28 February 2011

Gold Daily and Silver Weekly Charts


Antics intraday with a funny kind of a bear raid in silver that also hit a couple of the mining stocks exceptionally hard. I actually stepped in and bought some mining positions from my watch list because the prices became almost silly, and the volume indicated selling motivated not for profit but for a lower price. I can surmise that some of the new regulations intended to constrain naked short selling of non-SHO stocks are making some of the fundies 'edgy.'

Trapped shorts are often creative in their desperation. And of course the TBTF giants have huge daily needs, and in these thin markets it becomes harder and harder to make the standard plays pay. Just look at what the easy spreads drying up led Bernie Madoff to do.



This is the first delivery week for silver and the Comex shorts are squirming.

Stand and deliver, or as the famous bear Daniel Drew once said:
He who sells what isn't his'n,
Must buy it back, or go to prison.

Unless of course you have blind regulators, ETFs, and an exchange always willing to facilitate cash settlements for their friends.

Still, all in all, the noose appears to be tightening.




SP 500 and NDX March Futures


Thin market, light volumes, hollow rally, liquidity driven.

It is quite important to remember that the market's price is set at the margins, and the distribution of the marginal price is not uniform.

What more can I say?





American Monster: Excerpts from The Madoff Tapes



“It’s unbelievable. Goldman … no one has any criminal convictions—the whole new regulatory reform is a joke. The whole government is a Ponzi scheme.”

Here are some brief excerpts from a story in New York Magazine called The Madoff Tapes. The story runs to nine pages, so consider this just a taste and read the whole thing when you have the time. I thought Steve Fishman did a terrific job of letting Bernie talk and of presenting his thoughts in a orderly manner without a lot of interpretation and editorial intrusion. He has real talent as an interviewer, and seems a natural reporter.

But while you read this bear in mind that you are seeing reality interpreted through the eyes of Madoff, a master manipulator and pathological liar, an individual perhaps in deep denial, but the question is, to whom.

His psychiatrist in prison tells him he is not a sociopath because he has remorse. I think his major remorse is that he was caught. The article implies that he is a narcissist. I think he is all of the above, and much, much, more.  

Always full of self-pity and the quick deflections of a classic con man, he seems to blame his corruption on the failure of his father's business, and a personal vow never to let it happen to him, a resolve that became an obsessive compulsion.   Besides, everyone was doing it.  He just did more of it, more quickly and with an automated efficiency that turned into raw fraud when the easy gains evaporated.   It is a microcosm of the US financial sector today.

Sometime in the future someone is going to do a thorough analysis on what was common in the background of these fellows who were drawn to Wall Street in the 1980's and beyond, and what made them the way they are. But we can discover what set them free to do their worst, and that was the undermining of regulation, of the government, and the 'regulation is bad and greed is good' meme that has brought an entire society to its collective knees in a number of countries. Once the monied interests have traction with the government the corruption gets rolling and the feeding frenzy begins.
“Our government teaches the whole people by its example. If the government becomes the lawbreaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy.” Judge Louis D. Brandeis
At times Bernie Madoff sounds like a less articulate version of a former Fed Chairman, that is, less able to rationalize his way, with a prideful sneer, out of nearly anything and everything, with a practiced verbal acuity and evasiveness.

I think he is emblematic of an empire in decline, a decline that found a voice and became respectable with Thatcherism and Reagonomics, and into full flower with the repeal of Glass-Steagall and the undermining of the regulators, in a campaign led by a few New York bankers using plenty of lobbying money and sophisticated public relations campaigns, with the resulting institutionalization of fraud and mass plunder by the financial interests that continues today.  No one wants to be the one eyed man in a land of those blinded by greed, especially when the greedy are holding most of the carrots and the sticks.  So even the seeing pretend to be conveniently blind.  Go along to get along.

The only difference between Madoff and many of the others like him on the Street is that Bernie ran out of rope, and was caught. The others seem to be hanging on and are trying to bluff their ways out of similar predicaments by keeping the game going, at any cost to the country, unto the destruction of the dollar and bond, the misery of families, and the pure corruption of all that has made America great.   It is almost never the money; it's the will to power, and pride.

The rationale will be like the one offered by Madoff: a cheap apology, a spreading of blame to everyone and therefore to no one, the enablers and beneficiaries knew something was wrong, and they took the deals anyway.   There will be other lower level financial men offered up to the the law as a diversion for the crowd, and if is gets worse some of the oldest scapegoat cards in history may yet be played, an unforgivable act.  And it will be a shame, because the men behind the scenes will live on to roll out their frauds once again on a new generation of the unsuspecting.


New York Magazine
The Madoff Tapes
By Steve Fishman

“How could I have done this?” he asks. “I was making a lot of money. I didn’t need the money. [Am I] a flawed character?”

“Everybody on the outside kept claiming I was a sociopath,” Madoff told her [his prison therapist] one day. “I asked her, ‘Am I a sociopath?’ ” He waited expectantly, his eyelids squeezing open and shut, that famous tic. “She said, ‘You’re absolutely not a sociopath. You have morals. You have remorse.’ ” Madoff paused as he related this. His voice settled. He said to me, “I am a good person.”

