In Honor of the 70th Anniversary of the Munich Students Movement - 'The White Rose'

"Many people think of our times as being the last before the end of the world. The evidence of horror all around us makes this seem possible.

But isn't that an idea of only minor importance? Doesn't every human being, no matter which era he lives in, always have to reckon with being accountable to God at any moment? Can I know whether I'll be alive tomorrow morning?

A bomb could destroy all of us tonight. And then my guilt would not be one bit less than if I perished together with the earth and the stars.”

Sophie Scholl

The White Rose
First Leaflet
Munich, 1942

We will not be silent.

Nothing is so unworthy of a civilized nation as allowing itself to be governed without opposition by an irresponsible clique that has yielded to base instinct.

It is certain that today every honest German is ashamed of his government. Who among us has any conception of the dimensions of shame that will befall us and our children when one day the veil has fallen from our eyes and the most horrible of crimes - crimes that infinitely outdistance every human measure - reach the light of day?

If the German people are already so corrupted and spiritually crushed that they do not raise a hand, frivolously trusting in a questionable faith in lawful order of history; if they surrender man’s highest principle, that which raises him above all other God’s creatures, his free will; if they abandon the will to take decisive action and turn the wheel of history and thus subject it to their own rational decision; if they are so devoid of all individuality, have already gone so far along the road toward turning into a spiritless and cowardly mass - then, yes, they deserve their downfall.

Goethe speaks of the Germans as a tragic people, like the Jews and the Greeks, but today it would appear rather that they are a spineless, will-less herd of hangers-on, who now - the marrow sucked out of their bones, robbed of their center of stability - are waiting to be hounded to their destruction.

So it seems - but it is not so. Rather, by means of gradual, treacherous, systematic abuse, the system has put every man into a spiritual prison. Only now, finding himself lying in fetters, has he become aware of his fate.

Only a few recognized the threat of ruin, and the reward for their heroic warning was death. We will have more to say about the fate of these persons. If everyone waits until the other man makes a start, the messengers of avenging Nemesis will come steadily closer; then even the last victim will have been cast senselessly into the maw of the insatiable demon.

Therefore every individual, conscious of his responsibility as a member of Christian and Western civilization, must defend himself as best he can at this late hour, he must work against the scourges of mankind, against fascism and any similar system of totalitarianism.

Offer passive resistance - resistance - wherever you may be, forestall the spread of this atheistic war machine before it is too late, before the last cities, like Cologne, have been reduced to rubble, and before the nation’s last young man has given his blood on some battlefield for the hubris of a sub-human. Do not forget that every people deserves the regime it is willing to endure!

Please make as many copies of this leaflet as you can and distribute them.

"I was satisfied that I wasn't personally to blame and that I hadn't known about those things. I wasn't aware of the extent of the crimes. But one day I went past the memorial plaque which had been put up for Sophie Scholl in Franz Josef Strasse, and I saw that she was born the same year as me, and she was executed the same year I started working for Hitler. And at that moment I actually sensed that it was no excuse to be young, and that it would have been possible to find things out."

Traudl Junge, Im toten Winkel - Hitlers Sekretärin

Gold Daily and Silver Weekly Charts - Sweet Home Chicago

Intra-day bear raid was more effective in silver rather than gold which showed greater resilience.

SP 500 and NDX Futures Daily Charts - Hard Time Killin' Floor Blues

Weak reports on the economy continue.

Amazon earnings after the close.

Whither the Facebook IPO?

Is the Next Phase To Be Commodity Wars?

As the global trade system that had existed under the Bretton Woods II money regime evolves and changes, we may see more struggles for key commodities.

These will be characterized by local and regional military tensions as well as financial assaults on the relevant sovereign credit and currencies.

Reuters
12 Companies Join German Commodity Alliance
By Michael Hogan
Jan 30, 2012 3:23pm GMT

HAMBURG, Jan 30 (Reuters) - Twelve German companies have joined the new German alliance aimed at securing raw materials supplies in the face of growing competition for key commodities, the Federation of German industry BDI said on Monday.

In October 2010, Germany's government approved a new commodities strategy aimed at helping German industry secure supplies in the face of intense competition from China and other newly-industrialised countries which will include partnerships with supplier countries and greater cooperation between German commodity consumers.

A series of major German companies have been involved in talks about a project lead by German industrial association BDI to invest in foreign commodity projects and 12 have now agreed to join, the BDI said.

The founding members are copper producer Aurubis, chemical groups BASF, Bayer, Evonik Industries, Wacker Chemie < WCHG.DE> and Chemetall; carmakers BMW and Daimler ; steelmakers Georgsmarienhütte Holding, Stahl-Holding-Saar, ThyssenKrupp and electronics group Bosch.

"We are working together to build up a powerful corporation which will provide long-term improvements to Germany's raw material supplies," said BDI vice president Ulrich Grillo. Grillo is head of one of Germany's leading zinc processing groups Grillo-Werke AG.

