The dip today hit our target of 1225 right on the nose.

Let's see if the price can now consolidate and then begin its breakout.

Classic Example

NAV of Certain Precious Metal Trusts: GTU Closes Secondary Offer: Gold to Shine for Rest of 2010

The Central Gold Trust (GTU) shelf offering closed today.


TORONTO, Ontario (June 23, 2010) – Central GoldTrust of Ancaster, Ontario is pleased to announce that it has completed the sale of 5,730,000 Units of Central GoldTrust at a price of U.S. $48.90 per Unit to a syndicate of underwriters (the “Underwriters”) led by CIBC, raising total gross proceeds of U.S. $280,197,000. The Units offered were primarily sold to investors in Canada and in the United States under the Multijurisdictional Disclosure System.

The issue price of U.S. $48.90 per Unit was non-dilutive and accretive for the existing Unitholders of Central GoldTrust. Substantially all of the net proceeds of the offering have been invested in gold bullion, in keeping with the asset allocation provisions outlined in Central GoldTrust’s Declaration of Trust and the related policies established by its Board of Trustees. The additional capital raised by the offering is expected to assist in reducing the annual expense ratio in favour of all Unitholders of Central GoldTrust.

The new total of issued and outstanding Units of Central GoldTrust is 16,648,000. The investment holdings of Central GoldTrust are now represented by approximately 604,676 fine ounces of gold bullion, 6,156 ounces in gold certificates and approximately U.S. $16,980,360 in cash and short term notes.

I thought it was interesting that in response to a UBS poll, central banks and their ilk chose gold as the best performing asset for the rest of 2010, albeit with a minority of the respondents.
“Gold will be the best-performing asset for the rest of the year as investors seek to protect wealth from sovereign debt risks and economic turbulence...'So long as fears about global debt sustainability and sovereign risk remain heightened, gold will continue to rise,' London-based UBS analyst Edel Tully said today in a separate report. 'Against this backdrop, it is little wonder that nearly a quarter of respondents expect gold will be the most important reserve currency in 25 years’ time.'”

Gold to Be Best-Performing Asset for the Rest of the Year, UBS Poll Finds
Nothing is certain in the land where wealth and great fortunes rise and fall by fiat, and control frauds are a major facet of a national economy.

The FOMC will be announcing its decision at 2:15 EDT today. Benji and his Banksters are quietly strangling the US productive economy while taking very good care of the Fed's owners, the big banks, in a series of remarkable policy errors and some very innovative financial engineering. All the traders I know are watching that marathon match at Wimbledon, or the World Cup. No one seems to care what Ben has to say.

It was correct of Mr. Obama to sack General McChrystal for gross insubordination,, or quite simply, talking trash while drinking heavily to a Rolling Stone reporter.

Now if only Obama would give Timmy and Larry the boot for gross incompetence at the least, and replace them with the likes of Elizabeth Warren and Robert Reich, the US economy might gain some traction.

Let's see what happens.

SP 500 Futures and Gold at 10:30 AM

The Sept SP 500 Futures daily chart rolled over at big overhead resistance and has now fallen to support, retracing approximately 50% of its advance. Housing sales are falling dramatically according to this morning's economic reports.

Why this would surprise anyone is beyond me. Outside of the cheerleading the economy in the US is wooden, zombie-like, dominated by non-productive speculation and wealth transferal. It is becoming a textbook example of policy error for the next school of economic thought to come forward after this epic failure by the neo-liberals and their faux free market hypocrisy.

The SP 500 *could* fall to the bottom of that trading range which would take it down to 1050. However, JPM and Morgan Stanley have been appointed to get a General Motors IPO out into the market over the next week or so, which will help to relieve the US government of its 60+% stake in that company. So, while it may decline further, or find a footing here despite the news, I would not expect it to fall apart unless there is a big event or breaking news. They would really like to prop the market until they can get this pig out the door.

Gold was hit again by bear raids today. Make no mistake, this is what it is, and it is as we forecast. If one had hedges in place it did not matter, but it does serve to illustrate the shallow venality of this market, and the lax stewardship of the CFTC.

The economic news this morning was quite dire, and concerns about a 'double dip' will revive as the US enters its 'zombie-like' stagflation which is the natural consequence of policy errors and a failure to reform.

