31 January 2011

SP 500 and NDX March Futures Daily Charts - End of Month and January Indicator

The futures achieved a nice bounce off the big dip this morning to close the month on a positive note. As January goes, so goes the year, and it appears that we are in for eleven more months of clumsy price manipulation, central bank subsidies for their pals on the Street, and accounting fraud.

I might have been more impressed if the VIX had fallen more, if tech had followed more strongly instead of the usual SP futures wiseguy jam-boree, and if the stock touts were not out so aggressively and desperately banging their drums with the same old clichés to entice mom and pop to take the handoff here. Stocks are good for 10% per year, so just close your eyes and buy (now). That is what passes for financial wisdom on the extended informercial that is US financial television.

The divergence between the SP and the Russell is worth watching. The SP 500 tends to be a showpiece for the carnies to lure in the fish. And that divergence became a small chasm around mid-month and never really recovered.

Thin market, suseceptible to exogenous shocks. Maybe it will grind higher, but I do not like it. I put stocks shorts back on today on the late day strength after having taken down all my gains on Friday afternoon. These are balanced with a slightly different beta mix of some select longs in the precious metals sector.

Gold Daily and Silver Weekly Charts

Premiums for Physical Gold Bullion Bars Highest Since 2004 - Reuters

"Men judge more from appearances than from reality. All men have eyes, but few have the gift of insight." Niccolo Machiavelli

30 January 2011

Quantitative Easing and Relative Asset Performance From 2008: Gold, Silver, SP 500, US Dollar

Note the extreme volatility in silver. It was actually underperforming gold until the short squeeze breakout began in the second half of 2010. It is quite possible that this short squeeze was triggered, at least in part, by the Fed's announcement of a second round of quantitative easing and the further debasement of the dollar. That second round was a signal of their monetary policy intentions. The Fed will print to the limit of the bond and the dollar in a de facto default on the debts. And this is what has China angry.

When it becomes clear that the Fed will be doing quantitative easing for quite some time, it will be progressively harder for the bully boys in the bullion banks to keep 'a lid on things,' with a wink and a nod from the regulators. And then it gets even more interesting to say the least.

Consumer Metrics Institute: What US 4Q 2010 GDP Estimate Was Really Telling Us

Consumer Metrics Institute
What the BEA's Advance Estimate of Fourth Quarter 2010 GDP Was Really Telling Us
January 29, 2011

The Bureau of Economic Analysis' ("BEA") "Advance Estimate" of the fourth quarter 2010 Gross Domestic Product ("GDP") had a headline annualized growth rate of 3.17% for the U.S. economy, some 0.62% higher than their estimate of the third quarter's annualized growth rate of 2.55%. It is important to note that historically the BEA eventually adjusts "Advance Estimate" percentages by an average of 1.3% (up or down, with the standard deviation of the adjustments about 1.0%), making all the the below analysis a necessary but possibly meaningless exercise.

As a quick reminder, the classic definition of the GDP can be summarized with the following equation:

GDP = private consumption + gross private investment + government spending + (exports − imports)

or, as it is commonly expressed in algebraic shorthand:

GDP = C + I + G + (X-M)

For the fourth quarter of 2010 the values for that equation (total dollars, percentage of the total GDP, and contribution to the final percentage growth number) are as follows:

GDP Components Table

Total GDP=C+I+G+(X-M)
Annual $ (trillions)$14.9=$10.6+$1.8+$3.0+$-0.5
% of GDP100.0%=71.1%+12.1%+20.1%+-3.4%
Contribution to GDP Growth %3.17%=3.04%+-3.20%+-0.11%+3.44%

The quarter-to-quarter variances in the contributions that the components made were startling, and they can be better understood from the table below that breaks out the component contributions in more detail (and over time). In the table we have further split the "C" component into goods and services, split the "I" component into fixed investment and inventories, separated exports from imports, and listed the quarters in columns with the most current to the left:

Quarterly Changes in % Contributions to GDP

Total GDP Growth3.17%2.55%1.72%3.72%5.02%1.59%-0.69%-4.88%
Consumer Goods2.26%0.94%0.79%1.29%0.42%1.62%-0.32%0.41%
Consumer Services0.78%0.74%0.75%0.03%0.27%-0.21%-0.79%-0.75%
Fixed Investment0.50%0.18%2.06%0.39%-0.12%0.12%-1.26%-5.71%

While consumer services and exports remained relatively stable, the growth contributions of the other components changed dramatically. In fact, some of the swings in the component values dwarfed the overall quarter-to-quarter improvement of 0.62%: the changes in trade "added" nearly 5.2% to the total, while the swing in inventories "subtracted" over 5.3%. Statistically it can be challenging to pull legitimate composite signals from this amount of quarter-to-quarter noise.

Furthermore, some of the key components (e.g., the trade numbers and inventories) represent, at best, two months of real data plus one month of "guesstimate" -- a perilous task given the rates of change being experienced from quarter to quarter (particularly in the "deflater" being used, as covered below). The "Advance Estimate" will be revised at the end of each of the next two months, and then again in July. One year ago the prior fourth quarter's "Advance Estimate" ultimately ended up being erroneously high by about .7% by the time that the revisions were complete (six months later, at the end of July).

Additionally, the reported real (i.e., inflation adjusted) annualized growth rate of 3.17% benefited from a relatively low annualized inflation assumption of 0.3% for the quarter -- which contradicts a number of other current inflation estimates, including the December year-over-year CPI numbers (running 5 times higher at about 1.5%), the PPI finished goods numbers for December (reported to be over 10 times higher at a 4.0% annualized rate) and the BEA's own "deflater" for the prior quarter (which was set 7 times higher at 2.1%). Arguably, a major portion of the 3.17% growth would evaporate if the 0.3% "deflater" proves to be unduly optimistic.

Ironically, the flip-side of the low "deflater" being used for the entire economy is the extremely high 21.8% annualized "deflater" that was used to inflation-adjust the amounts of goods that were imported during the quarter. This huge spike in the imported goods "deflater" (up 31% from a -9.2% dis-inflationary number used in the third quarter) partially explains the dramatic drop in reported imports in the GDP equation (and that consequently boosted the overall GDP growth rate by over 4.9%). Given the recent movement in commodity prices (especially oil) it is hard to quarrel with the 21.8% number per se (even if it brings the 0.3% overall "deflater" into question), but the impact of that "deflater" has certainly added to the noise present in this GDP release, if not to the headline number itself.

Setting aside for the moment our concerns about the reliability of the data, a face-value read of the report reveals several surprises in the data:
► The inventory building that had been adding significantly to the headline GDP growth rate since the third quarter of 2009 has sharply reversed. This component is generally subject to the largest revisions from release to release, since the data seems to lag more than most of the series. But with that caveat, it is clear on face-value that the five consecutive quarters of inventory building has ended -- perhaps with a vengeance.

