Stocks and Precious Metals Charts - Incoming, All Over Again

 

"The singular feature of the great crash of 1929 was that the worst continued to worsen.  What looked one day like the end proved on the next day to have been only the beginning.

Nothing could have been more ingeniously designed to maximize the suffering, and also to insure that as few as possible escaped the common misfortune.  The fortunate speculator who had funds to answer the first margin call presently got another and equally urgent one, and if he met that there would still be another. In the end all the money he had was extracted from him and lost.

The man with the smart money, who was safely out of the market when the first crash came, naturally went back in to pick up bargains.  (Not only were a recorded 12,894,650 shares sold on 24 October; precisely the same number were bought.)  The bargains then suffered a ruinous fall.

Even the man who waited out all of October and all of November, who saw the volume of trading return to normal and saw Wall Street become as placid as a produce market, and who then bought common stocks would see their value drop to a third or a fourth of the purchase price in the next twenty-four months.

The Coolidge bull market was a remarkable phenomenon.  The ruthlessness of its liquidation was, in its own way, equally remarkable."

John Kenneth Galbraith, The Great Crash of 1929, 1955

"In the months leading up to the Black Thursday of the Crash of 1929, the markets experienced a series of terrific ups and downs that 'left everyone feeling exhausted.'

Now there is a significant amount of uncertainty with a strong undercurrent of fear. How bad will it be? Which banks are insolvent? Why aren't the normal indicators working? Why does reality feel different from what the government numbers are reporting?

At the same time, stocks are divorced from fundamentals so they are 'trading like commodities.'  The big players watch the short and long interest, and run raids against the smaller players and funds.  There is a cynical ruthlessness prevailing in the US markets that is the result of extreme lapses in regulatory oversight mixed with a surfeit of hot money with no particularly productive places to go.  So it roams the exchanges in search of a quick buck.

We're setting up for a rough time fraught with uncertainty.  This implies widening spreads and wild swings.

Asking the market to tell us what is coming now in the real economy is going to be tough, because the market doesn't know whether eat soup or jump out the window."

Jesse, Incoming, 6 September 2008


Stocks continued to wobble again, extending their declines ahead of the speech by Jay Powell tomorrow at Jackson Hole.

Bitcoin continued its decline from its recent all time high.

VIX popped up to its 50 DMA.

The Dollar rallied.

Gold was off a bit.  Silver was hanging in despite stocks and the Dollar.

Economist in general are operating on two important axioms.

First, that Volcker has proved that you can beat even a serious, pernicious inflation with high short term interest rates.

I remember that period of time very well.  There were some who made quite a good amount of future income by investing in interest rate sensitive assets such as dividend paying stocks and bonds and annuities, on the bet that 20% marked the peak of Volcker's gambit.

I can even recall a young engineer who took an ARM mortgage who interest rate fell in each subsequent year, so that merely by maintaining the same payment a 30 year mortgage was fully paid in 15.

The second axiom is that no matter how bad the crash, if the Fed floods the markets with liquidity is the right way then assets will return to their prior levels.   This is the Greenspan gambit from 1987.

There is a third axiom.  A supply shock of a key economic input, such as oil, can lead to a slump in activity as well as an increasing price spiral.   This is the oil embargo of the 1970s.   Economists don't think about this one very much, because they still don't know what to do about it from a policy standpoint, without plunging the economy into a depression.

There is a fourth  axiom.  It has not been fully formed as of yet.  In our hubris, we do not yet even recognize it's possibility.   It rests in existential matters of money.

We are well on our way to finding it.   And therein lies our uncertainty.

Have a pleasant evening. 

 

Stocks and Precious Metals Charts - Filling Jackson Hole

 

"In the history of every great catastrophe, you will find that some masterly bit of stupidity sets fire to the oil-soaked rags."

Edwin Lefèvre, The Game Got Them, Everybody’s Magazine 1908

“It appeared that the whole world was one elaborate system, opposed to justice and kindness, and set to making cruelty and pain.  And he and his father were part of that system, and must help to maintain it in spite of themselves.  Their frail human nature was subjected to a strain greater than it was made for; the fires of greed had been lighted in their hearts, and fanned to a white heat that melted every principle and every law.”

Upton Sinclair, Oil, 1926

“The euphoric episode is protected and sustained by the will of those who are involved, in order to justify the circumstances that are making them rich.  And it is equally protected by the will to ignore, exorcise, or condemn those who express doubts.”

