skip to main |
skip to sidebar
Silver proved to be a little more resilient than gold today, although both held their levels fairly well as the Street was engaged what is snarkily called 'window dressing,' which basic means rigging the valuations of the market.
Nothing has changed. Let's see how the holiday shortened week trades as we kick off the third quarter, and in two weeks, US earnings season with Alcoa.
The US dollar index continued its decline, as fund managers put forward a herculean effort to optimize their bonuses by buying equities.
On the bright side, Hans Nichols of Bloomberg Washington is reporting that Timmy Geithner may be leaving the government after the budget deal is done. Just another compelling reason to hope for a quick resolution.
Or maybe not.
One shudders to think who Obama might put forward, and what the confirmation process might look like in Congress unless he chooses someone to the right of Andrew Mellon.
Given his past history of selecting unexpected candidates somewhat over-friendly to corporations and Wall Street, one can only wonder.
The paint was going on thick and heavy today for the end of quarter, as the trading desks and hedge funds were optimizing their bonuses. Let's see how we go into the US holiday weekend.
I am using this opportunity to combine two items of interest to precious metals investors. I do not consider them to be particularly related. In other words, I do not consider any of the funds to have the same counterparty risk as some other financial assets purporting to represent an avenue towards the protection of precious metal ownership such as GLD and SLV and even Comex Futures contracts and options.
I do still think the premium on Sprott silver reflects the scarcity of bullion and the relatively friendly terms of taking ownership of metals from the fund, but this is just a theory.
![]()
![]()
"We have a very tough time understanding those bearish arguments against silver. We look at the real silver market, and based on the supply and demand data coming from the real, physical markets for silver, the fundamentals are only getting stronger.
And yet there exists another silver market, which as we’ve shown, is not very connected to the physical realm at all. And though silver investors have for decades suffered the tyranny of a rigged paper monopoly over silver price discovery, it appears to us that the tides are turning. In the age of QE to infinity, investors are being more scrupulous with their capital and as such they are demanding physical silver in quantity.
With more and more dollars flowing into the silver markets and a finite supply of physical to meet that demand, the theoretical losses for the paper silver short-sellers are near infinite. And with such a skewed and obvious risk/reward payoff vastly favoring the longs, we pose the following question.
Who is most at risk in the silver markets: the buyers of a scarce and real asset that serves a growing multitude of purposes, or the sellers, who are short a quantity of silver which may very well not even be obtainable at anywhere near current prices?
Let the Seller Beware!"
Sprott Asset Management, Caveat Venditor
I should add that buyer must also beware, because of the growing counter-party risk as the leverage extends and the available supply shrinks. If the dominos start to tumble, we have seen that the counter party risk can quickly cause the problem to reach critical mass. This is because the financial sector is grounded in leveraged speculation and gaming, and not in the real economy.
For years I had watched the charts showing the 'netting' effect of the derivatives markets, and how the nominal risks were really much lower because of the netting effect. However, once the markets were actually stressed, the netting fell apart because of a couple of major participants who could not deliver.
I think the same situation still exists in a number of markets due to the very weak financial reform and lax oversight of the Fed, the SEC, and the CFTC in particular. And of course the extreme moral hazard of bailing participants out of their oversized risks when they fail.
When you go to collect your silver, you may find only a stack of paper IOU's depending on which vehicle you are using.
When you socialize the losses and privatize the gains for a powerful few, when you reward the perpetrators and punish the innocent and unsophisticated victims of fraud, when you idolize greed, selfishness and deception and vilify simple hard work and honest decency, how can one really expect a healthy, vibrant economy? You are birthing a monster.
Austerity will not improve this picture, and will inflict intense misery on the growing number of unfortunates. They know this, but they don't care. When the oppressed react, there will be calls to put them down, to subdue them, savagely. Provoke and react. Never waste a crisis, and if you need it, create one.
This is the road to hell.
The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustained recovery.