► The net growth of governmental spending has also reversed. Given the political environment in Washington and the fiscal realities facing state and municipal governments, that trend is likely real and it will probably stay with us for some time.

► As mentioned above, the BEA reports a contraction in the quantity of imported goods and services by nearly 4%. While a contraction of this magnitude has occurred quarter-to-quarter many times before, it has generally been accompanied by (and ultimately caused by) a sharp contraction in consumer spending. No such change in consumer behavior is even hinted at elsewhere in the report. The only plausible explanation for this contraction is a huge shift in market share from foreign producers to domestic sources. However, no such shift was observed in any of the larger segments of the consumer economy -- including automobiles, apparel, electronics and oil.

► Again at face-value, about a quarter of the annualized growth (or about 0.83%) came from a recovery in residential housing investment, which is reportedly now growing at a tepid 0.08% annualized rate. This was the second positive quarter for residential housing investment during the year (but only the third over the past four years), and portends well for the economy if the reported trend continues. Our concern, however, is that the data used in this series has been subject in the past to short term distortions (e.g., permit rushes to beat code deadlines).

► Consumer spending was reported to have strengthened by about 1.3%, with consumer goods now being shown to be have an annualized growth rate of 2.26%.

We would like to believe at face-value the BEA's latest GDP report. However, even if it is absolutely correct, it portrays turbulent undercurrents in this economy that warrant attention:
► The recent round of inventory building is over. Inventory cycles generally run for a number of quarters, with the last building cycle running for 5 consecutive quarters and the last inventory draw-down lasting for 8 consecutive quarters. Inventories are likely to be a drag on the GDP over at least the next year.

► Governmental support of the economy has begun to sharply decrease. Mr. Bernanke notwithstanding, real commerce created by governmental entities has begun to decline, and it is likely to continue to do so for the foreseeable future.

► The recent rapid increase in commodity prices has caused a correspondingly rapid decrease in reported imports. Not reported is what the same rise in commodity prices has done to the purchasing power of consumer take-home pay. If the 31% swing in the quarter-to-quarter price of imported goods is correct, real discretionary consumer spending is about to take a serious hit.

Those observations can be drawn from the report if it is taken a face-value. Not obvious from the report itself is a turbulence created by the variance between the past few quarters of GDP reports and the experiences of the un- or under-employed in America. It also portrays a continued and reasonable economic growth that may seem unbelievable to homeowners trapped by their mortgages. It paints a picture of modest prosperity that is probably contrary to the real-world experiences of "Main Street" Americans that on a daily basis drive past strip malls that are at least as "Available" as occupied.

Our data continues to indicate that this recession and the much reported recovery (as supported by this GDP report) have not been a shared experience of all Americans. Mr. Bernanke, Mr. Geithner and their colleagues at Goldman Sachs have probably not personally felt the impact of this economic event to the same extent as those of us without privileged access to taxpayer supported defined benefit plans, pay checks backed by self-printed money, zero cost loans or microsecond access to equity market transaction data before those transactions are even executed.

The turbulent undercurrents read from the BEA's report don't address the social consequences of a likely widening gap between the rich and poor of this country -- or the young and old. Cultural, racial, gender and educational gaps have probably widened as well -- and we may well be seeing signs of that in our data. Frankly, no amount of slicing or dicing the BEA's numbers can reconcile this "Advance Estimate" report to the behavior of the on-line consumers that we track. Our consumers are still contracting their on-line demand for discretionary durable goods on a year-over-year basis -- and they have now been doing so for more than a year.

We have written extensively before on the possible causes for this divergence (see our FAQs for a brief summary of the methodology differences involved and a more detailed discussion of this most recent divergence). We are also keenly aware that our readership may be suffering from "contraction fatigue" and becoming increasingly inclined towards the good news coming out of Washington. Unfortunately, our data is what it is, as our "Contraction Watch" so clearly demonstrates:

In the above chart the day-by-day courses of the 2008 and 2010 contractions in our Daily Growth Index are plotted in a superimposed manner with the plots aligned on the left margin at the first day during each event that our Daily Growth Index went negative. The plots then progress day-by-day to the right, tracing out the changes in the daily rate of contraction in consumer demand for the two events. The 2010 contraction event is now more than a year old, dating back to January 15, 2010. Although the chart clearly bottomed at about 9 months into the contraction (at roughly 270 days), the rise since that bottom has been neither steady nor substantial. In fact, there is no way to forecast when the indicated contraction of on-line consumer demand for discretionary durable goods will end based solely on the recent course of the blue line.

The above chart speaks to more than the continued possibility of a (now generally dismissed) "double-dip" recession. It indicates that discretionary spending habits have changed (and remain changed) for the demographics that we track. The lingering contraction and near lateral movement of the blue line indicates that modest prolonged year-over-year contraction may be a new "normal" for the economy. If so, this is not something that the vast majority of Americans have ever experienced. Only our grandparents (or our peers in Japan) have seen anything of this sort. Let's hope that the BEA is correct. I'd rather have our data be wrong than to miss an entire decade of growth.

29 January 2011

Gold Chart - This Is What I Thought Was Probably Going To Happen Ex Egypt

Just to expose a little more of my process, this chart represents what I had *thought* might probably happen in this gold correction. This is a very oversimplified representation, because I also thought we might be making this low around February 4, but I was too lazy to draw in the extra bars to show that scenario as well.  But you get the idea.

It appears that the troubles in Egypt have given the lotus eaters a bit of a wakeup call, and so it was risk off on Friday. That is not to say the correction in metals and the ramp in stocks could not start up again next week, as this ersatz capitalism has a wonderful tendency for convenient forgetfulness when it suits the plans of the monied interests.

The shame of this market is not the occasional fraudulent element so much as any complicity in this greater degree of deception by regulators, politicians, and the bankers misusing public funds and trust, taking from those whose only desire in life is honest work and raising families, with a little comfort, safety, and happiness.

In other words, markets will always have some criminal element, some minority inclined to fraud. But when this tendency becomes general, and corrupts those designed to protect and advise the public, sooner or later there will be justice.

And with justice delayed, too often the trappings of hell and bad karma come with it. This is what we are starting to see today in far flung places around the world. May God have mercy on us.

28 January 2011

Gold Daily and Silver Weekly Charts - Potential Intermediate Bottom in Gold

The almost incessant bear raids on gold and silver took a break today as what economists like to call an 'exogenous event' took risk off the table, triggering a sharp flight to safer havens.

The gold and silver markets were short term oversold, in honor of Comex option expiration. Given an apparent free pass from the CFTC, the wiseguys were whooping it up in the paper metals markets, extending their leverage and selling short.

