22 February 2019

Stocks and Precious Metals Charts - End of the Line - The Big Gold Bullion Short Overhanging the Market

"Time is coming when markets search frantically for physical collateral to find that paper far exceeds underlying collateral for several metals and other resources.   I am warning that when markets fall in sustained negative response to bursting bubbles, widespread deleveraging will reveal insufficient hard collateral underlying traded asset-backed securities. 

The words rehypothecation and hyper-rehypothecation may be rediscovered or remembered again, forgotten somehow during much of decade since the Great Financial Crisis."

Harald Malmgren

"Those who run Washington generally trust the inhabitants of think tanks of their political bent to provide the intellectual foundations upon which much of public policy is built.  At least in some cases, however, that trust couldn’t be more deeply misplaced, since cornerstones of the ever-expanding think-tank universe turn out to be for sale.

In other words, those experts you regularly read or see on screen, whose scholarship and advice Washington’s politicians and other officials often use, are in some cases being paid, directly or indirectly, by the very countries [corporations, and oligarchs] on which they are offering advice and analysis.  And here’s the catch: they can do so without ever having to tell you about it."

Ben Freeman

Although not exclusively, think tanks seem to be spin factories in service to some faction of the global political powers and/or the moneyed interests.

There was some news from Washington in the afternoon that the US and China had reached an agreement in principle on currency, and are going to be toddling along with the other, more difficult trade issues.

Gold took its correction from a short term overbought condition reasonably well, as did silver. Let's see how it can do next week.

There is a largely undisclosed 'short' position on gold bullion, that exists almost without regard to the paper shorts that ebb and flow in the trading markets.   As Harald Malmgren notes above, when that short gets called, it will leave a mark.

There will be a significant amount of economic data next week, some of which may be market moving.   I have included the calendar for next week below.

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

Have a pleasant weekend.

21 February 2019

Stocks and Precious Metals Charts - The Madness of Crowds

“In reading The History of Nations, we find that, like individuals, they have their whims and their peculiarities, their seasons of excitement and recklessness, when they care not what they do.  We find that whole communities suddenly fix their minds upon one object and go mad in its pursuit; that millions of people become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first.”

Charles MacKay, Extraordinary Popular Delusions and the Madness of Crowds

"Put on the whole armour of God, so that you may be able to withstand the allures of evil.   For we wrestle not against flesh and blood, but against principalities and powers, against the rulers of the darkness of this world, against spiritual wickedness in high places.  Therefore take for youself the whole armour of God, that you may be able to withstand the evil of the day, and having done all, to remain standing."

Ephesians 6:11-13

“Judging others makes us blind, whereas love is illuminating. By judging others we blind ourselves to our own evil and to the grace which others are just as entitled to as we are.”

Dietrich Bonhoeffer

"I am on your side.   But you have no way of knowing it, because your heart is blind."

Albert Camus, The Stranger

A people do not just go mad on their own for the most part.  A few do, some perenially wacky minority.  But the rest have to be lied to and manipulated through well-crafted narratives that play on their worst emotions by those who would unleash the madness to serve their own selfish ends of money and power.   What they do not realize is that in the end the madness serves none but itself.

Stocks fell off a bit today, although they tried to stage a late afternoon rally that failed to stick.

Tech was the lead sled dog in bubbleland, with the SP 500 lagging. Pintrest has decided to join the unicorns and go IPO.

Gold and silver both backed off a short term very overbought condition.

The US Dollar rallied. The forex wiseguys love to sweep the markets back and forth to skin those who rely overmuch on leverage.

The economic news this morning was rather bad, with both Durable Goods Orders and the Philly Fed disappointing.

Until the markets and the financial system are reformed, there will be no sustainble recovery.  And given the current moral climate, and our fatal attraction to greed and power, the chances of social and polticial progress in support of reform seem a bit difficult.

Have a pleasant evening.

20 February 2019

Stocks and Precious Metals Charts - Minutiae - Force and Fraud

"Monetary conditions exert an enormous influence on stock prices. Indeed, the monetary climate - primarily the trend in interest rates and Federal Reserve policy - is the dominant factor in determining the stock market's major direction."

Martin Zweig

“Sometimes people hold a core belief that is very strong. When they are presented with evidence that works against that belief, the new evidence cannot be accepted. It would create a feeling that is extremely uncomfortable, called cognitive dissonance. And because it is so important to protect the core belief, they will rationalize, ignore and even deny anything that doesn't fit in with the core belief.”

Frantz Fanon

"The real collapse of our currency began when it became evident that certain industrial circles were more powerful than the government."

Adam Fergusson, When Money Dies: The Nightmare of the Weimar Collapse

"A credibility trap is when the regulatory, political and/or informational functions of a society have been so thoroughly compromised by a corrupting influence and a fraud that they cannot address the situation without implicating, at least incidentally, a broad swath of their own power structure.  The broader status quo has at least tolerated the corruption and the fraud, if not having profited directly from it, and most likely continues to do so.

And so a failed policy and a fraud can become almost self-sustaining long after it is seen to have failed, and even become counterproductive, because admitting failure is not an option for those in power, and those who which to maintain their access to it."

Unsustainable social or economic arrangements, such as an officially mispriced valuation of a market, a commodity, or even a currency for example, are backed by force and fraud. And as the fraud loses its power over time, force must increase, until there is an end in genuine reform, or eventual self-destruction.

People who have become complacent, and even a bit arrogant in their theoretical myopia, forget the need for confidence, and the interplay between full faith in a process and the acquiescence of people to common values.