Very nice bounce in the metals as silver turned green for the week and gold looks to have the potential to form at least a temporary bottom. The miners in my portfolio added some serious leverage to the gains, despite the short index hedges. Those hedges were increased into the close, as I remain skeptical of a sustained equity rally and any recovery in the real economy.
Distractions like trolls and sensationalists on chatboards and comment threads are more than annoyances, and will cost you money. The notion that all opinions are equally valid and valuable is romantic, egalitarian rubbish.
It is good and necessary to hear different views, and the discerning mind seeks out quality perspectives of all types. But it is not productive to waste time with baseless swill tossed out by trolls and 'analysts' too lazy to put some real work, facts, and diligence into their opinions.
You would not eat garbage off the street. Why would you put something that is of a similar character into your mind, so it will affect your investment accounts? Be selective in how you spend your time. There are quite a few opinionated idiots and broken traders who would love to drag you down to their level and beat you with experience.
Distractions can affect your trading. If they do, get rid of them.
Trading is just a business, and so one should treat it as such. It is neither good nor bad, but a craft of sorts if you will. One has to be on the right side of the market, and it has nothing to do with courage, and everything to do with knowledge, luck, and skill.
Conducting ourselves honorably and standing for the truth, upholding our oaths if you will, is a calling however, a high aspiration which we all receive, but which not all take up. And as with all worthy things it is never easy or accidental, and there are always failures as we learn, so we should not be too discouraged when we stumble and fall, or when we are fearful or confused. This is the human condition of us all.
But courage is moving forward, not when we are certain of every step to victory, but rather, when we are certain that this is the right thing to do, and are determined to do it as well as we can, come what may.
"It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat."
Theodore Roosevelt, Sorbonne, 23 April 1910
End of quarter paint job, helped in part by the sweet deal that the 'regulators' at the Fed cut for the banks and their debit card fees.
The Fed had originally proposed capping the fees at around .12, but today decided to give the banks almost double that at .22, and delay implementation of the rule from July to October. Mastercard and Visa, along with the financial sector, rallied on the better than expected tax on the real economy to help support bank profits.
Let's see how equities go into the long holiday weekend. Today was more window dressing for the trading desks to calcualate their quarterly results.
"It appears that there is an undeliverable force heading towards an unmanageable object."
At some point the shysters will lose control of the monetary papier-mâché which they have created. And the subsequent reaction could be epic, with the almost inevitable force of nature, like a tsunami rolling in.
Only a few people understand this. So it could be quite the surprise to many.
In the meantime the bankers and politicians are scrambling for the goodies pouring out of the financial piñata which they cracked open in the financial crisis.
The banks have plenty of gold to lease into the bullion banks, and then on into the markets and as collateral for leveraged paper obligations. But they are running out of silver, which causes me to believe that the silver cartel will break first, and will lead the way higher, as it has been doing.
A handful of Too Big To Fail Banks seem to be short more silver than can possibly be delivered without incurring terrific losses, even by today's distorted standards. From the looks of it, it appears that there is an undeliverable force heading towards an unmanageable object. Further complicating matters is the possibility of a magnitude 9.6 sovereign debt earthquake in the markets.
Unless there is some forced settlement, some draconian government intervention, silver appears to be a leading candidate for the manipulated market most likely to go supernova.
But I would be careful about trying to time this event too precisely, or overplaying one's hand with leverage. There are some powerful forces lined up with the Banks as you might well expect. And they can make things happen. We watch the charts, but they can write them, at least for the short term. But their time will come.
If the equity market does not fall apart over Greece et al., I would imagine that the trading desks will try to stand on the metals until a little closer to quarter end, then its elevator going up. But watch out for a Greek related problem. I am not sure how the markets might react to this if it really is another Lehman like event. So as you might expect I am running a paired trade, and net short into the close.
The dollar chart is a big problematic. I can make a scenario for a break either higher or lower from the chart. I think we will know the move when it comes, but predicting it in advance is a dicey thing, except for the broken clocks.