A hedge fund with a spreading strategy blew up earlier this week, leading to a massive decline in open interest and a sharp selloff in gold. One might surmise that this pigeon had been carefully marked out by his bankers for the slaughter, and it only needed the sanction of a poor GDP number, an FOMC decision, and the all clear from the regulars and the regulators to pluck the unlucky ducky. Perhaps he will have more time to spend at the poker tables, for he is a ranked player.

Silver made an exceptionally sharp rebound, again highlighting the artificial nature of this market and the price suppression. Some day the Comex will blow up in a default, and weighty people with grave pronouncements will opine endlessly on bubblevision about it and the need for 'new regulations.' But at the end of the day, it will be the investors who trusted in the integrity of the market who will be the losers.

A third chart has been posted. This is a very tentative analysis of the gold market, and a possible formation that we noted earlier this week that might be activated around the 1300-1310 support level. We had not expected this to happen until next week, into a possible cycle low point, but sometimes things happen and the market adjusts.

Too soon to print this one, but I wanted to share it from my 'private stock' of charts which I watch for my own purposes and needs.

I like gold, but silver looks more likely to be the irresistible force this year. I particularly like it because it is still so narrowly owned and little understood. When a certain contrarian bellwethers I watch become bullish of silver I might consider selling some, but not until then. And it appears as though it might have a long way to go, with lots of volatility and corrections. Never boring.

My biggest concern as always is the general liquidation panic that sweeps aside all assets, and in which everything is sold. This is hard to predict and not a common occurrence. The steady decline is more likely. There is an interesting divergence between stocks and gold/silver these days. It certainly worked this week. Short US stocks and long metals was a double barrelled blast.

SP 500 and NDX March Futures Daily Chart - The Sleeper Awakens

This is familiar. Demonstrations are taking place in a country for several days, and suddenly the US financial markets take notice and dive as it is risk trade off. Sounds like Greece all over again, without the flash crash.

Even Hillary of State weighed in, hedging the US bets on the if-come, encouraging their guy for thirty years Hosni Mubarak to be measured in his response, and perhaps step aside nicely since they like the opposition leader Mohamed ElBaradei who although currently under house arrest may be a contender, depending on which way the military tilts. A military I should add, that receives more direct US support ($2 billion annually they say) than any other country except Israel.

Perhaps the Egyptian government should compromise and force the demonstrators into free speech zones, deep in the desert and away from city and canal. Its the American way after all.

The important IPO of BankUnited was consummated this morning, and Blackstone and Carlyle, along with their underwriters on the Street, breathed a sigh of relief, and then pushed the 'sell' buttons.

The US equity market is very thin and held in weak hands. When genuine selling appears, and in this case for a part the withdrawal of artificial support, prices drop sharply as the risk trade comes off. Gold, silver and the dollar all rallied. But what about the bonds? Cliche-wise, this will probably end badly as Ben stretches the dollar and the bond to fill the pockets of the monied interests. 

And as for the next incident to stir the muddy waters of this gaseous recovery, head to higher ground if they start showing live pictures of demonstrations from the Americans' worst nightmare, Ar Riyadh. Then this will not be so easily dismissed as the rants of an 'uneducated people incapable of democracy'' as they said today on American TV, don'cha know. 

Net Asset Value of Certain Precious Metal Trusts and Funds

It will be interesting to see if this is a rounded intermediate correction and consolidation followed by a resumption of the fundamental trend and a new breakout higher, as we had seen in May-August last year.

More on this tonight.

Despite the Miss on Expectations Today's US 4Q GDP Number Was Still a Puffball

I just did not have the time or energy to do the work analyzing today's US GDP estimate for the 4Q10.  The drop in stocks and spike higher in metals had me squaring off accounts between the usual non-financial chores. 

For me the 'tell' that something was dodgy was the unusualy lower chain deflator which is used to calculate the 'real' GDP by removing the inflationary effect. .3% versus 1.5% expected and 2.1% prior. For every tick lower on the deflator the headline GDP growth number rises.

John Williams of ShadowStats did his usual excellent job of dissecting the corpus of the BEA's work and I am grateful for this excerpt. His site is a must read.

You may wish to take the time to read some of the free reports, on how the US government numbers are 'adjusted' over time, and his hyperinflation report which is quite interesting. I still do not agree, preferring to stay with my stagflation forecast which has long been my expected outcome. But I am keeping an open mind to both the deflationary and hyperinflationary outcomes.

Bear in mind that the UK had showed a contraction for the same period, a much more credible representation of the numbers. And so the talking heads would say that the UK suffered from the weather, and was mired in snow. Yes, and the US economy is mired in self-serving scoundrels and craven nincompoops.

GDP Estimate Was of Unusually Poor Quality.

This morning’s "advance" estimate of annualized 3.17% real (inflation-adjusted) GDP growth was nonsensical, even though it was somewhat shy of consensus. Most of the reporting was based on guesses; hard data simply are not available this early. Consider that more than the total reported fourth-quarter growth was accounted for by a narrowing of the trade deficit. The Bureau of Economic Analysis (BEA) indicated that 3.44 percentage points of growth was generated by an improved net export account. That estimate, however, was based on just the two months of available data (October and November) for the quarter. December’s data will not be available until February.

As noted in Commentary No. 345, the relative improvement suggested in the trade deficit for the fourth-quarter (based on the October and November reporting) could have added 1.3 annualized (0.3 quarterly) percentage points to fourth-quarter real GDP growth, but not 3.44 percentage points. That differential required extremely optimistic assumptions on the part of the BEA as to the December trade results. Accordingly, the upcoming trade release will be particularly interesting in terms of its implications for GDP revisions.

Separately, after quarters of a significant inventory build-up, a reduced pace of relative inventory increase reduced the reported real fourth-quarter GDP growth rate by 3.70 percentage points. Inventories at this point in time are even less reliable than the trade data. Nonetheless, inventory build-up still accounted for half the annual average GDP growth in 2010.

Also, despite the 30% annualized (8% quarterly) quarter-to-quarter contraction in housing starts, residential investment rose at a 3.4% annualized pace.

The point here is that reported 3.17% annualized growth, with the regular +/- 3.0% 95% confidence interval, along with such unusually large swings in unreliable components, should not be taken as a serious or meaningful measure of quarterly economic growth. I believe that realistic growth would have been flat-to-minus and eventually that should prove out in long-range revisions.

Where early GDP reporting generally is of extremely poor quality, some catch-up should be seen in the annual benchmark revisions due for release on July 29th. At that time — as will be seen with the payroll employment reporting due for revision a week from now — the revisions to prior economic growth generally will be to the downside, showing a more-protracted and deeper economic contraction in place than officially is recognized at present.