"The alliance has the goal of taking shareholdings in commodity projects to achieve a long-term improvement in the supply of raw materials to industry," Grillo said.

"The commodity alliance will become involved in projects at an early phase which seek and assess reserves so as to give German companies the option of sourcing (raw materials) or taking shareholdings," Grillo added.

In specific cases the alliance may itself invest in projects to develop commodity reserves, he said....

Read the rest here.

Gold Daily and Silver Weekly Charts

The precious metals took a well-deserved rest to consolidate their gains from the recent protracted rally.

SP 500 and NDX Futures Daily Charts

There is more talk of the Facebook IPO coming out this week, perhaps on Wednesday.

If this is the case the Street will prop this market up to get that IPO priced and out the door, barring any unforeseen events from Europe.

MF Global: A Despicable State of Affairs

Much of the financial press picked up this story from the Wall Street Journal, Money From MF Global Feared Gone. Much of the mainstream media in the US and the UK these days is just a conduit for sound bites from the monied interests.

"Nearly three months after MF Global Holdings Ltd. collapsed, officials hunting for an estimated $1.2 billion in missing customer money increasingly believe that much of it might never be recovered, according to people familiar with the investigation.

As the sprawling probe that includes regulators, criminal and congressional investigators, and court-appointed trustees grinds on, the findings so far suggest that a "significant amount" of the money could have "vaporized" as a result of chaotic trading at MF Global during the week before the company's Oct. 31 bankruptcy filing, said a person close to the investigation."

And as we have heard, quite a bit of that money was also diverted in the last few days into the pockets of MF Global's bank, JP Morgan, which still reportedly holds much of it. Now whether they are legally entitled to keep that money is another matter. But this entire charade has been cloaked with a public relations campaign using terms like 'missing,' 'vaporized,' and 'mystery' to describe the customer assets as if no one really knows where the funds had gone, which the CFTC has explicity stated months ago is not the case. And that the handling of the bankruptcy and the method of ordering customers with creditors is in violation of the CFTC's rule 190, as is evident from the precedents and intentions which established it.

What the press apparently has not yet heard or is not reporting is that vulture funds are now contacting the MF Global customers, however they may have obtained their names, and are offering them 85 cents on the dollar for their claims.   Most of the claim holders are reported to expect or to have been payed 72 cents on the dollar as things now stand.   The Wall Street Journal certainly casts gloom on their prospects for a full recovery and hopes of justice, based on the report from an unnamed source.

This is creating a difficult position for these much abused customers because of the need to settle their income tax obligations for 2011. Until they can prove the funds are not 'recoverable' they bear the responsibility for their tax obligations on the full amount. But if they settle with the vulture funds they can take the loss and move on, capitulating to the despair and the anxiety of having been cheated and abused by the partnership between government and Wall Street.

Obviously customers can ask for extensions on filing their taxes and hope for a settlement at some point. But the issue is the odd manipulation of the bankruptcy in the courts, and the uncertainty and fear fostered in the customers caused by the management of this situation through rumour and innuendo and the canard of the 'missing money' from almost day one.

Remember that the customers were not speculators who lost money on their bets, as the bailed out banks had been, but in many cases were depositors who had cash and valid title to precious metals and treasuries held on account in a firm that was one of the Fed's primary dealers and a major player at the CME.  And the money was taken twice.  First by MF Global, and then by the financial institutions that seized the money and then manipulated the courts and the press to hide it and to keep it.

The theft of customer funds was bad enough, but the manner in which the exchange, the regulators, the court, the Congress and the Obama Administration have dealt with the aftermath of this is truly despicable. Throughout the financial crisis the character of the public's dealings with the financial sector has been dominated by of opacity, obfuscation, misuse of influence, abuse of power, and fear.

If I have ever seen the opportunity for those in the government to take a heroic stand in defense of the people against the predations of powerful financial interests this was it. And they have failed miserably. So whatever these politicians now say seems at best a shallow mockery, with the ring of untruth, and the hollowness of hypocrisy.

And perhaps this is why the American people are turning away from their corporate-branded presidential candidates and Congressional representatives, whose approval ratings have fallen to 9%, in righteous indignation and revulsion, in disgust at their craven betrayal of their sacred oaths and trust.

They must have no sense of justice, or of proportion, or history, and apparently they have no shame.

Moyers Journal: How Did the Big Banks Get So Powerful? Easy Is the Descent Into Hell

Bill Moyers talks with former Citigroup Chairman John Reed to explore a momentous instance: how the mid-90's merger of Citicorp and Travelers Group, and a friendly Presidential pen, brought down the Glass-Steagall Act, a crucial firewall between banks and investment firms which had protected consumers from financial calamity since the aftermath of the Great Depression. In effect, says Moyers, they put the watchdog to sleep.

Listen carefully to the rationales provided for taking down Glass-Steagall, which helped to set up the current financial crisis and collapse. This interview with John Reed by Bill Moyers is one of the most powerful and yet simple summaries of the cause of the financial crisis that I have heard.