If the sovereign default situation goes badly there *could* be a liquidation selloff that would impact silver, and to some extent gold. This is why I am holding paired trades that are short stocks and long bullion. I further adjusted the risk downward today, and lengthened the shorts.
This one goes out to Blythe.
Blythe Masters: Prop Trader Most Likely to Go Supernova?
In trying to explain to someone what a 'confirmed breakout' from a symmetrical triangle' might look like, I have decided to draw the current formation, within which US equities are coiling, as 'flags' rather than triangles.
These flags are a little simpler to see on the chart, as they are quite consistent with the existing lines of support and resistance. I also think we have now reached that point in which if they break down they will fall rather decidedly, probably based on some precipitating 'trigger event.'
The most likely candidate for this is a deterioration in sovereign default.
We are approaching a holiday weekend in the States, and the close of June and the second quarter. So painting the tape, and prepping for a few more IPOs to be squeezed out like Hudson River brownfish, will be the order of the day, but with the looming shadow of another financial crisis making the players uneasy in their ill gotten gains.
Don't get me wrong. These jokers do not give two hoots for the common people of any nation. What concerns them, occasionally, is getting caught. Or even worse, cut off from the airport by pitchforks and torches. But they rarely think that far ahead.
A few seem to be waking up to the irony. A drumbeat of corporate persuasion that is noticeable to those outside the culture, and those who have switched off the propaganda feeds on the internet and in the mainstream media. But the illusion is unnoticed by those seeking an escape from complexity and the uncomfortable in simple solutions and slogans, quickly mouthed as a subtitute for thought.
"If we understand the mechanism and motives of the group mind, it is now possible to control and regiment the masses according to our will without them knowing it."
Edward Bernays
If a 'reformer' does not speak to the need to reform the financial system, the huge advantages and subsidies being given to the corporations and the ultra rich who control them, it is a fairly good indication of what sort of a reformer they really are, and who is pulling their strings.
There is a massive tax avoidance scheme being conducted, for example, by multinational corporations that use accounting methods to accrue income to tax havens overseas, and shelter their cash from income taxes. With the occasional tax holiday for which they fund large lobbying efforts, they can bring that cash home for tax rates much lower than you might pay, and then give the proceeds to their executives and shareholders as tax-lite dividends and capital gains. It does not take much of a presence or actual sales in any tax haven to do it. A mailbox, an attorney, and an accountant are enough.
As an individual, try shifting your wealth capital overseas, and avoid paying taxes on the capital gains and the interest. They don't make it easy to say the least. But corporations can establish branch offices in tax havens and use loopholes to avoid paying most of their taxes from operations across the US and around the world.
The problem is that corporations have become much more powerful and important than individuals, favored by the politicians on their payrolls.
You are responsible for what you watch, and what you put into your mind, even when it feels comfortable to be part of a mob. The mob will take you to places that you do not wish to go.
As for those who wish to use it, the madness serves only itself. People will kill their neighbor and poison their children, before they will admit that they were wrong. They have no love in their hearts, only lust, greed, and hatred which they call love, because they serve only themselves and dark powers.
And at the end they will say, 'we did not know.'
Salon
America's unique hatred of finance reform
By David Sirota
"Despite the moment's anti-union/anti-government sloganeering, the American employees who are paid the highest publicly financed salaries are not state and municipal workers -- nor even our $400,000-a-year president. That distinction goes to the bank executives who are now being paid record salaries -- salaries that continue to be financed by ongoing taxpayer-sponsored bailouts (and yes, huge bailouts are still happening).
We don't hear much about this because the United States government still promotes the fallacy that our banks are not publicly subsidized institutions subject to requisite public control like, say, a utility company might be. Instead, despite all evidence to the contrary, Washington pretends that these are corporations operating in a free market, ignoring the fact that an actual free market would have destroyed many of these very same entities back in 2008. Nonetheless, the nonsensical free-market apocrypha lives on because it serves such an important a purpose for banks and the U.S. politicians they own -- namely, to successfully thwart the push not just for full-on bank nationalization, but for even minimal financial regulation.