It can be useful to witness a currency die first hand in order for the true nature of a monetary system to be fully understood.  Such a systemic failure strips the commonly held but essentially arbitrary assumptions about official valuations bare.  It exposes the fraud behind the force, and the force that sustains the fraud.

The FOMC minutes indicated a consensus that the unwinding of the Fed's Balance Sheet will be halted by the end of this year.

Stocks drew some encouragement from this, as contrasted with the decline and gloom with which they went into the release of the minutes.

Gold and silver gave up their gains for the most part, and the Dollar moved back to unchanged.

Physical gold has flowed out of the Comex licensed warehouses quite handily since China has returned for business.

Have a pleasant evening.

19 February 2019

Stocks and Precious Metals Charts - In the Garden of Beasts - Developing Gold Chart Formation Targets 1550

"Again the memory of those days swept over him like a nightmare— the people they had met travelling; then people who couldn't add a row of figures or speak a coherent sentence.  The little man Helen had consented to dance with at the ship's party, who had insulted her ten feet from the table; the women and girls carried screaming with drink or drugs out of public places—

—The men who locked their wives out in the snow, because the snow of twenty-nine wasn't real snow.   If you didn't want it to be snow, you just paid some money."

F. Scott Fitzgerald, Babylon Revisited, February 1931

"To the politician and administrator laissez-faire was simply a principle of the insurance of law and order, with the minimum cost and effort. Let the market be given charge of the poor, and things will look after themselves...

Hobbes had argued the need for a despot because men were like beasts; [Joseph] Townsend insisted that they were actually beasts and that, precisely for that reason, only a minimum of government was required.

The acceptance of near-indigency of the mass of the citizens as the price to be paid for the highest stage of prosperity was accompanied by very different human attitudes. Townsend righted his emotional balance by indulging in prejudice and sentimentalism [Dissertation on the Poor Laws].  The improvidence (lacking personal responsibility) of the poor was a law of nature, for servile, sordid, and ignoble work would otherwise not be done. (born to be vile?)  Also what would become of the fatherland unless we could rely on the poor? "For what is it but distress and poverty which can prevail upon the lower classes of the people to encounter all the horrors which await them on the tempestuous ocean or on the field of battle?"

Karl Polanyi, The Great Transformation, 1944

"Thus the elements are in place: a weak legislative body, a legal system that is both compliant and repressive, a party system in which one (I would in 2019 now say either) party, whether in opposition or in the majority, is bent upon reconstituting the existing system so as to permanently favor a ruling class of the wealthy, the well-connected and the corporate, while leaving the poorer citizens with a sense of helplessness and political despair, and, at the same time, keeping the middle classes dangling between fear of unemployment and expectations of fantastic rewards once the new economy recovers.

That scheme is abetted by a sycophantic and increasingly concentrated media; by the integration of universities with their corporate benefactors; by a propaganda machine institutionalized in well-funded think tanks and conservative foundations; by the increasingly closer cooperation between local police and national law enforcement agencies aimed at identifying terrorists, suspicious aliens and domestic dissidents."

Sheldon Wolin, Inverted Totalitarianism, 2003

“Each day we are becoming a creature of splendid glory, or one of unthinkable horror.”

C. S. Lewis

The financial spokesmodels were unnerved with the rally in gold today, which was in no doubt due in some part to the weakness of the Dollar, and the stress on the physical supply with the return of China to business from their long holiday week.

As noted previously there is a relative scarcity in the 'free float' of physical gold, and the tricks and forced exchanges, and soft confiscations from other countries can only go so far in the face of a steady, almost unrelenting, demand for the real thing.  With leverage of paper to bullion in the gaming markets estimated at 100 to 1, a disruption in the flow of physical supply could be rather impressive.

The concern of the financial commentators was that it is unusual for gold to rally in what appears to be a safe haven move, but with stocks also rising. Always the stock market, for this crowd.  That is their major concern, their first priority. The system is God, and damn the people whom it was designed to serve and support.

Stocks did back off markedly into the close after a rather robust showing during the day. We must put our best foot forward for the rest of the world after all.  And at the end of the day, we can relax the charade a bit, and pocket the grift.

Chart-wise, gold has begun to flesh out a new cup,  which if it succeeds in cmpleting the formation, and if it manages subsequentlyt to break out, will target $1550 at a minimum measuring objective on the chart.

As I noted in some posts over the holiday weekend, the long bear market in gold, which was sustained by managed selling of physical gold by central banks in order to manage the market has clearly ended around 2007.   The price of gold began to rally a few years earlier in anticipation of this sea change in selling and accumulation by the major players.

And so now, after a long consolidation which has followed the first leg of the new bull market, the price of gold appears to be attempting to begin its second leg, and move to take out the prior highs.  Let's see if it can maintain its momentem to the rim of the cup, so to speak.  At that point a retracement is often customary.  Perhaps a retracement now would not be unusual after a long quick run.

Longer term a higher price in gold is likely to be accompanied by social disruption and political uncertainty as one might expect on an examination of history.  Gold provides a safe harbor in troubled times.  And we do seem to be lurching towards some perversely desired rendezvous with destiny, taking it to the limit, so to speak.

If by some miracle of providence we could have what a good person might wish for, rather than what they might see coming despite all their efforts, our grandchildren might not be tempted to damn us for our willful foolishness and careless pride. 

We can take comfort in the undeniable fact that the future is an elusive mix of possibilities and probabilities, and that the eventual outcome is, in the final analysis, largely unknown but in the hands of Providence, as well as our own.

But beware the leaven of the Pharisees and of Herod.

Have a pleasant evening.