The arguments for 'free financial markets' are being repeated again every time there is a discussion of financial re-regulation, providing reform to curb reckless speculation, and shrinking the TBTF banks and the systemic risks which they provide.

All of them are fallacious, but they are backed by amoral self-interest and more importantly, big money.

Although the great landscape of moral decay covers the widespread fraud in the mortgage markets and the foreclosures, there is fine microcosm of this outcome to be seen in the blatant theft of customer money at MF Global by the broker and his banks, as the courts and the regulators turn a blind eye to the victims.

John Swinton is anecdotally, and quite possibly apocryphally, reported to have said this about journalists in The Gilded Age of robber barons, but it aptly describes the economists, politicians, lawyers, accountants, regulators, and the rest of the Wall Street demimonde of our day. Once one sells the integrity of their knowledge, they become tolerant of and even open to soft participation in a much broader set of injustice and crimes.

"The business of the journalist is to destroy the truth; to lie outright; to pervert; to vilify; to fawn at the feet of mammon, and to sell his country and his race for his daily bread.

You know it and I know it and what folly is this toasting an independent press? We are the tools and vassals of rich men behind the scenes. We are jumping jacks, they pull the strings and we dance. Our talents, our possibilities and our lives are all the property of other men. We are intellectual prostitutes."

After the Crash of 1929, in the Congressional hearings a Wall Street 'publicist,' A. Newton Plummer, revealed that the majority of financial journalists had been 'on the take' from the great stock pools and manipulators of the day. He could not be discredited by the deniers because he had kept a great cache of cancelled checks to prove his allegations. So he was largely ignored, his story buried for the sake of confidence and recovery, and the freedom and ease of the complicit.

And in our day, now that the music is stopped, the participants and enablers are standing with dirty hands, ashamed but too frightened to acknowledge their part in it, and more cynically, concerned about losing the benefits and the easy money they have obtained from it.

And so the nation is caught in a credibility trap that stifles recovery and reform, and there does not seem to be the ability or the will to return to healthy markets and a balanced economy, what is derided as the 'old normal.' Descensus Averno facilis est...

"Easy is the descent to hell; all night long, all day, the doors of dark Hades stand open; but to retrace the path; to come out again to the sweet air of Heaven - there is the task, there is the burden."

Virgil, The Aeneid

John Reed on Big Banks' Power and Influence

Love Remains

"At that time many will falter, and betray and despise each other, and false prophets will appear and deceive many people. Because of the increase of wickedness, the love of many will grow cold, but those who stand firm to the end will be saved. And the gospel of the kingdom will be preached in the whole world as a testimony to all nations, and then the end will come." Matt 24:10-14

"If I speak in the tongues of men and of angels, but have not love, I am only a resounding gong, a clanging cymbal.

If I have the gift of prophecy and can fathom all the mysteries and knowledge, and if I have a faith that can move mountains, but have not love, I am nothing.

If I give all I possess to the poor and surrender my body to the flames, but have not love, I gather together nothing.

Love is patient, love is kind. It does not envy, it does not boast, it is not proud.

It is not rude, it is not self-seeking, it is not easily angered, it keeps no record of wrongs.

Love does not delight in evil but rejoices with the truth.

It always protects, always trusts, always hopes, always perseveres.

Love never fails. But where there are prophecies, they will cease; where there are tongues, they will be stilled; where there is knowledge, it will pass away.

For we know in part and we prophesy in part, but when perfection comes, the imperfect disappears.

When I was a child, I talked like a child, I thought like a child, I reasoned like a child. When I became a man, I put childish things behind me.

Now we see as in a glass, darkly; then we shall see face to face. Now I know in part; then I shall know fully, even as I am fully known.

And now these three remain: faith, hope and love. But the greatest of these is love."

1 Cor. 13

Many come here seeking ways to increase and protect their material wealth, and the well being of themselves and their families. And this is a worthy effort.

But not all remember to preserve something so much more important and precious -- themselves.

They do the right things, but then may go too far, falling into greed and lawless expediency, and win the battle, but lose the war, to a much cleverer, patient, and opportunistic foe.

For truly, what does it profit a man, to gain the whole world, but lose themselves.

Registered Silver Ounces At the Comex

There are 49,436 contracts currently open for the next delivery month which is March 2012. Each contract represents 5,000 ounces. That is 247.18 million ounces of silver being traded for March delivery against a registered 36.56 million ounces. This is a subset of all the contracts going out over the year.

The is leverage of about 6.8 to 1. It 'works' because most contracts are speculative and settled for cash. Comex is not where one goes for the delivery of a large amount of silver.

I think that over time the US markets will become increasingly less relevant as a price-setting mechanism for a number of commodity prices including the metals.

The failure of MF Global and the blatant cheating of the customers, both before and after the fact, will accelerate the process of failure.

It really is shocking, all the more so because so few people see it and understand its significance in the coming crisis of confidence in the US markets.