How can a country being run by gamblers, control fraud operators, corrupt politicians, and the idiot sons and shills of decrepit oligarchs (W Bush, Clinton, Obama, Palin for example) possibly turn around without a serious reform and change in regime, and a return to the fundamentals that made it great?

This is what Americans voted for in the last election, and they were cheated, and rightfully feel betrayed and disappointed. Change will still inevitably come, but such changes are historically fraught with risk. Other ways will be sought to further distract a restless public. Change and progress will be resisted with a remarkable intensity by a powerful few, like men possessed. The drums of war are being beaten by those who never fight themselves, but feed their half lives off the misery of others.

And so we go into the future with fear and trembling.

22 June 2010

Silver Leaving the Comex As Investors Want to Get Physical

Dave from Denver reports that:

"On Friday 516,522 ounces of silver were withdrawn from the Comex from Brinks.

Yesterday another 1.6 million ounces were withdrawn from Brink's and HSBC. It all came from the "eligible" category, which is the investor silver being kept at the Comex. This means it wasn't the banks and SLV playing a "shell game" with their "fractional" silver holdings. This was real stuff leaving and going into real hands off-Comex.

This is a lot of silver leaving the Comex and at least the silver leaving HSBC is motivated investors taking physical delivery.

In the context of gold/silver holding up as well as it has so far this week (silver contract roll, options expiry Thurs, 2-day FOMC meeting), it would seem that the demand for actual physical delivery of gold/silver maybe starting to overwhelm the cartel."

Gold Daily Chart: Déjà Vu All Over Again

A glance at the chatboards and the technical analysts last night cast quite a bit of gloom over the precious metals and the gold chart in particular after the smackdown in price it received after hitting another new all time high. Even some normally steadfast analysts seemed to lose their nerve at that big red 'engulfing candle.'

It didn't help apparently to have noted last week that gold almost always gets hit in an option expiration week, to a great or lesser degree depending on the underlying contract's popularity and the distribution of puts and calls. (Note 1) And of course this is an FOMC two day meeting week as well. Benjy and his mutts are all about the confidence game these days, and Larry Summers is the hairy-knuckled persuader who can move markets and destroy wealth, at least in the short term.

Some of it is disinformation from traders at hedge funds who spread rumours to support their own positions. Some of it is the natural exuberance of those who are hopeful but long suffering from being on the wrong side of a bull market. Even worse are those who simply ignore the markets and pursue some misplaced theory or belief for which they are willing to sacrifice themselves, and hopefully you, if they can manage it.

If you look at this chart below, as gold climbs within 'the handle,' it tends to get hit at the top of the channel with bear raids and profit taking, and then finds a footing near the bottom as the shorts cover and the hot money moves back in. It has done this twice now most recently. Why it comes as such a surprise that it is doing the same thing again is tied perhaps to the memory span of the markets now, which is about a day. This is a day traders market overall, and this is not a good thing.

This does not mean that the price of gold cannot drop from here and go lower, or even break down through support and change its trend. But it does mean that it has not done so yet.

It appears highly probable, to the point that I will be happily surprised if it does not, that the price of gold will go back down to test that trendline support, and set a firmer low, shaking out more weak hands. But anticipating the market too much to the upside or the downside is how speculators lose their nerve, or their money, which is consumed by losses, fees, and commissions through over-trading. They overleverage, overextend, and then throw their positions away at highs or lows.

And as for all these hysterical 'forecasters,' so certain of what will come next, and most often repeating the same, tired memes at every opportunity, keep in mind the old saying, "The words of the wise considered in quiet are better heeded than the shouts of a ruler among his fools." Ecclesiastes 8:17

Listen to all worth hearing, especially inviting a diversity of informed opinion, but allow the market and your own calm reason to instruct your actions. There is nothing more powerfully wrong and corrosively dangerous to your money than self-reinforcing group thought. I have seen the evolution of this condition on many chatboards as moderators and powerful and persistent posters start suppressing, first through peer pressure and then through outright bans and censorship, even fact based dissenting thought, contrary judgements, and evidence not supporting their assumptions.