With quarterly weakness in the housing starts and in new orders for durable goods, the indications remain in place for a re-intensifying economic downturn, as discussed inSpecial Commentary No. 342.

"Advance" Guesstimate on Fourth-Quarter 2010 GDP Was Unusually Flimsy.

The opening comments covered several unusual issues with the current GDP report. A more traditional problem lies in how inflation was handled. On a one-to-one basis, the lower the inflation rate used to deflate the GDP, the higher will be the real or inflation-adjusted GDP growth rate. Annualized GDP inflation — the GDP Implicit Price Deflator — was reported showing annualized inflation of 0.3% in the fourth-quarter, down from 2.0% in the third, while annualized CPI inflation rose to 2.6% in the fourth-quarter, up from 1.5% in the third.
And some practitioner of economic auterism will snarkily say, "But har har and tut tut. You obviously do not understand that the deflator has nothing to do with inflation, although it purports to perform the function of taking out the inflationary effect. The deflator is merely what we say it is."

And to that I say, yes, and it also has nothing to do with reality, but rather the desire to make black appear white, and hell seem a heaven.

David Rosenberg: Herbert Hoover Obama

I receive an automatic email from Dave Rosenberg of Canadian firm Gluskin Sheff every morning. He is always informed and clever, but occasionally he just makes my day. You can receive his e-letter by registering here.


A long-standing colleague and reader sent this off to me yesterday and it blew
me away. Read on:

Obama’s State of the Union:

“Two years after the worst recession most of us have ever known, the stock market has come roaring back. Corporate profits are up. The economy is growing again.”

Herbert Hoover, May 1st 1930, US Chamber of Commerce Meeting:

“While the crash only took place six months ago, I am convinced we have now passed the worst and with continued unity of effort we shall rapidly recover.”

Obama’s State of the Union:

“Thanks to the tax cuts we passed, Americans’ paychecks are a little bigger today. Every business can write off the full cost of the new investments they make this year. These steps, taken by Democrats and Republicans, will grow the economy and add to the more than one million private sector jobs created last

Herbert Hoover, October 22, 1932, campaign speech in Detroit:

“It can be demonstrated that the tide has turned and that the gigantic forces of depression are today in retreat. Our measures and policies have demonstrated their effectiveness. They have preserved the American people from certain chaos. They have preserved a final fortress of stability in the world.”

Obama’s State of the Union:

“But now that the worst of the recession is over...”

Herbert Hoover, June 1930, to a delegation requesting a public works project:

“Gentlemen, you have come sixty days too late. The depression is over.”

Obama’s State of the Union:

“The steps we’ve taken over the last two years may have broken the back of this recession…”

Herbert Hoover, State of the Union, December 6, 1932:

“The unprecedented emergency measures enacted and policies adopted undoubtedly saved the country from economic disaster…”

As I mentioned the other day, the only difference I can find between Hoover and Obama is that Herbert Hoover, the Great Engineer, had many impressive accomplishments in the private sector before becoming President. And he still screwed it up. lol. Even Sir Isaac Newton, who could develop a calculus to take the measure of the universe and plot the orbits of the planets, could not plumb the depths and mysteries of a massive financial fraud. I think the strength of such frauds is their incredible size supported only by deceptive simplicity. The scientific mind boggles at such brazen rapacity.

27 January 2011

The World Is Waiting For The Sunrise: A Practical Guide to the Re-Monetization of Silver

Here is an excerpt from a longer discussion presented by my friend Hugo Salinas-Price in London today.

Although the proper title of the presentation is 'A Discussion of Precious Metals As Money,' I tend to call it 'A Practical Guide and Rationale For The Re-Monetization of Silver.' You can read the presentation here. I present an important excerpt, part III, below.

For my own part, I do not favor a return to a formal gold or silver standard at this time. I do not prefer it because I do not wish the developed and dominant nations to monopolize and formally set the price of these metals as they have been doing informally, given the unstable, opaque, and dare I say conflicted, nature of their financial systems. Any monetary system requires some measure of transparency and honesty and these are sadly lacking in the modern financial system.

Rather, I think it would serve the purpose to have a trusted coin available with the sanction of the State, at a floating price, to serve in parallel with whatever fiat currency regimes that may be locally in place. 

Thus one could call it the re-monetization of silver, but not the imposition of a formal gold or silver standard. This has two striking benefits: the flexibility to informally devalue or strengthen the national fiat currency, with a sound and safe way to store individual wealth and promote savings and the accumulation of capital for productive investments.  A progressive country might even treat the gain (or loss) of the bullion coin's value as a non-taxable item, providing some remedy to the people if the central bank indulges in printing money and quantitative easing.

This is similar to that which we have today, except that the coin would provide a reliable and practical means of obtaining and storing wealth for the individual, far superior to the ad hoc system of precious metals ownership in place today that is greatly abused by naked short selling and paper leverage, the same taint of the banks which has devastated the global financial system. 

I would look for keen opposition to this by the Anglo-American banking cartel and their friends in central government, since this proposal is inimical to the domination of others through the absolute control of a paper money system and the process of confiscating wealth in the form of inflation, fees, and frauds.  However, I think the zenith of their power is already passing, and because of their foolish and reckless excesses the tide history is about to roll over them.  Most of those close to the system will never even see it coming. Such is the way of long cycle changes.

I believe this proposal offers a unique opportunity to whatever country first steps forward to take it, and provide a universally acceptable metal coin with a floating value that can be used for public and private transactions in their country, as well as private transactions in other regions of the world. After all, one of the primary currencies in young America was the Spanish Dollar, the silver eight reales coin, the source of the phrase, 'pieces of eight.'

With the inclusion of modern technology to promote confidence and inhibit counterfeiting with some elementary testing equipment, some fortunate country could establish itself as the first nation to introduce a hard alternative currency for itself and for the world, in the face of a failing post-Bretton Woods monetary system, to the benefit of their people.

I do not expect the US or the UK to be this innovator, and in fact to stubbornly resist it for the reason cited above. Rather it is more likely to be some emerging economic power such as Mexico, India, Venezuela, Russia or China.  Or perhaps even a confederation of countries or US states acting for the benefit of their people in the face of the powerful banking lobby centered in Washington and New York.

I see this as important now because of an abiding belief that the US dollar reserve currency and international trading regime is highly unstable and too likely to collapse because of a loss of confidence under the weight of pernicious financial corruption. Obama's failure to reform has sealed its fate, and I think we are beyond the point of no return.

I also see great peril in the west with regard to the principle of the private ownership of property, a deficiency created by the very banking system that rose to power on the canard of deregulation and free markets, which has been used as a guise by which to plunder the wealth of the nation. The large scale seizure of property through a highly questionable and fraudulently based foreclosure process may be a portent of things to come. Savings held as electronic digits are much easier to control, debase, defraud, and devalue. 