Great leaders see the big changes coming and harness them. There is no one on the horizon that fits that prescription. What I see is failure repeated, but as history indicates, not endlessly.

Year-To-Date Performance: Silver, Gold, SP 500, and the Dollar - Fitch Downgrades Europe

There are still two trading days left in the month so it is obviously too early to book the results.

And it may not be quiet next week, or the rest of the year, as Fitch issued a new downgrade on five European nations.

Fitch downgraded the sovereign credit ratings of Belgium, Cyprus, Italy, Slovenia and Spain on Friday, indicating there was a 1-in-2 chance of further cuts in the next two years. In a statement, the ratings agency said the affected countries were vulnerable in the near-term to monetary and financial shocks. "Consequently, these sovereigns do not, in Fitch's view, accrue the full benefits of the euro's reserve currency status," it said. ...

The old saying is, "As goes January, so goes the year."

If that is the case it may be a record year for precious metals but hard on traders' nerves.

It should be noted that the metals sector took an extraordinarily heavy handed pounding in December.

Let's see how the month ends.

Here's how things stack up so far.

Silver +22%
Gold +10.8%
SP500 + 4.7%
US$ - 0.1%

Gold Daily and Silver Weekly Charts

There was a really nice push up into resistance today.

Next week could be dicey unless there is some settlement in the European debt situation.

SP 500 and NDX Futures Daily Charts

There were additional rumours of the Facebook IPO coming out next week. If that happens the Street will probably prop the major markets in order to get it priced and out the door.

The market was wobbly today, with a late push in the financials failing to turn the markets green.

Gold Daily and Silver Weekly Charts - Consolidation (With a Slight Return)

We had the expected consolidation in the metals today after a spectacular rally run off the artificial hammering they took in December.

Flat now in the trading books at least, and waiting to see what happens next. I would like to see another day or two of gains consolidation with a little retrace, and then a gap and a leg higher.

But let's see what happens first. The market will always be there.

SP 500 and NDX Futures Daily Charts - Said the Joker to the Thief

4Q 2011 Advance GDP is out tomorrow morning.

The selling today had little volume behind it, and it looked more like a consolidation than a top, at least so far.

I'm flat the market now, and waiting to see what happens next.

A Closer Look At the Gold Chart For a Break and Run Possibility

Keep an eye on gold for the next few days to see how it handles any consolidation here.

The formation, at least so far, is remniscent of the breakout that led gold to the all time high last year.

It could fail and retest some lower support level. We need to be aware of that possibility. But a consolidation with a subsequent gap higher and breakout run could be a wild ride.

Gold Daily and Silver Weekly Charts - Sharp Metals Rally Off the FOMC Policy Statement

The big news today was the FOMC's decision to set an explicit inflation target of 2% using the PCE indicator. Bernanke expressed some of the reasons for choosing PCE rather than the more popularly watched CPI.

Intraday commentary on the Fed's statement is here.

The metals, which had been depressed ahead of the announcement, took off like a rocket, reaching up to overhead resistance as the metal bears scrambled to cover their option expiration trade.

So what next? The rally may be a bit overdone in the short term, and now that the put buyers are washed out the trading desks may take aim at the call option holders in the 1680 to 1700 range.

The last time we had a major failed option expiration like this the metals went on a tear higher that led to the breakout from the infamous 'cup and handle' formation. Let's see if that happens again.

The move by the Fed is more of a stealth bailout of the banks and creditors in the financial sector than it is a remedy for the real economy. The markets are still not efficient or safe, and the economy is being managed for the benefit of the money masters.

So I expect this move by the Fed will merely serve to precipitate further economic damage that will eventually lead to a strong public reaction and constructive change, albeit via a highly troubled and sometimes dangerous path.

Keep an eye on stocks. I'll believe this rally is going to last if they decide to bring out the Facebook IPO which has been parked on the shelf for some time now. Otherwise just watch out for the next wash and rinse. There are few real investors in these markets anymore.

SP 500 and NDX Futures Daily Charts - Benny Pledges to Inflate

Stocks rallied hard off the FOMC statement and subsequent press conference. The intraday commentary on this is here.

So what next? Somewhat discounted in the paper party is the dull fact that Ben and the Fed are driven by the dire state of the economy, despite their cheerful words to try and calm the markets.

And monetary policy is a blunt instrument, ill-suited to stimulating an economy that is broken and in serious need of rebalancing and reform.

Nothing good will come of this, but it may take some time to work itself out.

The MF Global Bankruptcy Filing: Did the Regulators Sell Out the Public for JP Morgan?

What seems fairly obvious is that the law calls for MF Global to file a Chapter 7 bankruptcy in which customers are given seniority to creditors, rather than a Chapter 11 non-broker bankruptcy in which the customer interests are not upheld.  The rationale for Chapter 11 has always seems to be contrived to favor a particular creditor bank.

Prior CFTC rulings and 'Rule 190' seems to have dealt with this in the past.  Statements by various CFTC commissioners of late also seem to suggest that customers absolutely have a senior claim to any assets.