So astonishingly successful has this farce been that our domestic debate about spending and deficits today is somehow primarily about demonizing the publicly financed five-figure salaries of teachers, police officers and firefighters, rather than about reducing the publicly financed seven- and eight-figure salaries of Wall Streeters. In Fox News parlance, the former are simply tarred and feathered as the takers in an "Entitlement Nation," while the latter are celebrated as the earnest John Galts who are keeping America afloat.
Against the backdrop of international politics, the unchallenged dominance of such a narrative in this country has become the most powerful American exceptionalism of all -- it now literally separates us from most of the rest of the industrialized world. Indeed, while our pro-corporate ruling class tells us to fear the shrugs of Wall Street's supposed Atlases, the same fears are being outright rejected by many other industrialized nations in the post-meltdown years -- even those with relatively conservative governments..."
Read the rest here.
With the dollar down, stocks up, and gold and silver down one might suspect today was an option expiration day in a delivery month on the Comex.
And so it was.
Greek vote on their bailout plan may move the markets later this week.
I put the long gold/silver and short stock indices trade back on today at an opportune moment in honor of the anomalies provided by an option expiry.
Eyes are on the Greek bailout vote.
Light summer volumes.
The US equity markets are coiling within obvious symmetrical triangles. They will break up or down, and that break *should* mark the next leg once confirmed by a daily close or two.
The SP 500 cash market has been finding support around its 200 DMA the past week. Traders are watching this carefully, as well as VIX, for the signs of an impending break lower.
I did add some index shorts intraday.
This interview will help you to understand the problems surrounding the Greek crisis, the intended looting of their public resources, and the model that is being repeated by the banks around world.
Rickards on Regulatory Capture, Corrupt Banks, and the Credit Default Swaps on Sovereign Defaults
Around 2000 I came to roughly the same conclusions that he does. I had the opportunity to study the European money system while it was forming in graduate business school, and it just did not make sense.
The euro was probably going to fail unless the union became a unified federal government with one set of laws and taxation policy, with the kind of revenue distribution that exists amongst states in the US, for example.
A single currency cannot span independent fiscal authorities because it removes the ability of the currency to flucuate in value based on their independent economic health, acts of God, and social policy choices of the different social organizations. This is basic monetary theory. I was surprised that it lasted as long as it did, but it was to the advantage of the financial world to tolerate the attendant deceptions because they were growing fat on it.
And a similar thing can be said for the global currency trading regime based on the dollar and arbitrary valuations subject to national manipulation. It has allowed multinational corporations and banks to achieve tremendous power and advantage over local governments.
In other words, the currency regime and financial deregulation are the setup, and the credit default swaps are the trigger. Why the politicians permit the naked selling and buying of such instruments by banks handling public money is beyond my understanding, save pure, blind greed.
I always thought that a crisis would be put forward as an opportunity for the 'one-worlders' to once again promote their idea of a one world government, and a universal order of central financial authority that eventually and inevitably evolves into a single political system. And that is still very much in the cards.
For this to happen, national governments must be undermined and absorbed, their people brought down to their knees financially. And then their saviors can begin the work of ordering their lives.
Did I mention that Monday is option expiration on the Comex?
C'est la guerre des monnaies.
It appears that the US and its client states are engaged in Management of Perception Part Deux, and pretending that it is 'risk off' and prices will not rise if we pretend that all is well. So they released some oil from the Strategic Petroleum Reserve to supplement the release of gaseous emissions from Zimbabwe Ben earlier in the week.
Concerns about the Greek debt situation and the US economy may drive next week's market action. Today was a bit of a toss because of the Russell rebalancing.
Another junior silver miner was taken out today when Golden Minerals and ECU Mining announced a 'merger' that is really a stock acquisition (and a msall cash kicker) of ECU. I expect this trend to accelerate.
Have a pleasant weekend.
Or as the ticker tape said at the end of day, October 29, 1929, 'Good Night.'