I do not know which way this market will go, up or down. I like to think that I know what to look for by now, and how to listen to what the evidence of the markets is saying to us. All the rest is discipline, perseverance, and money management. Most professional traders find their niche in some market inefficiency or informational asymmetry, and leverage it with their deep pockets, certainly deeper and better connected than yours. As an amateur you cannot hope to compete against them in their short term games. But pride and greed have a siren's song.

If you cannot make decisions and reason calmly when trading, then you are trading to lose, and should just stop it, now. This HFT-driven trading is THE worst market for cheap tricks and outright scams that I have ever seen. Even though they are stealing pennies, it is over millions of transactions, and it debilitates the trade. The silver market in particular is a shame, although we have seen similar manipulation in the energy markets by the likes of Enron for example, that brought one of the US' largest states literally to its knees. And still there is no reform.

Find some safe harbor and stay there, and stop venturing out in dangerous and unfamiliar waters. Better to take an adequate, modest gain than to suffer an immodest loss. You are just feeding the sharks, and they do not need the encouragement.

Note 1: On the Comex / Nymex, the metals options for the GC contract expire on the fourth business days prior to the underlying contract's delivery month. If that day is a Friday or the day before an exchange holiday, then it is the day before that. This is the 24th of June for the July contracts. There is something known as 'Asia Gold' and 'Asia Silver' that have a different expiry, but they seem to be an odd product designed to capture Asian business and has a metric specification and no volumes. For the US contract based options it is the 24th.

21 June 2010

SP Futures and Gold Daily Charts at 2:30 EDT: Smoke and Mirrors

The spike in the overnight futures based on the vague assurances from China to revalue the yuan higher, an obvious and strictly political move to pre-empt the discussion of their currency manipulation at the upcoming G20 meeting, was used to justify a classic 'wash and rinse' in the price of stocks, and bring in some coin for the needy Wall Street banks.

This is how the moral hazard of bailing out the Too Big To Be Banks has returned as an unintended consequence, strangling the real economy and the very markets which the bailouts were intended to save by taxing production and capital with the drag of a corruption tax that also has a dampening effect on efficient capital allocation.

The Banks, being fundamentally unreformed and insolvent, with failed business models based on fraud, are unable to make their expected outsized returns using conventional business means. With the mortgage and CDO ponzi scheme collapsed, they must resort to the more familiar soft control frauds in the capital allocation markets, creating and exploiting inefficiencies to support their unsustainable existence. Better that they would have been broken up and liquidated where necessary, rather than being saved without a structural reform.

No matter the rationales put forward, it was an act of political corruption in which the Congress and the last two Administrations are complicit. More and more wealth is being transferred out of the productive economy and into the hands of a financial elite that spends it in the non-productive accumulation of capital, high risk speculation, and hoarding incented by historically low tax rates for the very wealthy.

As I suggested last night, the spike higher in the futures was artificial, and worth fading to the short side. But while it stays above the trendline now around 1110 I would not lean on it too hard, since the threat of a snapback rally in the last hour is always there on these thin volumes. If it breaks down, we are probably heading down to the 1060 support in a roundabout way. The economy is floundering, with about half of US GDP dependent on fraud in financial assets and corporate accounting.

There is also an FOMC rate decision coming up on the 23rd, Wednesday, so we will see some artificial action around that. It is also the day that GTU closes its shelf offering which should take some of the pressure off the unit price.

Chart Updated at 5:00 PM EDT

As a reminder this is the option expiration week (June 24th) for gold and silver July contracts at the COMEX. Even so, the pullback in the price of gold is well within the range of the handle. Short term it is relatively easy to manipulate the price within a certain range of the primary trend, given the current state of regulatory capture at the CFTC. At some point the primary trend will take a much steeper slope as we head towards a commercial failure to deliver. But no one can accuse the people in New York and Washington of long term thinking when there are short term profits to be made, and campaign contributions to be pocketed.

Chart Updated at 5:00 PM EDT

Net Asset Values of Precious Metal Trusts and Funds in an Option Expiration Week

Although there will be plenty of commentary seeking some 'fundamental' reason for this pullback in gold and silver, I was looking for it, and noted last week that this week is the option expiration for the July contracts on the COMEX.