Why then did the SEC, with Gary Gensler's purported assent, seem to ignore the precedent and their own rules and cut a deal in a secret meeting to favor the Banks, specifically JP Morgan?

The personal involvement of Gary Gensler seems a little ambiguous based on the facts at hand, but it is obvious that the bankruptcy filing is being mishandled, and the SEC and CFTC are doing too little to represent the interests of the customers.

Obviously this should be more explicitly addressed and the customers need to be relieved of this travesty of justice. 

President Obama may speak brave words in his speeches, but the actions of his Administration show that there is little teeth in their supposed championing of the public interest over the powerful interests of Wall Street.   Actions speak louder than words.

MFGFacts
CFTC Warnings When Bankruptcy Codes Conflict: And a Still Secret Meeting

Last week we witnessed lawyers dueling in the bankruptcy court on the details of exactly what code of law supports customer priority in liquidation of the parts of MF Global Holdings, and gosh!….is the Holdings is even a broker ? Why are lawyers debating these questions at this late date?

First we’ll cover what started the fight and then move onto the genesis of why it has come to this so far into the proceedings. Do stick with the story as it might sound like legal minutiae, but does have everything to do with recovery of customer funds.

It started with the Sapere Wealth Management, LLC assertions (among others) that the MF Global estate must be administered under 17 C.F.R paragraph 190. Remember paragraph 190 as you will hear more about this in the next weeks. Applying this clause of the bankruptcy code to the liquidation of MF Global Holdings would assure customer priority in the liquidation of MFGH, which is also claimed to have taken customer assets out of MFGI, the commodity brokerage unit of the Holdings company, MFGH — before and after the bankruptcy.

That all customer property as defined in paragraph 190 of the code, must be returned to commodity customers free and clear of other claims is also supported by others parties, including the CFTC. The CFTC, however, also asserts that existing principles of law are available to ensure this, but first the court needs to make “antecedent determinations.” In other words, the CFTC legal team is playing the adult and indicating that we already have the laws on the books to deal with this once the court figures out what laws it wants to use.

So why is the question if MFGH is even a broker so important? Again, the key paragraph 190, which legally secures customer priority and distributions can only be applied to a brokerage Chapter 7 bankruptcy, which is used for brokerage bankruptcies, but was not used for MFGH, which is the holding company of MFGI. MFGH was filed as a Chapter 11 bankruptcy. This Bankruptcy Code is used for non-broker entities, seeking re-organization.

Also, and to use the words of the Sapere plea to the court, “A decision by the court that 17 C.F.R §190 applied to MFGH’s estate can, among other things, obviate the need for titan law firms representing MFGH and MFGI, respectively, to engage in battles with one another funded by “other people’s money,” i.e., at substantial costs to the estates of MFGH and MFGI.”

The ability to use many millions of customer funds locked in the estate to pay trustees and their “titan” law firms representing MFGH and MFGI is possible because the bankruptcy was filed as a Chapter 11 for the Holdings and Chapter 11 SIPC filing for MFGI, the commodity brokerage, and not under Chapter 7 for both.

As regular readers know, from the start of this sorry saga, MFGFacts.com has focused on the questions around why a Chapter 11 SIPC bankruptcy with almost non-existent securities accounts when neither SIPC nor Chapter 11 address brokerage liquidations. Additionally, Chapter 11 is the choice when a restructuring is planed, which is not so with MFGH.

A Breaking Investigative Report

Fortunately, these question are now receiving greater scrutiny in the industry press as we read in this investigation published last week by Mark Melin of Opalesque Futures Intelligence who contacted MFGFacts.com while conducting his investigation, Sold Out: How A Private Meeting Between Regulators Gave Away MF Global Investor Protections. In short, as Melin reports, “Deciding upon a Securities industry SIPA liquidation process for an FCM over the Commodity Exchange Act (CEA) liquidation and section 7 of the US Bankruptcy Code was a legal maneuver with far reaching consequences for customers with segregated funds and property with custodial banks. The selected SIPA liquidation does not recognize fund segregation or futures industry account regulations. The process considerably favors creditors.”

In other words, when the SEC threw the liquidation process to SIPC under for a Chapter 11 securities liquidation, and with the CFTC’s immediate agreement (under the conflicted Chairman Gensler who had not yet to recuse himself from MF Global issues), a framework of law was chosen where customers were — for the very first time ever — made creditors and their assets thrown into the entire MF Global estate. Many say what! And the industry is now asking how?

According to the report, the speculation is this: Robert Cook, SEC Director of Division and Trading and Markets is said to have been the lead regulator at the key meeting, the details of which are still not public. “Before joining the SEC, Mr. Cook was a partner at the powerful Washington D.C. law firm of Cleary Gottlieb Steen & Hamilton LLP, which represents JP Morgan, among other clients,” Melin reported. We all know that JP Morgan is the largest creditor to MF Global Holdings. Readers may reach their own conclusions about that. Yet, making the liquidation of MF Global Holdings and its parts a Chapter 11 and SIPC bankruptcy, set the stage for expensive dueling among lawyers over the fact if MF Global is even a broker or not. This also and — most importantly — tremendously enhanced the recovery position for non-customer creditors over all customers.