The resolution of the Greek financial crisis, the Fed's decision not to overtly engage in QE3, and the rebalancing of the Russell indices drove the US equity market action today.
I believe that there will be a vote by the Greek government on Tuesday regarding their decision on the debt packages. There are a range of discussions regarding the sale of private assets, haircuts for bondholders, and the sale of public assets. There is even talk of the US or IMF sponsoring 'Brady Bonds' backed by US Treasuries.
The people of Greece will have a national referendum on the decision in September I believe, as happened in Iceland.
As with most summations it compresses much of the complexity and therefore loses information in the process. I know he is a smart man, and is doing this out of necessity to achieve brevity and conciseness.
He never mentions the various unfunded wars, over 700 global military bases, and out of control health care costs, only glosses over the profound corruption in the bloated financial sector, a culture of greed and selfishness, and the government intrusions into private rights of citizens as a reflexive response to their problem with a credibility trap. How can one allow free discussion, disclosure, and transparency during an ongoing widespread financial fraud that has compromised the political process?
He does not address the international trade regime based on mercantilism and 'free trade agreements,' started in the Clinton Administration, that have become predatory killing fields of the middle class workers and their rights.
But it is a good job given the time constraint, and an excellent starting point for the core of the discussion. The current level of inequality of access to power in the US is perhaps the root of much evil.
If only people have the ability to discuss things rationally, without resorting to slogans and caricatures fed to them by a well funded corporatist propaganda machine.
As Herman Hesse said, "When the suffering becomes acute enough, one goes forward." So it is almost a certainty that the pain will become worse before the US moves forward.
But forward into what, only time will tell.
A video of today's Congressional Hearing called by Ron Paul titled “Investigating the Gold: H.R. 1495, the Gold Reserve Transparency Act of 2011 and the Oversight of United States Gold Holdings” is available here.
July is traditionally a big delivery month for silver, and the Comex is scraping the bottom of the barrel. Unless it can obtain a sizable relief of physical bullion at the right price, it faces at least a de facto default in delivery by way of forced settlements. A Brink's customer pulled 1,426,355 oz. out of the Comex eligible warehouse inventory today. It seems as though hardly anyone sees it coming, which is quite interesting in and of itself since the math is fairly straightforward. Your leverage keeps increasing until your financial arrangements implode. And then there is a run on assets that are not there.
Well, let's see what happens, and how the monied interests muddle through the latest series of crises and opportunities to fleece the public on the cheap. There will be no reform until the looters are satiated, and the politicians get paid.
This market is certainly high drama and all that, especially with the fresh revelations that the central bankers have taken it upon themselves to lend out their nation's gold, which was sold for a profit in the market by their private banking cronies. News to some perhaps. But not really. It is just becoming harder for the pimps and pitchmen to pretend not to notice that the water is rising above their ankles, and the last train is pulling out of the station.
I am again including the scenario that shows a bottom here in gold, and the potential path to a new target of 1650. I will not give this one credibility until we are well past expiration.
As always, if there is a general liquidation event all bets are off.
I am getting the uncomfortable feeling that the continual stifling of reform and incessant greed of the pigmen is going to lead to something that looks a little bit more like the French revolution than we might have been expecting. Complacent arrogance is the predominant management and political style amongst the masters of the universe in the Western world. Get for a bonfire of the vanities. Some venues might become decidedly over-toasty for the bankers roasting their marshmallows.
The short position in stocks was useful today, especially coupled with a sale near the depths of the decline and the addition of new metals positions as they threw the miners away. But added a fresh short into the close, as we are hardly out of the woods, just yet.
"How could I have done this? I was making a lot of money. I didn’t need the money. Am I a flawed character?”
“I realized from a very early stage that the financial market is a wholly rigged job. There’s no chance that investors have in this market.”
“It’s unbelievable. Goldman-- no one has any criminal convictions. The whole new regulatory reform is a joke. The whole government is a Ponzi scheme.”
Bernie Madoff
"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks."