As he [Andrew Madoff] tells friends, his rage at his father, far from dissipating, has metastasized. To friends, he’d described his father as a bully and a gifted manipulator. Madoff was a family man, yes, but to Andrew,  that was yet another manifestation of his narcissism. The family served the needs of Bernard L. Madoff.

I had more than enough money to support my lifestyle and my family’s lifestyle. I allowed myself to be talked into something, and that’s my fault. I thought I could extricate myself after a short period of time. But I just couldn’t.

From the beginning, Madoff, who’d moved to Queens at age 7, had a chip on his shoulder, along with a certain contempt for the industry [securities] he’d chosen. “It was always a business where you had to have an edge, and the little guy never got a break. The institutions controlled everything,” he said in a voice surprisingly thick with emotion. “I realized from a very early stage that the market is a whole rigged job. There’s no chance that investors have in this market.”

By 2000, as spreads and profits were squeezed in the market-making business, Madoff had a chance to sell for $1 billion or more. But he refused. “As far as my sons and brother and my wife were concerned, they thought I was nuts for not selling out,” he told me. His family was “livid,” and he didn’t dare explain it to them. “I couldn’t at that time, because it would have uncovered this other problem [the fraudulent nature of his business] I had.” (Nice illustration of the credibility trap that now hampers the entire US economy from the top down - Jesse)

The boys had their separate spheres, but Bernie didn’t hesitate to get involved. “He didn’t have a filter,” as one observer put it. He’d say things to his sons that other employees thought shocking, even abusive. His version of an explanation was, “Because I said so.” More than once, the boys thought, 'He’s a bully.'

Later, they wondered what fraction of that love was sincere.  They’d always known their father was a master manipulator, one quality that had helped him succeed on Wall Street.

Madoff says that he waved red flags, issued caveats that should have been obvious to even an unsophisticated investor. “They were all told by me, ‘Don’t invest any more money than you could afford to lose. This is the stock market. There’s always stuff that can happen. Brokerage firms can fail. I could go crazy and do something stupid. If you want a [safe thing], put your money in government bonds. So everybody understood this. “Everyone was greedy,” he continues. “I just went along. It’s not an excuse.” In his mind, the hedge funds and the banks were little more than marketers, skimming their 1 to 2 percent off the top, a fee for their supposed “due diligence,” though they exercised little oversight. “Look, there was complicity, in my view,” Madoff told me.

Through the nineties, Madoff dreamed of climbing out of the hole he’d dug. “I kept telling myself that some miracle was going to happen or that I was going to be able to work my way out of it. I just didn’t know when that was.” By around 2002, he realized this was a fantasy. “By then, the number was so astronomical I didn’t know what I was hoping for, quite frankly.” So he continued. The scheme demanded endless funds. Money flowed out almost as quickly as it came in, at points.  (A certain global reserve currency comes to mind - Jesse) 

And then the family that had for so long been a source of pleasure and support was gone. The boys had cut off their mother—a situation for which Madoff blames the lawyers but which was also the boys’ preference.

He sees himself at this stage as a kind of truth-teller. He has disdain not only for the industry but for the regulators. “The SEC,” he says, “looks terrible in this thing.” And he doesn’t see himself as the only guilty party on Wall Street. “It’s unbelievable, Goldman … no one has any criminal convictions. The whole new regulatory reform is a joke. The whole government is a Ponzi scheme.”   (Name some names Bernie if you have true remorse, and wish to be remembered as anything except a fraud and cheap con man - Jesse)

A Microcosm of the Market Manipulation in the US and the Repeated Failure of Ideology


I am seeing this same sort of 'gaming the markets' across many markets and stocks that the author notes below, especially in those markets amenable to leverage and electronic manipulation such as indices driven by futures, options markets, and ETFs which more closely resemble carney games than investment vehicles.

There has always been some element of this, but it is starting to become predominant and is driving out the honest trade and investment which cannot compete, in the same manner that the mortgage frauds corrupted and distorted a major sector of the economy and drove out conventional investment, regulation, checks and balances, regulatory oversight, and finally common sense.

It is getting to be a bit much, and is going to end badly. It will end badly because, like the shadow economy which has been crafted by the same makers, it is hollow, a facade, set up for the benefit of a few who transfer wealth to themselves from the many. As someone wrote to me today:
"There aren’t really many good options for people who just want to save some money for retirement and live their lives in the meantime. Not even social security or pensions for 30-year veteran teachers are safe from pirate raids and partisan deconstruction. Everything else available to the ordinary retail and retirement saver has become a Wall Street killing floor."
This is no accident. This is no error in judgement. This is not philosophy. It is a calculated white collar crime, that has co-opted many elements of society. It hides behind slogans like 'small government' and 'libertarianism' and 'free markets' but its real intent is to subvert the law and corrupt the processes of the economy and society. It is a type of financial coup d'etat.

The problem is not that there is too much government, but rather, the government which you have is tainted with corruption and needs a thorough cleaning and reform. Knock down all the fences if you will in the name of an unsustainable ideal, and give the ravening wolves free range for their plunder. And then be surprised.