The CFTC Warned in the 1980s of Potential for Abuse and Problems when Bankruptcy Codes Conflict with a Duel Registered Entity

As Melin shares, that the CFTC – to the agency’s great credit — recognized and dealt with this problem: Citing the exemplary record in the futures industry in the event of bankruptcies, former CFTC Director of the CFTC Division of Trading, Andrea Corcoran writes in a January 1993 issue of Futures International Law Letter “As early as 1980, however, concerns were expressed about the ability to retain this record in the event of the bankruptcy of a dually-licensed firm – that is, a firm registered as both a futures commission merchant (FCM) and a securities broker-dealer.”

To rectify this, the CFTC then drafted rules we find under then now famous Part 190 where Corcoran writes, “In the final rules, the Commission noted that Section 7(b) of SIPA (read Securities Investors Protection Act) …proved that a trustee in a SIPA liquidation shall be subject to the same duties as a trustee in a commodity broker bankruptcy under Subchapter IV of Chapter 7 of the Code.”

The CFTC was well prepared for a MF Global-like event. Against this background, and as Melin also reports, the choice of a Chapter 11 SIPC bankruptcy code for the liquidation of a futures broker, makes Chairman’s Genslers “give away” even more baffling. We’d call it a throw away and ask if Chairman Gensler invited a single CFTC attorney into that early hour meeting before agreeing to file MFGI under MFGH as a Chapter 11 SIPC bankruptcy? Regardless, with that decision the fate was sealed. And not only were customers and the industry severely damaged, but there was a complete disregard of the decades of work, preparation and public service by the many professionals in the CFTC to which Chairman Gensler was entrusted.

And now we have the spectacle of “titanic” lawyers in one of the largest bankruptcies ever arguing if an entity is a broker or not.

FOMC Statement - Targets 2% Inflation - Highly Accommodative Monetary Policy Until 'Late 2014'

The Fed extended its window of highly accommodative monetary policy to 'late 2014.' In a separate statement the Fed said it is targeting "2% inflation" as a target. This is the first time they have named an explicit inflation objective. The limiting factor of this decision is the value of the US dollar relative to hard goods, and not other fiat currencies which are subject to similar manipulation and soft devaluation.

The inflation target will be measured using PCE rather than any variation of CPI.

So unless there is a major policy error, deflation seems to be 'off the table' as an option at least as far as the Fed is concerned.

The initial market reaction is for stocks to come off their lows, and gold and silver to rally sharply. Now we know why they were sitting on them so hard. If they had not I suspect we would see gold breaking out over 1700 and silver well past 33. This goes beyond the management of perception into the realm of a control fraud by the banks. I hope that when the truth comes out that people will not be persuaded to ignore that distinction.

This statement shows a longer term commitment to de facto QE at least. The Fed does not need to further expand its balance sheet just yet, but rather deploy those funds strategically while engaging in swaps with other central banks to counter the financial risks globally.

I suspect that before they formally announce a further expansion of their balance sheet the Fed will go 'off-balance sheet' in the easing as financial firms are often wont to do when engaging in opaque accounting. The swaps and non-competitive bidding for balance sheet assets may be a part of this.

I do not object to stimulus per se, but rather this type of blunt policy that does not address or repair the problems that led to the financial bubble and collapse in the first place, which is largely the reform of the financial system, the yawning gap between productive labor and mere money manipulation, and the hard choices required to resolve the TBTF banking problem and unsustainable concentration of both power and risk.

This is against the backdrop of the extended infomercial for crony capitalism coming from the financial conclave at Davos. Demagoguery and deception in support of the status quo seems to be the rule of the day in the financial sector and its associated professions and exclusive clubs.

Therefore self-regulation, restraint, and reform are a thin bet to say the least. The crisis is more like to continue to expand, and the taint of corruption and crime continue to spread.

"When a man has so far corrupted and prostituted the chastity of his mind as to subscribe his professional belief to things he does not believe, he has prepared himself for the commission of every other crime."

Thomas Paine

So the set up and trend seems to be for a more notably historic impulse for change.

For immediate release
Federal Reserve Open Market Committee
January 25, 2012

Information received since the Federal Open Market Committee met in December suggests that the economy has been expanding moderately, notwithstanding some slowing in global growth. While indicators point to some further improvement in overall labor market conditions, the unemployment rate remains elevated. Household spending has continued to advance, but growth in business fixed investment has slowed, and the housing sector remains depressed. Inflation has been subdued in recent months, and longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects economic growth over coming quarters to be modest and consequently anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that over coming quarters, inflation will run at levels at or below those consistent with the Committee's dual mandate.

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.