John Dalberg Lord Acton
"I preyed upon the weak, the harmless and the unsuspecting. This lesson I was taught by others : Might makes right."
Carl Panzram, serial killer
"I was completely swept along with my own compulsion. I don't know how else to put it. It didn't satisfy me completely so maybe I was thinking another one will. Maybe this one will, and the numbers started growing and growing and just got out of control, as you can see."
Jeffrey Dahmer, serial killer
Not all sociopaths wield knives and knotted cords. Some wear suits, and are exceptionally intelligent and articulate, obsessively driven, and are able to use and undermine the law and the rules for their advantage, like weapons. It is never about the win, never about the money. It is about the kill, the expression of their hatred, about elevating themselves with the suffering of others.
Bind, torture, kill. Not only with ropes and knives, but also with power and money, and the subversion of law. Lawlessness is their addiction, their will to power.
In the end what they want is to fill the hole in their being, which has tormented them from childhood, by destroying others, and to differentiate themselves from all those other lower being whom they hold in contempt. They find no commonality with human happiness and the normal life, because of the hatred they have for themselves, and their sense of alienation from all that is human. Their compulsion is to rape and destroy.
When societies become lax and complacent, these sociopaths can possess great political power through enormous sums of unprincipled money. And over time they become almost anti-human, destroyers of all that is good, all that is life, all that offends their insatiable sickness with its goodness. They twist the public against itself, and turn a broad sweep of society into their killing grounds.
This is the undeniable lesson of the last century. There are monsters, and they walk among us.
Interesting bear trap sprung in the afternoon as recycled news on Greece caused a huge reversal in the markets which had been down all day. It was said that the IMF and ECB had reached an agreement on a new bailout for Greece.
Never mind that the government of Papandreou has about the same political track as Hosni Mubarak of Egypt and will probably be out on their ear before the end of summer, when the privatisation sale of Greece's public assets is consummated, more or less. If the Greek people do not toss them out on their ear first.
Look for more volatility dead ahead.
"You demagogues are like the fishers for eels;
in still waters they catch nothing,
but if they thoroughly stir up the slime,
their fishing is good;
in the same way it's only in troubled times
that you line your pockets."
Aristophanes, Ἱππεῖς Hippeîs
![]()
![]()
![]()
"Private capital tends to become concentrated in few hands, partly because of competition among the capitalists, and partly because technological development and the increasing division of labor encourage the formation of larger units of production at the expense of the smaller ones.
The result of these developments is an oligarchy of private capital the enormous power of which cannot be effectively checked even by a democratically organised political society. This is true since the members of legislative bodies are selected by political parties, largely financed or otherwise influenced by private capitalists who, for all practical purposes, separate the electorate from the legislature.
The consequence is that the representatives of the people do not in fact sufficiently protect the interests of the underprivileged sections of the population. Moreover, under existing conditions, private capitalists inevitably control, directly or indirectly, the main sources of information (press, radio, education).
It is thus extremely difficult, and indeed in most cases quite impossible, for the individual citizen to come to objective conclusions and to make intelligent use of his political rights."
Albert Einstein, 1949
The tension between the power and wealth of the few and the rights and liberty of the many therefore requires a continuing commitment to government of the people, by the people, and for the people. A general and pernicious attack upon the obligations of government to regulate and limit the power of the powerful few over the many is the impulse of a nascent tyranny, and the wellspring of treason.
Gold and Silver continue to drift higher. The shares continued to outperform bullion today.
"When they (western central banks) report having 30,000+ tons, that is not true. They may say they still maintain ownership, but they do not have it and they will never get it back. It’s been sold, it’s gone into the market and it’s gone." John Embry
I am back down to a bare gold bullion position, and short the US stock indices. This will be my short term position until I see the stock market bounce and breakout of overhead resistance.
The equity market did not respond well to Bernanke's toothless jawboning today. The average person has not awakened from their slumber, but their sleep is not untroubled. The deception begins to unravel, slowly but surely.