Anyone who believes that not enforcing the rules, or even simply eliminating them, will result in the natural and efficient flow of productive activity has never driven on a modern freeway. This notion is just another version of a belief in the noble savage, the view that people are naturally good and rational, but are corrupted by rules and society. And those people who espouse this think that they are cavorting in some magical world with Peter Pan, instead of with some of the oldest and basest forms of evil against which good people have continually come together throughout history for their mutual protection.

And when the next financial crisis comes along, perhaps the people will not be so complacent and gullible, and see the real culprits behind the ideological scapegoats and fog of talk show hosts. But I'm not betting on it.

From FMX Metals Connect

Editorial comment: It’s becoming increasingly annoying watching dealers buy calls and sell puts the day before we rally $20, and then the next day buy put and sell calls before we drop $20.

Yesterday’s sell off from the 1415 area seemed almost orchestrated. At the very least, the futures selling came in during the thinnest trading hours.

While exchanges herald the benefits of electronic trading there is one thing wrong with it. Electronic trading minimizes the information leakage associated with using brokers, for sure, but it is also allows oligarchic organizations to anonymously manage price movement while hiding behind digital displays.

We won’t use the word manipulate, in part because of our libertarian bent, but it’s getting ridiculous. Where there used to be 50 5-lot thieves on the floor now there are five Too-Big-To-Fail banks with infinite fed-sponsored balance sheets doing whatever they please. The idiot locals on the floor, fragmented as they were, served to keep the big banks in check because there was transparency of price and to a large extent, the players were known.

This doesn’t exist anymore and we don’t see an end to it. Instead of thinning the forest for the trees, technology, regulatory and economic factors have killed the saplings and destroyed market diversity. This translates to a narrow and deep liquidity pool in trading venues; god forbid if one of them fails.
Never fear. The Big Banks will remain on the Fed's dole, and will be receiving nearly continuous bailouts until the currency and the bonds are exhausted, if things go according to plan. And then the reivers will move on.

25 February 2011

Gold Daily and Silver Weekly Charts - Bear Raid Confirmed and the Silence of the Lambs



A Simple Economic Solution to Hunger, Poverty, and the Problem of the Poor
An old woman came down this way,
She had no bread left to eat they say,
The bread was gobbled by the corporate men,
And she fell in the gutter in the cold and rain,
And was never hungry again.

At that the birds in the forest fell silent,
On every treetop is rest,
In every hilltop can be heard
Barely a breath.


The medical examiners came down this way,
'She is not just putting on,' they say,
The starved old woman was buried six feet deep,
And was never heard from again.
And the examiners smiled for the corporate men.

And the birds in the forest fell silent too,
On every treetop is rest
In every hilltop can be heard
Barely a breath...


Bertolt Brecht, Liturgie vom Hauch, 1927

The CFTC is accepting comments on the silver positions and market structure at the Comex. You may read about it and perhaps comment to the CFTC here.

From the quick bounce back it does appear that the big flash crash in silver in late day thin trading was a bear raid after all. We will know more when the Comex releases final numbers.

I had taken the opportunity on Thursday to buy the dip in silver at its gut wrenching bottom rather heavily, and with positions of leveraged instruments a little less ordinary. Most of those were sold today for a profit, and one must look forward to next week to see which way the markets wish to go. Monday is 'first delivery day' for the current contract and the ugly negotiation for cash settlements will begin in earnest.

The raid yesterday may have been a negotiation tactic. It certainly was a cheap and tawdry affair, obvious to all but the most willfully blind, and those in silent complicity. With the volume drying up in the markets making one's quota on the trade desks must be getting increasingly difficult.

It reminded me of playing a game with the little girl, who cheats in the most clumsy and obvious ways, thinking herself very clever. And if she loses, she complains and pouts incessantly until you cover her losses. Rather like the American crony capitalists, I think.



This goes out to the Boys on the Prop Trading Desks. Nice try this week, but kind of pitchy. And you definitely got no soul.



And as always, for Blythe. Thanks for breakfast, sugar bun.



A Special Request, Going Out To Max Keiser's Silver Liberation Army (SLA).
Stand and Deliver Next Week, Comex Bitchez...



SP 500 and NDX March Futures Daily Charts - US$ In Trouble



John Williams of Shadowstats provides some interesting insight on the Dollar even as the US equity markets continue their levitation.
U.S. Dollar Losing Its Safe-Haven Status? With political upheaval surfacing in the Mid-East and North Africa, global capital increasingly has been moving into traditional safe-haven investments such as precious metals, or into safe-haven currencies such as the Swiss franc. What is of particular significance here is that flight capital has been seeking shelter outside of the U.S. dollar, which for decades had been the favored safe-haven currency. Against the U.S. dollar, the Swiss franc – another traditional safe-haven currency – hit a record high in the last day or so. Other than for the British pound, the U.S. currency has been losing exchange-rate value against the other major currencies (Australian dollar, Canadian dollar, Japanese yen and even the euro) during this period of mounting political instabilities. Gold has neared its all-time high, while silver recently has set a multi-decade high.