And I think confidence in the financial markets and assets are at all time lows among the people, despite the aggressive public relations campaign to the contrary being conducted by the bankers and their demimonde in the corporations, central banks, and central governments.

Thus there is an obvious need for a store of wealth that is universal, liquid, portable, and not as subject to the whims of the shadow banking system and the financial plutocracy.  This could happen in the existing system if naked shorting were banned and the regulators would perform their sworn duties to the people, but that appears to be unlikely, and all too easily corruptible. A

Alan Greenspan has said that to the extent that a fiat currency and credit system acts with measured restraint, 'acts like gold,' it can be sustained with an orderly growth and stable prices. And if all good boys and girls act with perfect rational honesty and lack of overly selfish interest and misbehaviour, markets will be naturally efficient and require no regulation.

That is the very point of this. They have not, they do not, and they can not do so in the future, because of the tendency towards corruptibility that a pure fiat system offers to the politicians, insiders, and financial engineers. Abuse of power, as in a dictatorship, is maintained only to the extent that they can extinguish and suppress the alternatives, and even the knowledge that other choices exist. The strength of a broad democracy lies in transparency and relatively independent alternatives, a refuge if you will from the vagaries of human error and venality.

So a convenient and widespread bullion coin appears to be a good alternative. Admittedly it would not be a panacea. There are none. Every system requires work. But some systems are easier to maintain, more robust, less susceptible to failure, and just better than others.

The question in my mind is not so much 'will it happen?' as it is 'who will be the first?' To me it would be the ultimate irony if such a move to promote economic freedom came from a non-Western country.

The World is indeed in the winter of its financial discontent, and 'waiting for the sunrise.'

The World Is Waiting For The Sunrise:
Part III of a four part presentation
By Hugo Salinas-Price
The Cheviot Sound Money Conference
Guildhall, London, England
27 January 2011

Since ancient times one of the most important activities which any State exclusively reserved to itself was the minting of the nation’s money.  In our age we have seen that modern banking systems have completely usurped this fundamental function of the State. Had the banking systems of the world fulfilled this function correctly, we should not be pondering monetary matters.

The fact is that the banking systems of the world have one and all followed the same banking rule book, which they altered when the rules proved an impediment to increased profits, and they have managed to expand themselves into total bankruptcy. Not only that, but having taken over the power of issuing money – of zero quality – they have arrogated unto themselves as if by a natural, God-given right the function of being the central promoters of growth and prosperity.

Thus have the money-lenders promoted themselves into a ruling plutocracy. We are now witnessing the inevitable downfall of these plutocracies which have not been interested in the welfare of their nations, but first, second and last in their own enrichment and power. Thus the plutocrats have bankrupted themselves out of greed and irresponsibility.

We have shown how the Treasury of the UK can have a silver coin minted, and how it can endow that coin with a monetary value. Please notice that we are not assigning this task to the Bank of England. The Bank of England is a Central Bank, a financial institution which regulates banking in the UK. Among other responsibilities, it is in charge of monetary policy, which means that the creation, maintenance and increase or decrease in the amount of fiat money circulating in the UK is within its authorized sphere of action.

The historic development of banking all over the world has led to the present situation, where all money is the exclusive preserve of banking systems and their Central Banks and where, in fact, there is only one kind of money in the world, fiat money.

We live in a world where the dominant paradigm is fiat money issued exclusively by a Central Bank and its related banking system. Humanity today knows of no other money but this!

If and when the Treasury of the UK, in obedience to the instructions of Parliament, proceeds to the minting of a one-ounce pure silver coin with no engraved value and issues a monetary quote for that coin, this will be a revolutionary event from the point of view of the bankers.

The prevailing paradigm of fiat money, and only fiat money, issued exclusively by the Central Bank and its related banking system will have been broken! The State, through the Treasury, will be creating true money.

This will be permanent money which will remain in circulation until it is so worn out that it has to be replaced, at Treasury expense, with new coinage; money that will never be at risk of disappearing due to a collapse of the banking system. Banking, the business of lending money, is a legitimate business subject to risks which all businesses must run. However, the creation of money is not and cannot be a legitimate function of banking: there is a conflict of interest involved in the union of the two functions. The present worldwide monetary and financial disarray is evident proof of this statement.

The rupture of a paradigm is a rare event; entrenched ideas are hard to dislodge. A fresh approach leads to new avenues of action and opens up new horizons which can resolve the total dead-end confronting the world. The system of fiat money issued by banking systems has exhausted itself and cannot offer real alternatives to progress, but only such aberrations as QE 2.

The first thing that will happen when the prevailing monetary paradigm is broken is that people will immediately begin to regard money in a different light: they will have an option, where there was previously no option at all. Britain would no doubt receive the monetization of a silver coin most enthusiastically. The demand for the coin would be enormous.

If the bankers are allowed to have their way, there will be no monetized silver coin. They will adamantly oppose it. They will be frightened to death of the preference which the British would surely give to the silver coin. They will allege that if the silver coin becomes a reality, Britain is doomed. The bankers are prisoners of their paradigm and can think in no other terms.

No one can foresee all the consequences of introducing a silver coin into circulation in parallel with paper and digital money. Churchill once said, “In politics, experimentation is revolution.” However, real silver money has been the rule in history, not the exception; thus a partial return to silver money as an option alongside paper and digital money is hardly an innovation or experimentation. In historic terms, what has been experimentation – and QE 2 is avowedly experimentation – has been global fiat money created by bankers who quite evidently have had no notion of what they were doing and did not know or did not care what the consequences of their actions would be. The British would experience the joy of holding real money in their hands and saving money that will surely be worth something in the years to come: money that cannot be devalued. Revolution, for the bankers who have not lived up to the trust placed in them; for the people, it heralds peace of mind and hope for a better future, not revolution.

Should not a proposition which offers something sure to be welcomed unquestioningly by hundreds of millions of individuals all over the world be worth considering, notwithstanding the objections of the bankrupt bankers? The deep-seated dread on the part of the bankers regarding the latent preference for silver (and gold) on the part of the population reveals a fundamental social instability which will have to be addressed at some point.

Politics implies tensions between sets of ideas. At some times, ideas that further social progress, prosperity and good husbandry are paramount; at other times, the prevailing ideas impede prosperity, breed apathy and promote profligacy.

There is now a potential tension between two conflicting ideas: the idea of the Welfare State, which is tottering on to its eventual collapse, and the idea of taking one’s welfare back into one’s own hands, which at present revolves around an unexpressed mute desire for savings of real, tangible money such as monetized silver. The monetization of a silver coin would provide a channel for that potential tension and create an enormous tide of savings in silver coins.

