01 December 2010

Gold Daily and Silver Weekly Charts

One of the more interesting things that happened recently was the decoupling of gold and silver bullion from the equity market and the US dollar.

This is most likely an example of the primary trend reasserting itself after a short term period of artificial price manipulation for option expiration and the first week of the important December delivery at the Comex.

Another way of saying this is that in the short term markets often trade on 'technical factors,' that is, one group of market players may take an overweight position, as we saw this week in the put-call ratio in stocks. So today we had a sharp short covering rally.

Does that really mean anything fundamentally changed? Well, the spinsters can always find 'a reason' for the short term moves in stocks, but it is hard to imagine that what was a disaster last week suddenly becomes all wine and roses this week. Real economies do not shift gears that quickly, thank God. But the wiseguys will use their market positioning, news sources, and rumours to 'manage perception' as do other powerful groups such as the government.

By the way, I hope you have noticed that much of what you hear on the mainstream and from 'experts and analysts' verges on pure propaganda these days. Bloomberg has gotten so outrageous that I can barely stand to watch their shows during the day.

Today for example a nice young lady came in and explained how Social Security was really broke as of 2015 because 'the money was not really there.' Her point was that the trust fund is in US special obligations and since the government spent the money on general things (like tax cuts for the wealthy) it is gone and so cuts must be made.

Well, the US has also spent all the money it is using to pay the interest and redeem the principal on US Treasuries, and so by the same reasoning it ought to cavalierly default on those obligations as well. In fact it ought to default on those obligations first because a Trust is senior as a pre-allocated fund to a non-specific general obligation. But of course that never came up. But that is in effect what is happening with the Fed's quantitative easing. And this is making those who recently looted the system nervous because they have not yet had the opportunity to transfer their dollars into other hard assets and rents producing property.

The problem is that the system has never been reformed, and the money is not reaching the real economy, but merely being used to bail out the creditors who were principally responsible for the financial fraud and subsequent crisis in the first place.

Let's see how this plays out. But expect things to get more disruptive and blatantly unjust because of a lack of moral leadership from the top down and a general deterioration in the concept of duty, honor, and obligation to country and the people in our national leaders and the pampered princes of the 'me generation.'