Oil prices have spiked in response to the various crises, adding further upside pressure to U.S. consumer inflation from oil supply fears and ongoing dollar weakness. As with the dollar-debasement efforts of the Fed, these inflation pressures reflect factors other than strong economic demand.

At the same time, the fragility of the faux U.S. economic recovery is becoming more obvious to the markets, with economic data increasingly surprising consensus forecasts on the downside, as seen in this week’s home sales and GDP revision reporting. In the months ahead, an intensifying “renewed” decline in broad economic activity should gain increasing market recognition.

Irrespective of whether the political turmoil spreads or dies down, irrespective of Saudi efforts to help contain panicked oil price rises, irrespective of short-lived fluctuations in exchange rates and precious metals prices, the U.S. now stands at a point where it is particularly vulnerable to an evolving global loss of confidence in the U.S. dollar. Heavy selling of the U.S. currency and panicked dumping of dollar-denominated paper assets, which could trigger U.S. financial market upheaval and the early stages of a hyperinflation, is possible at any time with little or no warning. It could be triggered by an unhappy economic or political surprise, or otherwise. Where risks remain high of U.S. financial turmoil unfolding in the months ahead, the onset of a hyperinflation still has an outside timing estimate of 2014.



Do You Need To Buy a Vowel? M_NETIZATION


Global Economic Recovery Plan 'B' - Seek Safe Havens For the Elites, Ignite the Derivatives, and Then Wait a Couple of Decades...



Prospects for US Banks and the Economic Recovery



The reason for the bailouts and the debasement of the currency is not to promote an economic recovery in the US. Far from it.

The objective is the same as it is in other countries around the world dominated by monied interests, such as Ireland.

The purpose is to save the banks and their bondholders, and the financial status quo. To this end the peoples' interests will be sacrificed if they allow it.

The US government is caught in a credibility trap. They cannot inspire confidence and re-establish the soundness of their economy, because they are not able to make the necessary reforms that would actually justify such a renewed confidence, to make it credible and real.

They cannot make these reforms because to do so would shatter the facade of the status quo which is corrupted and complicit, and includes far too many of them both directly and indirectly. This they fear more than anything else.

So they try to bluff their way out of it, hoping for a break, engaging in even more fraud and deception and debasement. And the financial looting continues while the real economy declines and the ordinary person suffers.

And it is working, because some vocal portion of the public shows itself to be easily led by slogans, faux news, financial carnies, and the manipulation of their lowest emotions, even to their own destruction. And the rest seem too often dulled by apathy and diversion.







24 February 2011

Gold Daily and Silver Weekly Charts - Empire Strikes Back



“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public..." Adam Smith

Today's intraday commentary on the silver bear raid is here, Silver Bear Raid and the Infamous Dr. Evil Strategy.

Absent news it looked like a very heavy handed effort to game the markets. But lets wait to see if the CFTC can shed any light on it (uh huh).

The Fed doesn't like it when commodities start rising in response to their financial engineering and 'money printing.' It makes them look bad.



Eric Sprott: The Government Lied... There is No More Silver.


SP 500 and NDX March Futures Daily Charts



“I have never known much good done by those who affected to trade for the public good.” Adam Smith

Support held, and there was a bounce in tech.

The close into the weekend tomorrow will be the real test.




Silver Market Hit Hard With Bear Raid - The Infamous Dr. Evil Strategy


Yesterday I said:
"Today was the option expiration on the Comex, and those options which are 'in the money' and have not been settled for cash are now converted to March futures positions.

Depending on the size and distribution of those conversions we may see some 'action' in the front month because they are sometimes notoriously weak hands and will receive at least one 'gut check.'"
And a gut check to run the stops was very obviously delivered in the afternoon trading session at the Comex and across the monthly contracts.

This is remniscent of the 'Dr. Evil' strategy that got Citi warned and fined in Europe a few years ago. Memories of Citi's Eurobond Manipulation At the time one of the defenses offered by an ex-pat trader was 'in the US everybody does it.' Has JPM taken up the trading strategy that Citi once made infamous? And why would banks be trading for themselves in markets with players they help to finance, and with public money?

Large players can come into a relatively small market and drive the price by selling in size, running the stop loss orders which they often can 'see' through probing orders and positional advantage, and essentially bomb the market, manipulating the price in the short term to their advantage. The profit is made through derivative and correlated bets that depend on the price of the metal, index, or bond such as shorts on mining stocks, currencies, bonds, etc.

This is why the 'uptick rule' in stocks served a purpose, and why regulators are in place to keep an eye on big players with deep pockets and a far reach. In a properly regulated market the CFTC would immediatly pull the trading records for today and track the big sellers, and inquire as to the reasons for their sudden selling in a quiet market.

It *could* have been a hedge fund margin call. It could even have been a margin call provoked by a bank tightening credit lines with one hand while playing the market with their other hand. There were rumours being spread all week keying in on the day after expiration.  I do not have any inside information, no special knowledge, only the advantage of experience and a watchful eye on the markets.