We believe that the undoubted desire of all peoples of the West - and of the East, as well - is to enjoy real money as the foundation of their economic efforts, and that this desire has been unexpressed and mute because no one has proposed a means of satisfying it. Silver money, which has ever been the money of the people, can become a reality that comes to life in parallel with the prevailing fiat money. Its further development and growth in importance can be only dimly sketched, but it comes to life pregnant with possibilities.

The creation of a silver coin with a stable monetary value, which can remain in permanent circulation in parallel with paper and digital money, would finally close the circuit that turns a worldwide desire into an actuality. The surge into silver money would be enormous. Should we fear what the people desire, or should we understand that desire and its justification, and open the way for it to express itself?

We also believe that the monetization of a silver coin by the method we have outlined – its various details are suggested but can be altered to suit – can become the irresistible objective of a political party that wishes to come to power; there is a silent desire for real money on the part of all people of the world and - the world is waiting for the sunrise!

SP 500 and NDX March Futures Daily Charts

Benny's blowing an equity asset bubble.

Let's see how far he can take this one before it starts leaking.

Never underestimate the brazen callousness of desperate men.

Gold Daily and Silver Weekly Charts

It's never easy or straightforward when the Fed is meddling with the markets, trying to make red looks like green, and black look like white.

If you cannot stomach this you are much better off as a long term investor.

These are the games people play especially in times of regulatory laxity and politicization of the markets.

26 January 2011

SP 500 and NDX March Futures Daily Charts

If Goldman Sachs offered to sell you AAA rated collateralized debt obligations, would you take the deal?  What if Bernie Madoff opened a new investment fund? Would you hand over your precious savings?

What makes you think that the equity market is any different, since it is being ladled out by the same unreformed and underregulated financial machine that has been defrauding customers and selling mispriced financial assets for over ten years?

Oh, but this is different. These investments are 'real companies' with 'real earnings.' After all, this is not 1999 or 2007. Now you have Dodd-Frank directing the SEC and the CFTC to crack down on the insiders and protect your investments.

And the average 'ownership' time for a share of stock is under a New York minute, with the potential for the market to vaporize while you go to sleep or even step out for lunch. Oops, we pushed a button, and all your money is gone. But this cannot be, because at the Fed, and the NYSE, and the City of London serving the public interest openly and transparently is job one. Just ask them if this is not so.

Little wonder that the ruling elite of the US and Europe hold the investing public and the rest of the world in complete contempt.

Gold Daily and Silver Weekly Charts

Nice bounce off a deeply oversold condition as we noted yesterday.

And of course today was the anticipated option expiration on the Comex. How unusual.

So far no surprises, but too soon for the bulls to break out the party hats for a return to trend.

Eric Sprott said that he thinks gold is putting in 'a low for the year.' I am not sure where the low is, but save a panic liquidation in stocks, that seems like an historically good bet.

One Reaction to the Obama State of the Union Address That Made Sense

It amazes me that the discussion on change centers on 'improving competitiveness' when the crisis was caused by a massive financial fraud and political and regulatory failure that goes largely unresolved and unrepaired, sucking the life out of the real economy and spreading corruption of thought and action. Slogans and code words are the substance of the public policy discussion in the US and Europe, and I think with the intent to deceive, a propaganda campaign. The mainstream media in the States is owned by a handful of powerful corporations. But fewer and fewer turn to the mainstream media anymore.

"In addition, any economist will tell you that when the free market fails a black market emerges. The blogs are the black market of information."

David B. Collum, Cornell University

As for competitiveness, the current global trade regime is underpinned with and founded on a fraud, a set of managed currencies pinned to the US dollar and under the control of a banking cartel. There is no real free trade, only an illusion of such, promoted by the rapacity of multinational corporations and their partners in authoritarian governments.

The only real competition I can see is the race to destroy the middle class and reduce the public around the world to the least common denominator of slavery, serfdom, and servitude, with the dollar and the jackboot as their weapons.

From Mark Thoma:

"Eliminating regulation: The idea is that removing unnecessary regulation will improve our ability to innovate, and this will help the economy create new, good jobs. However, it wasn't lack of innovation or lack of competitiveness that got us into this mess, it was an out of control financial sector.

The President talked about eliminating unnecessary regulation, but far too little was said about the need to implement new regulations where they are needed. In addition, by focusing so much on helping business, the president risks sending the message that what is good for business is necessarily good for the nation. (Risk? As the risk of sounding snarky, that is the reason for the season. It was the corporate FIRE sector that caused the financial crisis in the first place. - Jesse)

Businesses need the right environment to thrive, but we must not lose sight of the fact that it's the skills of the people that work at businesses that matters most. Our ultimate goal is the best possible life for as many people as possible, and that requires a broader focus than businesses alone."

25 January 2011

Gold Daily and Silver Weekly Charts, Royal Gold and the US Dollar: Gold Deeply Oversold

Obama delivers his 'State Of The Union' speech tonight.

Tomorrow is option expiration on the Comex for precious metals. The FOMC will also be announcing its rate decision.

This intermediate gold top and correction bears a striking resemblance to the May - August 2010 top and correction just prior to gold's amazing breakout rally.

I think the next four weeks are going to be quite interesting in a number of dimensions, and through the chill of winter, a portent of Spring is in the air.

SP 500 and NDX March Futures Daily Charts

The Wall Street caldera is slowly expanding, swollen with monetary magma.

23 January 2011

Tavakoli: No Need to Qualify - This IS a Massive Cover-up of a Control Fraud

Hard to top this for straight talk and right to the heart of the matter from someone who knows the financial markets, and especially derivatives, better than most.

From this afternoon's mailbag (with permission):
"Loved your commentary: 'The American government is acting as if it is involved in a massive cover-up of a control fraud and corruption that could perhaps be the worst in its history.'

There's no need to qualify. The government IS involved in a massive cover-up of control fraud and corruption, and it is the worst in U.S. history.

We let the servants quietly steal from the wine cellar and larder (for more than a century), and after discovering that no one would check their behavior—in fact, we handed the keys to our consumables to all the servants and let them bribe the overseers—they have watered down all the wine, and they backed up the truck to the larder and replaced most of the food with jars of peanut butter.

The bad guys have won, it's almost too late to find our food and wine (5 year statute of limitations for securities fraud). As you rightly point out, those who speak up like William K. Black are marginalized.

Perhaps the most positive thing one can do at this point is try to stay on top of the anomalies created by this mess and try to preserve and increase wealth for the few that will listen."

Janet Tavakoli
Tavakoli Structured Finance

22 January 2011

America Appears To Be Trapped in a Massive Coverup of Control Fraud and Corruption

I think most readers with an economics background would be familiar with a liquidity trap, which is a situation where monetary policy is unable to stimulate an economy suffering a non-cyclical credit contraction, either through lowering interest rates or increasing the money supply because expectations of adverse events (e.g., exogenous deflationary factors, insufficient aggregate demand, or civil or international war) make persons with liquid assets unwilling to invest.

