Stocks and Precious Metals Charts - Let Justice Be Done, Though Heavens Fall - Stock Options Expiration Tomorrow

“You levy a straw tax on the poor
and impose a further tax on their grain.
Therefore, though you have built stone mansions,
you will not live in them;
though you have planted lush vineyards,
you will not drink their wine.
For I know how many are your offenses
and how great your sins.

There are those who oppress the innocent and take bribes
and deprive the poor of justice in the courts.

Seek good, not evil,
that you may live.
Then the Lord God Almighty will be with you,
just as you say he is...

But let justice roll on like a river, righteousness like an ever-flowing stream.”

Amos 5:11-15, 24


"The state of slavery is of such a nature that it is incapable of being introduced on any reasons, moral or political, but only by positive law, which preserves its force long after the reasons, occasions, and time itself from whence it was created, is erased from memory.  It is so odious, that nothing can be suffered to support it, but positive law. Whatever inconveniences, therefore, may follow from the decision, I cannot say this case is allowed or approved by the law of England..."   Fiat justitia ruat caelum.

Somerset v. Stewart, Court of King's Bench, 1772

Some markets caught a bid today, compliments of a cleverly dovish Monsieur Draghi of the ECB.

The ECB head has announced the beginning of the end for their quantitative easing program.   But then he very dovishly added that he does not see interest rates increasing until some time after the middle of next year.

Equities were led higher by big cap tech.  Apparently the Street is cheered by the valuations which, although they are high in the mid 20's range, are not as high as they were at the peak of the tech bubble at the latest turn of the century.

Gold and silver were up despite a sharply higher Dollar.   Merci, Monsieur.

The available for delivery supply of physical gold seems to be getting a bit thin again.

There will be a stock options expiration tomorrow.

If only the markets were the real economy.  Then they could make everything just fine.

As it is, despite all the good news and our fearless leaders birthday, I have a really bad feeling about how this is all going to end.

Need little, want less, love more.   For they who abide in love abide in God, and God in them.

Have a pleasant evening.

Thomas Frank on the Democratic Party, Their Credibility Trap, and the Beleaguered Middle Class

“In its quest for prosperity, the Party of the People declared itself wholeheartedly in favor of a social theory that forthrightly exalted the rich—the all-powerful creative class.

To the liberal class, every big economic problem is really an education problem, a failure by the losers to learn the right skills and get the credentials everyone knows you’ll need in the society of the future.

Professional-class liberals aren't really alarmed by oversized rewards for society's winners; on the contrary, this seems natural to them -- because they are society's winners. The liberalism of professionals just does not extend to matters of inequality; this is the area where soft hearts abruptly turn hard.

Of course Republicans do it too. The culture wars unfold in precisely the same way as the liberal virtue-quest: they are an exciting ersatz politics that seem to be really important but at the conclusion of which voters discover they've got little to show for it all besides more free-trade agreements, more bank deregulation, and a different prison spree.”

Thomas Frank


"What is most important for democracy is not that great fortunes should not exist, but that great fortunes should not remain in the same hands. In that way there are rich men, but they do not form a class."

Alexis de Tocqueville


"People of privilege will always risk their complete destruction rather than surrender any material part of their advantage.  Intellectual myopia, often called stupidity, is no doubt a reason.  But the privileged also feel that their privileges, however egregious they may seem to others, are a solemn, basic, God-given right.  The sensitivity of the poor to injustice is a trivial thing compared with that of the rich."

John Kenneth Galbraith

The examples of the credibility trap are apparent, especially in the Democratic Party because their own contradictions are so glaring.  It is harder to see in the Republicans because their hypocrisy in serving the wealthy faithfully in economic matters while duping the public with inflammatory cultural issues is almost a trademark.

But as Frank relates, the middle class is being badly abused and neglected by both professional political parties.  And this is unfortunate, because it is a strong and stable middle class that provides a large social organization its coherence and durability.

I do not see meaningful reform coming until the status quo in American party politics is repudiated and renewed again with a more democratic focus on people.

The powerful, those who built and have been fabulously rewarded by the current system, will oppose any threat to their exorbitant privilege, which they see as perfectly equitable and justified and fully well-deserved, with all the wiles and power moves that they can deploy, even against their own.

When one has all that a normal person could possibly need and even want, those who continue on playing for blood, who are generally 'afflicted'  in some manner— for those personalities it becomes all about the game, and winning for its own sake, and power.  And there will never be enough people and things to fill their emptiness.

This growing dichotomy, this gulf between appearance and reality, between policy and outcomes, will not only strain the social fabric, but historically is the kind of human dynamic that can light a fire in hearts and minds, despite increasingly desperate attempts to discredit, suppress, and then extinguish it.

And there are too often consequences that no rational person would wish happen.  And yet they do, and with some striking, almost cyclical, regularity.  Such is the weakness of human nature, and the wonderful power of self-delusion.

Stocks and Precious Metals Charts - The Recovery™ - Bare Ruined Choirs

'Bare Ruined Choirs' - Detroit, Michigan

"By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.  By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. 

The sight of this arbitrary rearrangement of riches strikes not only at security but at confidence in the equity of the existing distribution of wealth."

John Maynard Keynes


"In reality high profits tend much more to raise the price of work than high wages."

Adam Smith


"That time of year thou mayst in me behold
When yellow leaves, or none, or few, do hang
Upon those boughs which shake against the cold,
Bare ruined choirs, where late the sweet birds sang."