The Committee also decided to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Sarah Bloom Raskin; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who preferred to omit the description of the time period over which economic conditions are likely to warrant exceptionally low levels of the federal funds rate.

For immediate release

Information received since the Federal Open Market Committee met in December suggests that the economy has been expanding moderately, notwithstanding some slowing in global growth. While indicators point to some further improvement in overall labor market conditions, the unemployment rate remains elevated. Household spending has continued to advance, but growth in business fixed investment has slowed, and the housing sector remains depressed. Inflation has been subdued in recent months, and longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects economic growth over coming quarters to be modest and consequently anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that over coming quarters, inflation will run at levels at or below those consistent with the Committee's dual mandate.

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.

The Committee also decided to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Sarah Bloom Raskin; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who preferred to omit the description of the time period over which economic conditions are likely to warrant exceptionally low levels of the federal funds rate.

Net Asset Value of Certain Precious Metal Trusts and Funds

Gold Daily and Silver Weekly Charts

Gold and silver took a pause in their rally today.

The FOMC announcement is tomorrow and gold option expiration is on Thursday.

SP 500 and NDX Futures Daily Charts - APPL After the Close

YHOO hit EPS but missed revenues, but APPL is the big tickle and will be announcing their results shortly.

The SP left a big hanging man doji candlestick formation. This could mark a top.

Benny and his merry money mavens will be making their announcements tomorrow afternoon. Gold and silver took a corrective hit today in honor of their pronouncement. Bear in mind they have come rather far fairly quickly.

All eyes on AAPL.

Net Asset Value of Certain Precious Metal Trusts and Funds

The Sprott Silver Trust premium remains depressed compared to historical norms. I believe that this is due to the 'underwriter effect' as they clear their over allotments obtained at 13.20.

The other premiums remain healthy, showing a reluctance to sell off hard in this metals correction, at least so far.

Gold Daily and Silver Weekly Charts

Nice up day in the metals.

The Fed will announce the results of their meeting on Wednesday.

This Thursday will be an option expiration in gold. The likely range is 1650 to 1700 based on the put/call ratios.

From the charts, it looks like gold will be hitting some fairly stiff resistance between 1680 to 1700.

The Republican presidential freak show kicks into high gear with tonight's Republican debate and the upcoming Florida primary election. So far it has not disappointed.

SP 500 and NDX Futures Daily Charts - Wobbly Day - VIX Recumbent

Joe Granville made a major bear call today, saying he expects the Dow to be down 4000 points by the end of the year, with the decline starting about now.

I can sympathize with a bearish outlook for stocks based on the economic fundamentals and the earnings reports so far.

The Fed will announce the results of their January meeting on Wednesday.

Tomorrow is the State of the Union message. I will not be able to fly in to Washington and spend the evening at Bullfeathers or The Palm as in the past, alas, sharing gossip and conviviality with old friends amongst the staffers and assorted beltway denizens. This is always most enjoyable in an election year.

The silence on MF Global is deafening.

Still running short stocks and long bullion.

The Ballad of the US Economy and Financial Markets

Corzine, MF Execs and JPM Named in RICO Lawsuit

Privately sponsored RICO lawsuits have a difficult time obtaining the types of information that are required to make a conspiracy case unless they get lucky in the discovery process or find a willing whistleblower. The defendants generally lawyer up and stonewall, using the types of court maneuvers that prove so effective in mortgage fraud cases, theft of customer funds, and mass foreclosures based on forged documents.

The chances of an Obama Administration investigation with teeth seems unlikely. Their Justice Department has strong ties to the big banks and mortgage companies and a very poor record of prosecuting fraud cases.

Of course there is little reason to hope for anything different from any Republican administration. Ron Paul would be honest enough, but it is hard to tell which laws he would choose to enforce and which ones would be considered an intrusion on free markets.

It might be more effective for the public to demand the appointment of a special prosecutor with a proven record of effective investigation of the big banks. Too bad Eliot Spitzer was taken out of the picture in a bank sponsored 'investigation' into his sex life by the Bush Justice Department.

Bloomberg
Corzine Sued for RICO Violation by MF Global Customers
By Linda Sandler
January 20, 2012, 6:42 PM EST

Jan. 20 (Bloomberg) -- Jon Corzine, MF Global Holdings Ltd.’s former chief executive officer, was sued under U.S. racketeering law by commodity customers alleging he and other executives “unlawfully” took money from their accounts and failed to segregate their money as the law requires.

The suit alleges that hundreds of millions of dollars were transferred from customers’ accounts to other MF Global units, at a time when the company was short of cash and faced calls for collateral as its risky Eurobond and other investments fell in value.

Named in the suit, JPMorgan Chase & Co., the company’s banker, should have noticed the “depletion” of customer money, and should have investigated, according to the plaintiff. The customers are seeking unspecified restitution and damages.