America is caught in a confidence or credibility trap, in which the changes, investigations, and reforms necessary to restore trust to an economy or market are rendered unlikely because doing so would expose a pervasive corruption that the principals fear would destroy any remaining trust.  It could also endanger the careers of politicians and business people who may have permitted and even appeared to facilitate the control fraud that caused the financial crisis in the first place. Personal risk trumps public stewardship.

The fraudulent activity is covered up and therefore continues or at the very least appears to continue, crowding out most productive business investment and activity which cannot possibly hope to compete with the highly profitable fraudulent activity ad asset bubbles under such opaque and uncertain circumstances.  Informed market participants are unwilling to invest their liquid assets in a system which they suspect is riddled with accounting fraud, insider trading, and regulatory weaknesses, except of course in a few situations and somewhat ironically in some existing frauds, such as a bubble in equity valuations for example, which they think they understand.

The American government is indeed acting as if it is involved in a massive coverup of a control fraud and corruption that could perhaps be the worst in its history.  I think many people who are looking at this know in their hearts that all is not well, that there is something not quite right in the current situation.  How else can we explain such massive and widespread financial fraud, with so few meaningful indictments, or even ongoing investigations with credible disclosures?  And the worst perpetrators appear to be dictating the remedies and reforms to the system for this government sponsored recovery.

Hank, Tim, and Ben alluded to the consequences of the discovery and uncontrolled disclosure of this fraud, and it frightened the Congress so badly that they immediately gave up and signed over 700 billion dollars, and many billions more, to facilitate the coverup of this under the guise of recovery and stabilization.  I would like to imagine that those in charge are attempting to prevent a panic while they put out the fires, but I see little serious remedies designed to save the public, much less than to perpetuate the firetrap.  And so the corruption continues to smolder and fester, and thereby debilitate the nation.

More than an American scandal, this fraud reaches deep into the halls of power in Europe, some of whose national governments are already failing. What had been the Keating Five is now the Global Finance 500.

People say they understand this, but they really do not understand the implications of it. They intellectualize and theorize around it, try to deal with it by smashing it down into something they can get their mind around and accept. They may even try to turn it to their short term personal financial advantage. But they are not dealing with it and certainly not facing up to it.

The US banking system controls the issue of the reserve currency of the world, which impacts the price of  virtually everything that is bought and sold.

And as you might expect there are many whose vested interest is to distract and to change the subject away from it. There is a great deal of money to be made by serving the desire to turn people's attention away from the problem to find someone else to blame, some other problem to focus upon, and some new victim class to absorb the public anger. It is an old story, often repeated in tragedy.

Thirteen Ways to Hide the Truth

But unfortunately, confronting the truth and fixing the situation is key to any sort of sustainable recovery. And this is the trap of crony capitalism and control fraud, when it has nearly exhausted its victims, and is having difficulty finding new ones to maintain its growth and facade.

Until that time there will be a procession of scapegoats, defaults, bailouts, and property seizures, both implicit and explicit, and a growing toll of innocent victims and systemic destruction, ending finally in the collapse of the US national currency and international trade.  

If it had not been that the US is so large, and for the time being controls the bulk of the world's reserve currency, it is likely this would have already come to some conclusion before spreading so widely and pervasively.  But the situation remains highly unstable and threatening, despite assurances to the contrary.

William K. Black is telling us something very important, as Harry Markopolos had been trying to tell some simple but important things to the investors in Bernie Madoff's investment scheme.  The Madoff investors preferred to vilify and ignore him.  It appears that the same thing is happening to William Black.  And the final outcomes may be similar.

What can one person do besides to spread the word, and demand the truth in their own place and their own way?  Support those who stand and tell the truth, sometimes at great cost.  Insulate and remove yourself from the fraud as best you can to preserve your wealth and your integrity. 

Above all resist the disinformation, propaganda, and distractions,  and all the insidious rationalization and convenient skepticism to complicit apathy, making it clear that you will be neither a willing victim nor a silent bystander to the intoxicant of blame and hatred, and the victimization of others designed to turn the people on one another, be they Gypsy, Muslim, Jew or Christian, black, white, Asian, Hispanic, disabled, old, poor, ill or weak, or any other variety of outsider and convenient target. 

For once the madness starts, it can never be controlled, and will eventually come for all, and consume all.

The Great American Bank Robbery
Video - Lecture
By William K. Black

1. Why do we have repeated, intensifying economic crises?
2. What can white collar criminology add to our understanding of what's going wrong?

Note: The William K. Black video was first served at this Cafe in August of 2009 in a post titled The Great American Bank Robbery. It was not so widely received at that time as it seems to be now. I view this as a promising development. The events of the past few years are opening people's minds to the possibility that things are not as they appear, and that the financial crisis and reform did not happen for reasons which they had not yet seriously considered.

The Imperial Presidents

Wall Street is the Praetorian Guard.

As for Nero, we'll just have to wait and see.

But perhaps it might be good to have some fire insurance.

21 January 2011

Concentration in US Banking Since the Repeal of Glass-Steagall

It should be noted that Glass-Steagall was repealed in stages before 1999, with relaxation of the rules as a result of the lobbying efforts led by the Wall Street banks, and with the backing of Alan Greenspan.

A Brilliant Warning on Robert Rubin's Proposal To Deregulate Banks 1995

The Great American Bank Robbery - William K. Black

Source: Systemic Risk In Banking EcoSystems

SP 500 and NDX March Futures Daily Charts

Weakening momentum and light volumes.

Any event will likely do it, even if Benny throws his best slop at it.

But if volumes remain light and the markets detached from reality, they can drift on monetization.

Gold Daily and Silver Weekly Charts

As a reminder the Comex option expiration is January 26.

US Dollar Index Drops to Strong, 'Must Hold' Support

Let's see if the euro short squeeze rally has reached its zenith, implying a bottom for the archaically weighted US Dollar Index.

A significant break of support here negates the double bottom formation.

It is not so much that gold and the dollar have moved lower together, but rather, the euro rally took quite a bit of risk buying off gold, at least from the continent. Asia remains a firm buyer and will most likely do so.

When the perception of sovereign risk changes again back from optimisim to gloom, I would expect both the dollar and gold to strengthen. Unless that gloom begins to encompass the buck, and acknowledge the yawning chasm of state and municipal defaults which the Yanks and their ratings agencies are so far blithely avoiding, deflecting the concerns to Europe.

This soft shoe dance that Ben and Timmy have done so far is getting a bit thin.