And so there it all is. I was ready for it. I may or may not make money from it, but at least I had flattened my positions as I had said earlier this week and did not lose from it. But it sickens me to the heart nonetheless, to see a once great government fallen so low.


23 February 2011

Gold Daily and Silver Weekly Charts - Blythe Might As Well Be Walkin' On the Sun


Today was the option expiration on the Comex, and those options which are 'in the money' and have not been settled for cash are now converted to March futures positions.

Depending on the size and distribution of those conversions we may see some 'action' in the front month because they are sometimes notoriously weak hands and will receive at least one 'gut check.'

The trends remain as they are, without regard to the short term 'wiggles.'

I made the call for gold, and slightly thereafter silver, based on a fundamental analysis of the US economy and the actions of the Federal Reserve. This was when the prices were 275 and 4.50 respectively. I see no reason to change anything yet.

When the fundamentals change and information becomes more universally disclosed, then the market will clear and reach stability. Until then the safe havens from the dollar credit bubble will continue to go higher in spite of the gimmickry and perception management of the monied interests and their financial engineers. They have been caught with their hands in the cookie jar, and are trying to bluff and rationalize their way out of it to their personal benefit, as they have done throughout their lives.




SP 500 and NDX March Futures Daily Charts


Here comes the most important test for US equities, for the rest of the week and especially over the weekend.

They have fallen to levels that have typically sparked a new round of buying in this protracted liquidity rally for another melt up higher on thin volumes.

The end of this will come, but perhaps not yet. The market must tell us what is hidden and must be revealed.




Taibbi: Why Wall Street Isn't In Jail - Video Interview


This strikes to the heart of what I have called the credibility trap.

The US government cannot effectively deal with the financial crisis and the required credible reforms because in fixing the problems they would necessarily expose the underlying fraud, and endanger the very powerful status quo that funds them and their political campaigns.

This is more difficult to manage than a liquidity trap because the very means of remedy have been co-opted. The doctors caused the illness, and cannot pursue a cure without admitting their malpractice, which may not have been done in simple error but with complicity.

So this malaise and period of selective recovery will continue until there is a another, more destructive crisis that finally clears away the fog of corruption.  Or there is some exogenous event to distract the people to some other problem, to change their focus. 'Never waste a crisis' as they say in the Washington Beltway.




A Thought on Recovery, Reform, and Events of the Day



"It is not those who advocate, but those who prevent, stabilizing transfers of purchasing power, who are the true Marxists. These self-styled capitalists do not espouse Marx’s theories, but they do something much worse: They perform them. They behave in precisely the way that Marx expected capitalists to behave. They cripple the American system’s greatest strength — its ingenuity, flexibility, adaptability. They prevent the sort of collective action through which earlier generations proved that capitalism could made be consonant with decent, stable, and broadly prosperous societies. In doing so, they risk proving Marx right."

Steve Randy Waldman said this here and I think he is brilliantly right. This is becoming less a struggle to recovery as it is an obsession with personal greed and the will to power gone horribly wrong, corrosive to social structure through corruption, and veering towards the dangerously self-destructive.

Are fellows like Governor Walker of Wisconsin and his backers the Koch brothers 'performing Marxists?' lol I have often wondered if Greenspan was a Randian fifth columnist leading fiat money to its ideological conclusion, but certainly not a Marxian.

Or could it just be that current events and crises bring out and show us who we really are, and hopefully, offer to change us? Those who hold other people in contempt are ever more contemptible, the would be masters ever more deceitful, and obsessive greed leads the few into rough hands and dark cellars. How much wealth did Mubarak and Gaddafi really need after all? Is there not some pathology clearly in evidence with these man-gods, and even in the minor deities on Wall Street? Sad little boys and broken men become dark spirits, seeking to fill the hole in their beings with things, people, all possessions without savour, a wreckage of devices. And even more sad the husks and shadows of people, never at peace, who follow after in their wake, like swirling leaves pulled fitfully along with the wind.

Hell is truly the inability to feel love, empathy, and compassion, knowing the price of everything, but the value of nothing.

Strange days, I am sad to say. Change is in the wind, and is starting to blow like a hurricane, as cycles come round again.

"Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity...
And what rough beast, its hour come round at last,
Slouches towards Bethlehem to be born?"

W. B. Yeats
Both austerity and stimulus will falter in the mire of imbalanced, broken systems and corruption. The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustained recovery.

22 February 2011

Gold Daily and Silver Weekly Charts - Empire Strikes Back



"You must unlearn what you have learned." Yoda

Did we mention that this is an option expiration week at the Comex? Tomorrow is the day.

Silver was reaching for a definite high note while Uncle Thug was on vacation yesterday. And the sell off in equities helped to shake it back down on profit taking to the strong hands. So far normal market action.

If you do not care for volatility you will not like silver. It is tough to sit it out, because if there is a break in the commercial positions known as a 'commercial signal failure' the price could easily go up several dollars per day.

In this case given the insiders who are short, and the semi-official backing which I suspect they have, I doubt they will fail all at once, but in stages and over time, and so the price will continue to creep higher until the market clears.





