19 June 2013

Gold Daily and Silver Weekly Charts - Pretty Much as Expected, With a Twist

"There is something on earth greater than arbitrary or despotic power. The lightning has its power, and the whirlwind has its power, and the earthquake has its power; but there is something among men more capable of shaking despotic thrones than lightning, whirlwind, or earthquake, and that is, the excited and aroused indignation of the whole civilized world."

Daniel Webster

"In the realm of economics, price controls are designed to constrain volatility on the grounds that stable prices are a good thing. But although these controls might work in some rare situations, the long-term effect of any such system is an eventual and extremely costly blowup whose cleanup costs can far exceed the benefits accrued.

The risks of a dictatorship, no matter how seemingly stable, are no different, in the long run, from those of an artificially controlled price."

Nassim Taleb, The Black Rose of Cairo, Foreign Affairs v.90 iss 3

In the best of times, the market is often a short term indicator of itself and its own internals, and little else.  Although it generally maintains some connection with the underlying reality of what it is intended to represent.  It is over the longer term that value is properly discovered and priced, if allowed to proceed without undue interference.

In times like these with genuine investors in short supply, and traders and automated programs gaming nearly everything based on internals, one has to be careful not to read too much into daily moves in market price.  That is a sad artifact of a poorly regulated market, and especially of one that is being manipulated by some temporary, albeit powerful, force.

There was nothing unexpected in what Bernanke or the Fed had said. What surprised me was the depth of the stock sell off AND the fact that while stocks were falling, VIX was falling as well. Although VIX did come back a bit into the close. Traders are certainly petrified aren't they. Not.

I hear a thin crowd turned up to hear Obama speak in Berlin today, as compared to the adoring masses that turned out for his last speech there. And that approval by the people of the Congress is hovering around 10 percent.

Is the bloom off the rose? O rose thou art sick.

Let's see what tomorrow brings. But there was nothing in what Bernanke said today that leads me to conclude that things are improving significantly in the economy AND the Fed will end its highly accommodative monetary posture anytime soon.    But I also doubt we will see efficient and honest markets in that time horizon either.