This is the kind of weakness I like to buy in adding to the 'long gold / short stocks' hedge I am running. It takes some guts but that is why we use charts to help take the emotion out of your decision and maintain a perspective. It also helps to ignore non-sensical forecasts and book-talking from chatboards and analysts who live in perpetual fantasies that come alive periodically when the market gives them a random nod. If you really want to see the worst in human nature, become a trader.

It really is that obvious anymore. Words like 'malfeasance' or at least 'nonfeasance' in office come to mind when considering the regulators at the CFTC and the SEC, their bosses, and the appropriate oversight in the Congress.

When there is a default on delivery, as I suspect there will be, I would hope that the usual 'non-involvement' and personal incompetency defenses will not be so easily accepted by a long-suffering public.

As a reminder, the GTU shelf offering closes on June 23.

20 June 2010

SP Futures Up Sharply on 'Hopes of Chinese Yuan Strengthening'

While the SP 500 stock futures are indeed up about 15 handles, you'll forgive me if it seems like the rationale for this rally at a key resistance point is as thin as its volumes, or the integrity of its governance, and as contrived as the great reformer himself.

It looks like a fade, but we'll have to wait for tomorrow. Sometimes the trading desks and hedge funds like to probe higher in thin trade to find out where the stops are, and their position size, to determine the cost of a breakout, or a breakdown. You know, like the flash crash which the US capital allocation system most recently enjoyed.

US STOCKS-S&P futures surge at open after China's yuan move
Sun Jun 20, 2010 6:14pm EDT

NEW YORK June 20 (Reuters) - S&P 500 stock index futures rose sharply at the start of trade on Sunday as investors bet China's announcement over the weekend to make the yuan more flexible will lift sales at U.S. multinationals over the long-term.

The rise suggests indexes will open higher on Monday and follows a strong start of trade for the Australian dollar and euro as China's move signals more yuan appreciation and was taken as a vote of confidence in the global economic recovery's staying power.

The revaluation will effectively increase the purchasing power of Chinese buyers and "the best bet would be for commodity-based companies and consumer goods companies," said Tom Sowanick, chief investment officer at Omnivest Group in Princeton, New Jersey earlier on Sunday.

S&P 500 futures SPc1 jumped 13.80 points to 1123.90 and were well above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract.

Happy Father's Day

4 years: My Dad can do anything!
7 years: My Dad knows a lot…a whole lot.
15 years: My father does not know quite everything.
18 years: Father is so old-fashioned.
21 years: Oh, that man - he thinks he knows but he doesn't.
25 years: He knows a bit about it, but not much.
30 years: I might find out what Dad thinks about it.
35 years: Before we decide, we will get Dad's idea first.
50 years: What would Dad have thought about that?
60 years: My Dad knew literally everything!
65 years: I wish I could talk it over with Dad.

Not everyone has had a good and loving father. It is easier for a man to have children than for children to have a real father. And even if you had a good one, a great shock awaits when you realize that one day, no matter how badly you wish to speak with him, you can't; it is not possible.

And yet you do, and you can.

"Because you are his children, God sent the Spirit of his Son into our hearts. He is the Holy Spirit. By his power we call God, "Abba." (Αββα) And Abba means 'Father.'"

"Abba, Father," he said, "everything is possible for you. Take this cup from me. Yet not what I will, but what you will."

US Ceding Parts of Arizona to Criminal Activity, As It Has Been Doing in the Financial Markets

This situation is an analogue to the US economy, where increasingly larger portions of the financial markets in the US are being ceded to white collar fraud and manipulation by the gangs of New York. The problem is not with law enforcement per se, but that the basic functions of government are being overwhelmed by inept and corrupt lawmakers and regulators, the powerful rule of special interests, and a general lack of concern and disdain for the needs of the ordinary citizens. These are the root cause of the failures of government in the US.

This is not a problem of Republicans versus the Democrats. It is the age old problem of the avarice of an oligarchy of the self-proclaimed elites against the rights of the private individual, and the common people.

"From whence shall we expect the approach of danger? Shall some trans-Atlantic military giant step the earth and crush us at a blow? Never. All the armies of Europe and Asia...could not by force take a drink from the Ohio River or make a track on the Blue Ridge in the trial of a thousand years. No, if destruction be our lot we must ourselves be its author and finisher. As a nation of free men we will live forever or die by suicide."