SP 500 and NDX March Futures Daily Charts



"To anticipate the market is to gamble. To be patient and react only when the market gives the signal is to speculate."

Jesse Livermore

Well I have to confess to a little more than speculation perhaps, as I read a signal from this market that it had reached bubble territory, and that the 'rally' into option expiration last week was hollow, and went heavily short US stocks into the close on Friday.

Flat now, and waiting for the market to tell us which way next. The support is fairly obvious. I will be looking at the short term indicators later on.  So far we do not have a general 'sell' signal on more than the short term.





20 February 2011

Gold and Silver Options Expiration At the Comex This Week


As a caution, not all option expirations are created equal, in terms of the shenanigans and market moves that they precipitate.

The breakout in gold and silver came off an option expiration.


19 February 2011

Silver Bankers May Be Sitting on Big Derivatives Losses and the Fed May Be Funding Them



My question is simple. What are bankers like J.P. Morgan and HSBC doing playing in such size in this market? What is the economic and productive benefit? Perhaps there is a good answer. The taxpaying public certainly deserves to know. The CFTC says they have looked into this, but the detailed results of their findings remain less than forthcoming.

IF this is legitimate hedging for producers then all well and good, but then there is no justification for secrecy. If these are trading positions held by the bank, or by the bank as agent for speculators, then there may be a greater reason for secrecy, but the magnitude of the shorts is far out of bounds in size. Ten years of production is not a short position, but the entire market and then some.

The CFTC certainly appears to be acting poorly as the market regulator for the people. Given the regulatory failures of the past ten years that lead to the financial crisis, it would be useful if the Congress were to make very pointed inquiries regarding this situation. But given the performance of the Congress, and their affinity for the deep pockets and big contributions of the financial sector, that may be too much to hope for.

I think it is worth noting that the BIS data, which I use myself, is very good, but normally six months in arrears or more.  I tend to use it to track the float in eurodollars which the Fed stopped publishing when it also halted the production of M3 data.  But this is not Harvey's fault, but merely another sign of the opaque nature of the US markets.  There is no reason not to demand monthly disclosure.  Investors and depositors are always expected to make informed decisions, and then they are denied the information from large market participants using their positional advantage.

The comment and analysis below is from Harvey Organ's most recent commentary.
"The huge rise in silver price has caught the silver bankers totally offside on the silver banking. The BIS data released in November (www.goldexsextant.com) shows that the G 10 bankers have collectively sold forwards and swaps to the tune of 4 billion oz and short naked calls for another 3 billion oz. The total, 7 billion oz represents 10 years of production. If you just do the forwards, then it is 7 years of annual silver production.

Let us say the average cost of acquiring these derivatives and forwards equate to $15.00 for silver. Thus collectively the entire G10 bankers are feeling massive pain (losses) to the tune of:

7 billion oz of silver( 32.30-15.00) = 7 billion x $17.30 = 121.1 billion dollars of losses.
This is in a market of only 14 billion dollars. It begs the question to what economic need was this done.This is still off balance sheet.

If you include only the forwards or swaps (the lending of actual metal to which nothing has come back yet) then the losses are:
4 billion x 17.30 or 69 billion dollars.
Regardless how you look at it, the bankers are in serious trouble with this huge rise in silver prices. I hope you understand the severity of the situation."
This situation merely highlights Obama's failure as a reformer, and the general failure of both parties to act in positions of trust for the American people, rather than the special interests that provide them money and sincecures after they leave office.

As I noted on my own silver chart, I am no longer will to forecast anything but intermediate targets for silver, given what appears to be widespread imbalances and crisis-inducing leverage in the market, especially given the strong demands on the bullion market from the sovereign and individual buyers in the BRIC countries.

It is never pretty when a fraud collapses, and this one in particular is difficult because it seems to encompass those stewards of the market upon whom one generally relies for information and some measure of confidence in the data.

The market will clear when it clears, and seems to be defying 50% margin requirements increases and well placed disinformation campaigns in the process.

18 February 2011

Gold Daily and Silver Weekly Charts


The short squeeze in silver is fairly remarkable and obvious to all but the most pig-headed or willfully misdirecting.  Looking at the Comex warehouse, SUPPLY is consistently and smoothly decreasing even while PRICES are increasing sharply.

Silver does appear to have hit a bit of a 'high note' here perhaps, and has once again come far and fast. A consolidation or a pullback might not be unexpected, depending on what US equities might do. For now many things are riding on the dollar liquidity bubble, including those who are merely fleeing it and seeking safer stores of wealth, particularly in Asia.  Silver is outperforming gold as demonstrated by the decreasing gold to silver price ratio, no doubt influenced by the fact that the central bankers have access to gold in their national treasuries, but few have any silver. Silver is in a short squeeze, and so volatility and upside surprises are to be expected.

Intraday comments on the Comex Silver market were given here.

As for gold, the Financial Times notes that the world demand for gold is doing better than you might have gathered from the mainstream media.
"Unbelievable. Explosive. Insatiable. These are some of the words bankers are using to describe the gold market. That may come as a surprise, as the gold price has had an uncharacteristically quiet start to the year, for the most part trading either side of $1,350 an ounce.