William Shakespeare, Sonnet LXXIII

The FOMC increased the target range for its benchmark interest rate by 0.25% to a range of 1.75%-2%.   There was no dissent among the eight voting members.

In its statement the Fed said the economy is growing at a 'solid rate,' a change from its May statement that the economy was growing at a 'moderate rate.'   They eliminated their language about policy being 'accomodative' for some time, and said that 'recent data suggest that growth of household spending has picked up, while business fixed investment has continued to grow strongly.'

Fed officials thank that monetary policy is near the interest rate at which the economy would experience full employment and price stability, which the Fed has defines as 2% inflation.

The Fed’s statement also includes a summary of economic projections, which are economic, labor market, and interest rate forecasts from Fed officials.

The Fed raised its outlook for growth and inflation this year, while lowering its expectations for the unemployment rate.

The dot plot now shows most Fed officials believe that two additional rate hikes are coming in 2018, bringing the year’s total up from three to four.

In other words, The Recovery™ is alive and well.

In the press briefing, Chair Powell said that the Fed is keeping an eye on non-financial corporations and households, and see no real problems with either with regard to debt and leverage there.

Are you kidding me? The average American working household is living paycheck to paycheck, with almost no cushion to cover a myriad of common incidents that occur in life that can quickly become personal tragedies.

I see no reason yet to change my longer term forecast of economic stagflation to be resolved through exogenously motivated systemic changes, prompted perhaps by broad rejection of the status quo and expressions of civil dissatisfaction reminiscent of the late 1960s.

Stagflation is such an unnatural economic outcome that it takes a remarkable dedication to policy errors and self-deception to achieve it.  And as surprising and utterly improbable an outcome it seemed back in 2005, it sure seems more likely now given what the Fed and fiscal authorities have done.

And it is still improbable.   But if stagflation does come, I am fairly confident that the establishment and their technocrats will blame it on Trump and his trade policies.    That I think is almost a sure thing.  The credibility trap would demand it.

Keep an eye on the yield curve.

Based on this more hawkish perspective gold and silver slid and then recovered and finished marginally higher. Silver took the 17 handle and gold at 1300. The dollar drifted a little lower.

Stocks gave up much of their early gains of the day to finish lower.

Need little, want less, love more. For those that abide in love abide in God, and God in them.

Have a pleasant evening.

Stocks and Precious Metals Charts - Markets Gangnam Style - They Never See It Coming

"This means that the Government is following through on Treasury Secretary James A. Baker 3d's comments on Thursday implying that the United States might let the dollar fall in reaction to higher interest rates in West Germany. Mr. Baker said today that Bonn ''should not expect us to sit back here and accept'' rises in German interest rates that experts say could slow the economies of both countries and that indirectly have been contributing to falling stock prices on Wall Street.

Analysts and the Administration official, who declined to be identified, said Mr. Baker's remarks, in a television interview, meant that the Administration and the Federal Reserve Board would not interfere if market pressures start pushing the dollar down somewhat against the mark. They also said a decline of the dollar against the mark could be expected to bring a decline against many other currencies as well.

During an appearance on the Cable News Network program, ''Newsmaker Saturday,'' Mr. [James] Baker discussed major influences that have been playing upon a Dow Jones industrial average that plunged 9.5 percent this week, or 235.48 points, producing the largest weekly loss since World War II. The drop on Friday of 108.36 points alone wiped out $145 billion in the value of investors' stocks.

''I think if you look at the underlying economic fundamentals in this country, they're very, very good,'' he said. But he added that the stock market appeared to be reacting to prospects of tax increases by Congress, the enactment of protectionist legislation to reduce foreign imports, and to fears of rising interest rates and inflation. He also said growth of computer-generated ''program trading'' of securities had contributed to the size of the daily sell-offs."

NY Times, US Said to Allow Decline of Dollar Against the Mark, Sunday, October 18, 1987

As a reminder, the US stock market crashed on Black Monday, October 19, with the Dow Jones Industrial Average falling roughly 22.6%.

The FOMC will be releasing their June rate decision tomorrow afternoon.

The market is broadly, if not unanimously, expecting a 25 bp rate increase tomorrow.

They are further expected three rate increases this year. Although given the *right* kind of economic reports there may be room for a fourth.

The Administration is signaling less concern with the impacts, collateral damage if you will, of their policy decisions and liquidity drains on the emerging markets.  This is the famous 'our dollar, your headache' posture that was made famous by James Baker III.

That sort of attitude tends to dissipate quickly when markets start smoking and the interdependent consequences of overly leveraged and gimmicked markets start falling down, and losses come home to roost on the market overlords, the Banks.

Here is the substance of the Fed's recent statements:

1. Inflation expectations are low and little changed
2. Risks to the economy are balanced
3. Rates will be raised, but slowly

Let's see if the Fed varies any of its familiar patterns.

Gold and silver were off a little on a slightly stronger dollar.

After the bell we are waiting for the judge's decision on the AT&T and Time Warner merger. This decision may have a large impact on the M&A climate this summer.  Watch for the action in similar 'vertical' plays involving content holders like Disney et al.

As a reminder there will be a stock option expiration for June this Friday. I believe that this one will be a 'triple witch' if not a quad.

The Korean summit flashed in Singapore, with a promise and a hope that we can all just get along.

"What can be added to the happiness of a man who is in health, out of debt, and has a clear conscience?"

Adam Smith

That may be advice from a 'moral philosopher' worth heeding. 

Need little, want less, love more.  For those who abide in love abide in God, and God in them.

Have a pleasant evening.