And it was almost funny to see the Amazing Krugman wagging his printing finger at China over the threat of impending inflation. Physician heal thyself.

GE's Jeff Immelt To Replace Paul Volcker

In case there was any question remaining in your mind as to what is really happening.

It should be noted that GE was the number one corporation in lobbying, spending $40 million on the purchase of political influence last year.

Obama is looking more like Herbert Hoover every day, but without the Great Engineer's accomplishments.

As someone said, it could have been worse, Obama could have chosen Lloyd Blankfein as his advisor. But that would have been a demotion for Lloyd, and a probable lessening of his existing impact on public policy.

Volcker Out, Immelt In on Economic Board
January 21, 2011

SCHENECTADY, N.Y. — President Obama will name Jeffrey R. Immelt, the chief executive officer and chairman of General Electric, on Friday to run his outside panel of economic advisers, replacing Paul A. Volcker, the former Federal Reserve chairman, who is stepping down, the White House said.

Mr. Immelt will chair a new Council on Jobs and Competitiveness that Mr. Obama intends to create by executive order. In a statement issued shortly after midnight, Mr. Obama said he wants the council to “focus its work on finding new ways to encourage the private sector to hire and invest in American competitiveness.”

The council will be a reconfigured version of the board Mr. Volcker chaired, the President’s Economic Recovery Advisory Board. That body, created by Mr. Obama when he took office in the thick of the worst economic crisis since the Great Depression, is set to expire on Feb. 6...

"The liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it comes stronger than their democratic state itself. That, in its essence, is fascism - ownership of government by an individual, by a group."

Franklin D. Roosevelt

US Policymakers Considering Various Paths for State Bankruptcies

PIIGs on steroids, and selectively applied defaults.

Thank God the Banks will be saved any pain or discomfort.

Washington and New York will rule them all with an iron rod.

Path Is Sought for States to Escape Debt Burdens
By Mary Williams Walsh
January 20, 2011

Policy makers are working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired public workers.

Unlike cities, the states are barred from seeking protection in federal bankruptcy court. Any effort to change that status would have to clear high constitutional hurdles because the states are considered sovereign.

But proponents say some states are so burdened that the only feasible way out may be bankruptcy, giving Illinois, for example, the opportunity to do what General Motors did with the federal government’s aid.

Beyond their short-term budget gaps, some states have deep structural problems, like insolvent pension funds, that are diverting money from essential public services like education and health care. Some members of Congress fear that it is just a matter of time before a state seeks a bailout, say bankruptcy lawyers who have been consulted by Congressional aides.

Bankruptcy could permit a state to alter its contractual promises to retirees, which are often protected by state constitutions, and it could provide an alternative to a no-strings bailout. Along with retirees, however, investors in a state’s bonds could suffer, possibly ending up at the back of the line as unsecured creditors.

“All of a sudden, there’s a whole new risk factor,” said Paul S. Maco, a partner at the firm Vinson & Elkins who was head of the Securities and Exchange Commission’s Office of Municipal Securities during the Clinton administration.

For now, the fear of destabilizing the municipal bond market with the words “state bankruptcy” has proponents in Congress going about their work on tiptoe. No draft bill is in circulation yet, and no member of Congress has come forward as a sponsor, although Senator John Cornyn, a Texas Republican, asked the Federal Reserve chairman, Ben S. Bernanke, about the possiblity in a hearing this month.

House Republicans, and Senators from both parties, have taken an interest in the issue, with nudging from bankruptcy lawyers and a former House speaker, Newt Gingrich, who could be a Republican presidential candidate. It would be difficult to get a bill through Congress, not only because of the constitutional questions and the complexities of bankruptcy law, but also because of fears that even talk of such a law could make the states’ problems worse.

Lawmakers might decide to stop short of a full-blown bankruptcy proposal and establish instead some sort of oversight panel for distressed states, akin to the Municipal Assistance Corporation, which helped New York City during its fiscal crisis of 1975.

Still, discussions about something as far-reaching as bankruptcy could give governors and others more leverage in bargaining with unionized public workers...

20 January 2011

What Am I Reading?

Why people care about these sorts of things puzzles me but here goes.

I read non-fiction off and on all day long during trading/working hours from a wide variety of internet sources and things sent in by readers, so in my off hours I tend to shy away from financial and economic material.  I did my basic economic reading from 1992 through 2004, reading almost nothing else but that sort of thing. Quite a bit of that was done on international flights and in hotels while traveling for business.

I have at least a thousand books in my library. I 'collect' things. My oldest book is a 1630 edition of Thomas More's biography by his great grandson Cresacre More. I have an enormous collection of early edition books and pamphlets by and about John Henry Newman and the other figures in the Oxford Movement.

Before the internet took over I spent many happy hours browsing in the stacks of the booksellers along Charing Cross Road and in lower NY. From what I can tell the old bookmen are a dying breed.

I recenly finished The Passage by Justin Cronin. This is an excellent work of apocalyptic science fiction that is amazingly detailed and well written.   It was part of a sci-fi binge that included the entire Dresden Files series of novels by Jim Butcher.  Great reading material for hospital and doctors waiting rooms.  Before that the Odd Thomas series by Dean Koontz. And everything by Douglas Preston and Lincoln Child. I am a Sherlock Holmes devotee as well, and always manage to find something.

I just started The Bed of Procrustes by Nassim Taleb. This is more of a philosophical book as it is financial, and eminently readable on an a continually interrupted basis since it a collection of aphorisms.

I do keep a select set of books next to my chair for reading in the late and quiet hours of the evening after all the family is put to bed, the doors locked, and the windows closed.

From this I am re-reading sections of Econned by Yves Smith which is an awesome work about the financial crisis and its roots. If you do nothing else read the introduction thoroughly and you will know more about the financial crisis than most. I rarely read the same book twice unless it has real substance.

I am also re-reading sections of Arrogant Capital by Kevin Phillips.  It is driving me to despair of any serious reform effort in the US.

I am eagerly waiting to buy a DVD copy of Inside Job.

And there it is.

SP 500 and NDX March Futures Daily Charts - An Economic and Policy Failure

I think the first leg of this correction in stocks is waning a bit as the highly overbought and complacent condition is being worked off, and new shorts are engaging in the market to be squeezed by steady buying in light volumes led by the SP futures.

Perhaps another move down, while Benny's dose of liquidity directly to Wall Street takes effect.

Excepting some event, it is hard to imagine a protracted stock market decline at this time given the artificial support that Wall Street is receiving.

The pigmen feel that they are firmly in control of both NY and Washington.
"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
An Economic Philosophy That Has Completely Failed, William K. Black

'Failure' depends on what your objectives are. If looting for short term benefit of the Wall Street monied interests and their well-oiled Washington support system, things are working quite well.