The dramatic language is being applied to the strength of Chinese demand. Many have been truly shocked by the level of Chinese buying in the first few weeks of the year. As one senior banker (who is not prone to hyperbole) put it: “The demand in China is vast. It’s unbelievable. Whatever you think the demand is it’s much bigger… I’m really staggered.”
Perhaps the Federal Reserve and Wall Street Banks can send some one of their missionaries to China to educate them on what constitutes real wealth. Timmy may be ready to give it another go.




SP 500 and NDX March Futures Daily Charts



Isn't American crony capitalism marvelous?

Third bubble in eleven years.



Registered Silver Ounces Available For Delivery at the Comex: The Emperor's Errant Knavery


Here is a chart of registered silver ounces available for delivery in the Comex warehouse. Nine out of ten Americans may notice a trend.

If it seems somewhat counter-intuitive that the available supply continuously declines even as the price soars, you may begin to obtain some sense of the true nature of the management, regulation, and character of this market.

Comex has two categories of silver in its warehouse.

The eligible category merely means that the silver is in a condition to conform to the standards of delivery. Size and quality of the bar in other words. It is being stored at the Comex warehouse, but is not offered for delivery into contracts.

Registered means that the silver is available for delivery to those who demand bullion.

Eligible silver can become registered and deliverable if the owner of the silver declares it saleable at some price. And of course if it is there, and otherwise unemcumbered by senior obligations or conspicuous absence. There are a little over 60 million ounces of eligible silver being stored by customers at the Comex, in addition to the registered dealer inventory.

The registered inventory of silver at the Comex, 42 million ounces, is worth about 1.34 billion dollars at today's prices.

The entire silver inventory at the Comex warehouse, roughly one hundred million ounces of silver, is worth about 3.2 billion dollars at today's prices.

There are some rules passed a few years ago, delivery limits sanctioned by the CFTC, that prevent a large entity from taking too much physical bullion in a single month, and enforcing a paper settlement. I think that is why the inventory is undergoing a slow but very steady drain.

In other words, THEY can SELL as much as they wish, but YOU can only TAKE as much as they allow you to take at the current prices. That might sound like a con by any other name, but it is certainly no definition of market pricing of a physical commodity when you can sell what you wish at whatever prices you set, but then refuse delivery at those prices.

When and if this market leverage breaks, the silver on the periphery, the non-eligible supply of smaller bars and coins, is going to evaporate given the large amount of leverage in the unallocated silver bullion that people believe that they own, and the realization that the confidence which investors have had in the integrity of US markets has been abused. The silver on the periphery is a relative drop in the bucket compared to the growing demand from millions of buyers, however relatively smaller than the bullion banks which each individual buyer may be.



17 February 2011

Gold Daily and Silver Weekly Charts


Next week is March options expiration for gold and silver on the Comex.

US equities are looking fully valued and entering bubble territory fueled by Benny's handouts to the banks. Thin volumes and short holding times in markets where price is set at the margin by the last transaction is a setup for a flash crash.

Watch VIX and try not to get out in front, but perhaps its time to take out some insurance and bring in some profits.

On the global front, the Arab unrest is spreading amongst the oil dictators and western client state regimes.

Remarkable that, outside of Iceland and Greece, the put upon people of the West seem to be very quiet. In particular the people of Ireland are surprising in their acceptance of a new form of tyranny, not by the gun and the jackboot, but by the pen and the ledger book, and of course the cooperation of local political corruption.




SP 500 and NDX March Futures Daily Charts


Tomorrow is equity option expiration on the US stock exchanges, and also the last trading day before a three day holiday (President's Day) weekend.

Stocks are quite overvalued, and probably ready for a correction, or at least a consolidation. Any macro exogenous event could trigger a five percent correction.

I hate to keep saying that this is a momentum fueled melt up on light volumes, with Benny's banks leading the charge, but that is exactly what is happening. And they seem to be getting increasingly edgy about handing this off to mom and pop and the institutions.

However until VIX turns, which could be happening soon, I would not step out in front of this. But as of the last hour of trading I started getting defensive and battening down the hatches.

As for the real economy, nothing will improve until 'the truth is found to be lies,' as the song says.




Net Asset Value Premiums of Certain Precious Metals Trusts and Funds




16 February 2011

Gold Daily and Silver Weekly Charts, and a Tribute to Blythe Masters







In 1991, Blythe Masters read in economics (presumably with a heavy influence from H.P. Lovecraft and Stephen King) at Trintity College, Cambridge. In 1997, Blythe headed a small team of economists at J.P. Morgan bank in New York which developed the concept of the Credit Default Swaps as a means of insuring loans. This has led to Masters being described by The Guardian newspaper as "the woman who invented financial weapons of mass destruction." Regrettably, the quote from the Bhagavad-Gita about Shiva, destroyer of worlds, had already been taken by J. Robert Oppenheimer.

In April 2010 Masters told the Economic and Monetary Affairs Committee of the European Parliament that "there are definitely lessons that have to be learnt. I for one feel that I have learnt from that experience and there are things I may like to have seen done differently." There is nothing better than on-the-job training when manipulating the world's economy, as Ben Bernanke can attest. Theory is all well and good, but there is something to be said for the good old trial and error method.