Abraham Lincoln
"In a press conference ignored by the American national media, the sheriff described how his deputies were outmanned and outgunned by the cartel smugglers who increasingly operate using military tactics and weapons. The result, said Sheriff Babeu, was that a wide corridor of Arizona from the border North to the outskirts of Phoenix is effectively controlled by the cartels. "We do not have control of this area," the sheriff said.

At the same time as the sheriff's ignored press conference, the national media did cover assurances from the Obama Administration that crime was down at the border; that the border had never been safer. This ludicrous propaganda was based on selected crime stats from San Diego, Phoenix, Austin and San Antonio. The new reign of terror on the border in Arizona was airbrushed out of the picture.

Here's the real picture Obama does not want you to see. Warning signs were posted this past month by the federal government 80 miles North of the border on the South side of I-8 between Casa Grande and Gila Bend urging U.S. citizens not to camp or hike in the "Active Drug and Human Smuggling Area" because "Visitors May Encounter Armed Criminals."

Read the rest of the story at Crossing a Dangerous Threshold by Michael Panzner.

It is not a question of financial stimulus or fiscal austerity, which are a meaningless debate intended to distract attention from the much more serious problem. The fundamental issue is the enforcement of the laws, the administration of justice, the upholding of the Constitution and the Bill of Rights, and the reform of the financial markets and the economy. All things, all policies, are turned to foul ends while the system is driven by a fundamental corruption.

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

18 June 2010

Gold and Silver Option Expiration Dates Remaining in 2010

Not all expirations are equally influential on the markets. As in the case of stocks it depends on the popularity of the contract, and of course the size and distribution of puts and calls at the various strike prices.

Investors can ignore these 'wiggles.' I tend to keep them in mind for entry and exit purposes for non-futures positions, and potential hedging in my trading portfolio.

Gold, Silver, and SP 500 Futures Daily Charts

Gold made a new all time high on the weekly close, and the handle is now broken to the upside. Some have been trying to spot a rising wedge in this handle formation, but as you can see it is more of an uptrending channel, as the cup and handle dominates the longer term chart. There is plenty of room for another retracement, and do not expect this to be easy. The premiums on the trusts and funds are low, and there is quite a bit of stubborn bearish sentiment.

Silver is trying to break out above resistance around the 20 level. I suspect it will do so fairly soon.

It is obvious that the SP 500 needs to move higher to break out of this diagonal trading range.

There are so many cats out there talking their books that it is no wonder that the average investor prefers to sit on the sidelines. They do not know whom to trust or believe even on the basics f the economy.

Official Gold Reserves As of June 10, 2010, and Truths Yet to be Told

It is important to remember that these are the 'official' numbers. And it does not show how the reserves are 'encumbered' by leases and loans.

For example, there is circumstantial evidence that the Reserve Bank of Australia loans up to 100% of its gold reserves to the bullion banks who subsequently sell it, and then 'owe' it to the Bank and the people of Australia. The trick of course is the significant counterparty risk in the event of a serious short squeeze.

And they are not the only ones. Since this is an asset owned by the people, a timely and transparent accounting by the Treasuries and the Banks is something that the people of every nation obviously deserve. Whether the financial engineers, who enjoy experimenting with Other People's Money and doing favors for their private sector cronies, will ever willingly provide that information is another story altogether. It will almost certainly be under force of law, or an independent audit.

World Gold Council
Official sector gold reserves as at June 2010

European central banks sold virtually no gold over the past quarter, save a small amount for minting gold coins. Total sales by European central banks have amounted to just 1.8 tonnes since the third central bank gold agreement began in September of last year. The only sales of note made via CGBA3 have been by the IMF, which has sold 38.7 tonnes since mid-February. We expect the IMF to sell at a similar pace this quarter.

Outside of the agreement, the main purchases reported over the last quarter have been by Russia and the Philippines, both of which have long-standing gold buying programmes. The Central Bank of Russia bought another 26.6 tonnes of gold over the past quarter, taking its total gold holdings to 668.6 tonnes or 5.5% of its total reserves, and remains the 9th largest official sector gold holder. The Philippines central bank bought 9.5 tonnes of gold in March, taking its gold holdings to 164.7 tonnes or 13.7% of total reserves.