The suit, filed in federal court in Manhattan today on behalf of Robert Marcin and other MF Global segregated account holders by Grant & Eisenhofer PA of New York, is one of at least 10 against Corzine and other MF Global executives. Plaintiffs including the Virginia Retirement System have been competing to lead a consolidated lawsuit seeking so-called class-action status....

Read the rest here.

Gold Daily and Silver Weekly Charts

The metals were higher today led by silver.

Next Thursday January 26 is an option expiration for gold.

Here is the current list of option expirations in the metals.

As you can see in the stock commentary below I think the market is looking tired and a bit toppy. It may have another move up left, but now is a good time to get defensive again on equities.

I am still running the long bullion - short equity indices paired trade, and increased the bearish weighting a bit into the close.

SP 500 and NDX Futures Daily Charts - Turning Bearish, Keep an Eye on the VIX

Flat to down day with a little late pop into the close. All eyes are on the Greek situation.

Earnings were a disappointment especially with GOOG but IBM carried the Dow Jones Industrials higher.

I think we are nearing a short to intermediate term top in stocks. \

The SP could have as much as 20 points left, but we'll look at the VIX to signal a top and reversal if there is one.

This is a difficult call because the monetary and sovereign debt considerations are somewhat exogenous and may trump the slowing economy.

But even with the pumping the market looks tired.

I increased the short weighting in the long bullion - short stocks pair trade into the closing rally.

Metals Options and Futures Calendar for the First Half of 2012

Source: CME Group 2012

Jan. 26 Comex February gold options expiry
Jan. 26 Comex February copper options expiry
Jan. 27 Comex February miNY gold futures last trading day
Jan. 27 Comex January silver futures last trading day
Jan. 27 Comex January copper futures last trading day
Jan. 27 Comex February E-mini copper futures last trading day
Jan. 27 Nymex January platinum futures last trading day
Jan. 27 Nymex January palladium futures last trading day
Jan. 31 Comex February gold futures first notice day
Jan. 31 Comex February silver futures first notice day
Jan. 31 Comex February copper futures first notice day
Jan. 31 Nymex February palladium futures first notice day
Feb. 23 Comex March silver options expiry
Feb. 23 Comex March copper options expiry
Feb. 24 Nymex February platinum futures last trading day
Feb. 24 Nymex February palladium futures last trading day
Feb. 27 Comex February gold futures last trading day
Feb. 27 Comex February copper futures last trading day
Feb. 27 Comex February E-micro gold futures last trading day
Feb. 27 Comex March E-mini copper futures last trading day
Feb. 27 Comex March miNY silver futures last trading day
Feb. 29 Nymex March palladium futures first notice day
Feb. 29 Comex March silver futures first notice day
Feb. 29 Comex March copper futures first notice day
March 16 Nymex April platinum options expiry
March 20 Nymex April platinum futures first notice day
March 27 Comex April gold options expiry
March 27 Comex April copper options expiry
March 28 Comex April miNY gold futures last trading
March 28 Comex March silver futures last trading day
March 28 Comex March copper futures last trading day
March 28 Comex April E-mini copper futures last trading day
March 28 Nymex March palladium futures last trading day
March 29 Comex April E-mini gold futures last trading day
March 30 Comex April gold futures first notice day
March 30 Comex April copper futures first notice day
April 25 Comex May copper options expiry
April 25 Comex May silver options expiry
April 26 Comex April gold futures last trading day
April 26 Comex April copper futures last trading day
April 26 Comex April E-micro gold futures last trading day
April 26 Comex May E-mini copper futures last trading day
April 26 Comex May miNY silver futures last trading day
April 26 Nymex April platinum futures last trading day
April 27 Comex April silver futures last trading day
April 30 Comex May silver futures first notice day
April 30 Comex May copper futures first notice day
May 24 Comex June gold options expiry
May 24 Comex June copper options expiry
May 26 Comex June miNY gold futures last trading day
May 29 Comex May silver futures last trading day
May 29 Comex May copper futures last trading day
May 29 Comex June E-mini copper futures last trading day
May 29 Comex June miNY gold futures last trading day
May 31 Comex June gold futures first notice day
May 31 Comex June copper futures first notice day
May 31 Nymex June palladium futures first notice day
June 26 Comex July silver options expiry
June 26 Comex July copper options expiry
June 26 Comex July silver futures last trading day
June 27 Comex June gold futures last trading day
June 27 Comex June copper futures last trading day
June 27 Comex June E-micro gold futures last trading day
June 27 Comex July E-mini copper futures last trading day
June 27 Comex July miNY silver futures last trading day
June 27 Nymex June palladium futures last trading day
June 29 Comex July silver futures first notice day
June 29 Comex July copper futures first notice day
June 29 Nymex July platinum futures first notice day

Gold Daily and Silver Weekly Charts

Gold was capped while silver continued to rally off physical buying that might be attributed to the Sprott Physical Trust expansion.

SP 500 and NDX Futures Daily Charts

Google missed after the bell taking some of the air out of big tech. Intel and IBM beat. Microsoft beat earnings and missed revenue.

Frothy market.