Blythe has been the head of Morgan's commodity trading since 2006, and was reponsible for notably heavy losses in the firm's portfolio last year. JPM does not specifically disclose its own market positions, but is rumoured to be short a multiple of the solar system's estimated reserves in the silver market. The positions are said to be 'almost as volatile as Lindsay Lohan's personal life' and 'about as far underwater as the Titanic.'

SP 500 and NDX March Futures


Thin volume melt up.

Get the big picture yet?



Wall Street and the Financial Crisis: Nobody Goes to Jail - And Therein Lies the Problem


It all comes back to the credibility trap, much more intractable than a liquidity trap. The US government cannot perform effective change without admitting the corruption and placing the powerful status quo at risk. So this malaise and period of selective recovery will continue until there is a another, more destructive crisis.

In a partnership of Wall Street and Government, justice is a scarce commodity. As Jeffrey Sachs of Columbia said, both political parties are on the take, and the political process is horribly compromised.

Unfortunately this prevents the discovery of root cause, and the necessary systemic reform and reconstruction that would allow for a sustainable recovery.

As all reform efforts are co-opted by Big Money, the lies are coming thick and fast, often modulated only by people's specific self-interests in a continual drumbeat of slogans and propaganda. This is a fairly accurate description of a social system in decline. There will be a bull market in hysteria and demagoguery, a very bad time to be weak or a minority. 

And if the people rise en masse, the very powerful will throw their lesser fellows to the wolves.  This is why it is important to understand your real place in the hierarchy.  If you have less than five millions per year in net income, there is little difference between you and a day worker in the eyes of the truly rich and powerful, except for your value as a useful idiot, cannon fodder, and finally as prey.  A cow is only valuable while it provides milk. You do not understand the will to power if you think otherwise.

I am no longer surprised that some people are willing to give themselves over to the power of this world, and to sell their honor and sometimes even their souls to its cause.  The recent cases of the politicians, economists, regulators, and rating agencies is a fairly good example.  The real surprise is how readily they do it, and so cheaply. And the pretenses they are willing to suffer to hide their complicity.
"Why Richard, it profits a man nothing to give his soul for the whole world--

But for Wales."

Thomas More, on the occasion of the perjury at his trial of Sir Richard Rich

Nice piece from Taibbi worth reading.


Why Isn't Wall Street in Jail?
By Matt Taibbi

...Nobody goes to jail. This is the mantra of the financial-crisis era, one that saw virtually every major bank and financial company on Wall Street embroiled in obscene criminal scandals that impoverished millions and collectively destroyed hundreds of billions, in fact, trillions of dollars of the world's wealth — and nobody went to jail. Nobody, that is, except Bernie Madoff, a flamboyant and pathological celebrity con artist, whose victims happened to be other rich and famous people...

Read the rest here.


The Next Two Years in the Financial Asset Markets - Emperadores en Fuego



As Ozzie Osbourne says, "All Aboard!" lol

The good news is that it will not be as straight down as this.

Joe Saluzzi gave a very good description of the character of this market today on Bloomberg.

Keep your hands and head inside the train at all times.

Don't worry. Trust in Ben and Tim.

And meanwhile in the Mideast...

Note:  Most people think of stocks as the be all and end all of dollar financial assets.  In the case of a burst of inflation or a hyperinflation, the equity market will soar for a time, although its gains will be illusory. So stocks are an insurance but not so much as you might expect if that is the outcome.  Try not to get in front of it, as phony as you might think it may be. But the stock market is of much less consequence as compared to the bonds and currency markets.   It is the three card monte to the bond and currency numbers rackets. The stock markets are the pretty lights and buildings that the tourists stare at while the carnies pick their pockets.


"Higher and Higher. What Could Go Wrong?"

 

"What a Beautiful View At the Top. We're the King of the World."



"Who Could Have Foreseen This?  Remain Calm.  All Is Well."



"Mommy!"





And if the Fed should make a mistake, the efficient electronic trading markets are designed to be self-correcting.

US Budget Expenditures - CBO Long Term Outlook


Obviously one can question their growth assumptions, and therefore tax revenue assumptions.

However bear in mind that this chart is for the expenditures as a percentage of GDP, and is therefore tied to the growth.

Personally I would think that they would lowball the interest payments, which are not so tied to the CPI as COLA increases in things like Social Security.  Bondholders are not as captive an audience as your old people.  

But as I always say, until the financial system is reformed and the economy is brought back into balance, nothing will 'work,'  whatever combination of austerity, stimulation, growth, and tax changes it may include.  This discussion is the misdirection and distraction, the financial magician's tools, from the actual transfers of wealth being conducted, those transfers being a nice way of saying 'looting.' 

The US resembles post Soviet Russia just prior to its currency collapse and the rise of the oligarchs who sought to monopolize productive assets which they bought with paper and financial manipulation.    Communism died, and it ended in oligarchy.  Democracy is dying, and it too will end in oligarchy, unless something is done to change the outcome.