The Saudi Arabian Monetary Authority reported last quarter that “gold data have been modified from First Quarter 2008 as a result of the adjustment of the SAMA’s gold accounts”, meaning SAMA’s gold reserves are now reported to be 322.9 tonnes or 2.8% of reserves, from 143 tonnes or 1.2% previously....

What Have They Been Doing Since the Financial Crisis Began?

"China is considered a stealth buyer of gold, said Boris Schlossberg, director of currency research at Global Forex Trading. As the world's largest producer of the metal, China often buys gold from its own mines and doesn't report those sales publicly. But in April 2009, China did admit to having added 454 tonnes, or a 76% increase, to its reserves since 2003.

Analysts suspect the country is continuing to buy gold and could in fact, be the world's largest buyer consistently. It simply doesn't reveal it's pro-gold stance proudly, however, because China is also the world's largest holder of U.S. Treasurys.

Announcing an aggressive gold buying spree is not in China's best interest because, for one, it might push gold prices higher. Secondly, it could devalue the U.S. dollar, which would subsequently lessen the worth of the country's portfolio of U.S. government bonds, Schlossberg said."

Central Banks Join Gold Rush - CNN

Just as there are stealthy buyers, how can one refuse to acknowledge the body of evidence that there are also stealthy sellers, hiding behind official secrecy, derivatives arrangements, leases, and accounting frauds that will shock and anger the real owners of the assets when their hidden and conflicted dealings with their cronies in the private banking sector are revealed?

Anyone at this point who says that the Fed would never engage in such obviously compromised and conflicted transactions, and then go to great lengths to hide them, has either not been reading the real news, or is as compromised as the central bankers and their cronies in government and the mainstream media are, morally and intellectually.

And if they will allow the equity markets to be manipulated, as any even modestly sophisticated trader with decent access to tools must now recognize and admit, why would they hesitate to enable and encourage the manipulation of the sovereign bond markets, and those markets that affect them, which are by far the most important markets of all?

The world is not big enough for them to find a place to hide from justice after the truth is revealed. So they will lie and obstruct, extend and pretend, increasingly desperate for power, corrupting all that is corruptible, until the very end, and the final downfall and collapse. And then will come the crocodile tears, and the claims of ignorance, and finally weak apologies that they thought they were doing the right thing, but were honestly mistaken.

Such is the case in all control frauds, white collar crimes, official corruption, and Ponzi schemes.

The banks must be restrained, the financial system reformed, and the economy brought back into balance, before there can be any sustained recovery.

Net Asset Value of Certain Precious Metals Trusts and Funds

The Central Gold Trust shelf offering will complete next Wednesday, 23 June.

On fading Jeff Christian and Jonny Nadler

Stay thirsty my friends.

17 June 2010

SP 500 Futures Daily Chart and Gold Sets Handle and Moves Higher

Charts from 10:30 New York time this morning. As a reminder tomorrow is the stock options 'quad witching' expiration.

Stocks look overdue for a pullback, with 1100 providing a key support, and below that around 1090. We're back on the 'short stocks / long gold' trade as of yesterday, believing that the stock rally was artificial and support for the IPO's rolling out under the careful guidance of Mother Goldman.

"In today’s exchanges, strong programs prey on weak ones, humans are hard to find, and the SEC struggles to keep up."

Monsters in the Market, the Atlantic, July 2010

The 'handle' on the gold chart is very well defined, and gold is making a strong move higher this morning in an attempt to break out. I do not suspect it will be successful so easily, but once it does it may gap higher overnight and then say goodbye to these price levels. There are powerful interests which do not like to see gold move higher just yet, because it creates doubt in their financial engineering. Larry Summer's documented this effect in his paper on Gibson's Paradox. Greenspan was right so many years ago when he said that statists hate gold, because it provides a safe haven for the individual, and a stumbling block to the powerful.

Net Asset Values of Certain Precious Metal Funds and Trusts

The premium on GTU continues to be compresses because of the large secondary offering of units. That should be completed on June 23. We would expect the premium to revert to the mean, closer to 8%, once the shares are sorted out.

NAV Added later, as is indicated by the time stamp.