John Kenneth Galbraith, A Short History of Financial Euphoria, 1990

"It's a small group with a lot of power.  A lot of wealth.  They don't necessarily - they're not necessarily always the names, the household names that spring to mind, in this kind of context.  But they are the people who could pull the strings.  Who have the influence.  Who call the shots.

The oligarchs are flush with victory, and feel that they are firmly in control, able to subvert and direct any popular movement to the support of their own fascist ends and unslakable will to power.  This is the contempt in which they hold the majority of American people and the political process: the common people are easily led fools, and everyone else who is smart enough to know better has their price.  And they would beggar every middle class voter in the US before they will voluntarily give up one dime of their ill gotten gains."

Simon Johnson, The Quiet Coup, May 2009

"Where are the princes of this world, and those who lorded it over the creatures of the earth?  Those who made sport of the birds of the air, and hoarded up riches in which they trusted, and for whom there is no limit to their greed, those who schemed to get wealth, and were always anxious about their possessions.  But now there is no trace left of them.  They have vanished down into the bowels of the earth, and others have risen to take their place."

Baruch 3:16-19

Gold and silver were in a sharp recovery rally today, after the protracted smackdown related to the recent stock option expiration.

They both went out near the highs of the day. 

Yeah, Friday was the time to start buying slowly, and then put the pedal to the medal yesterday after the big stops-clearing dip.

Stocks traded weakly but managed to come back a bit in the quiet afternoon trade.

VIX popped and then fell back down in the afternoon.

The Dollar just chopped around and was nominally unchanged.

The Fed heads are meeting in Wyoming once again.

Now we know how many holes it takes to fill Jackson Hole.

It will be interesting to hear what Jay Powell has to say.  

Donnie is putting quite a bit of pressure on him, and the rest of the Fed governors.

Donnie has been buying a lot of bonds for his own portfolio.   Hint.

Have a pleasant evening.

Stocks and Precious Metals Charts - Unloving and Unforgiving

 

"He discovers, on entering there, a new world which was unfamiliar to him, where he sees vice and good manners reigning as equals, and where he can profit as much from what is bad as from what is good. The Court is like a marble building: it is made up of men who are very hard, but highly polished.

The same pride which makes a man treat those of less powerful standing arrogantly, makes him cringe servilely to those above him. It is the very nature of this vice, which is neither based on personal merit nor on virtue, but on riches, posts, influence, and useless knowledge, to render a man a snob to those who are below him as to fawn upon those who are above."

Jean de La Bruyère, Les Caractères, 1688

“The content of your character is your choice. Day by day, what you choose, what you think and what you do, is who you become.”

Anand Giridharadas, The Persuaders

"I am making no charges and mentioning no names. For history teaches us that no party has a monopoly on honesty. Both parties attract their share of crooks and weaklings. But that does not mean that these problems are incapable of solution. That does not mean that a campaign promise is enough. A new administration must screen out those who regard Government service as the door to power or wealth, those who cannot distinguish between private gains and public trust, and those who believe that old-fashioned honesty with the public's money is both old and out of fashion."

John F. Kennedy, Speech at Wittenberg College, October 17, 1960

"They will be unloving and unforgiving; they will slander others and have no self-control.  They will be cruel and hate what is good.  They will betray their friends, be reckless, be puffed up with pride, and love pleasure rather than God.  They will act religious, but they will refuse the grace that could make them righteous."

2 Timothy 3:3-5

"Beware the leaven of the Pharisees, which is hollow hypocrisy.  There is nothing covered that shall not be revealed, and hidden, that shall not be made known.  .Whatever has been said in the darkness shall be heard in the light: and what has been whispered behind closed doors shall be shouted from the roof tops."

Luke 12:1-3

Stocks were lower today, led by the big cap tech stocks and their associates.

There was some attribution for this to an MIT paper that suggests that 95% of companies are not going to be making money from their AI investments.

I think it is more likely that the bubble faltered, and that the pundits were looking for some reason to justify it other than a break in a speculative bubble.

Only a few of the suppliers of the 'picks and shovels' in any new era asset bubble make any money.   This time is no different, and Wall Street knows it.

This is the nature of a bubble.  It is always a pig, with lots of compliments from invested parties, and heavy on the lipstick. 

Gold and silver were hammered.

The Dollar was up about ten cents, so no flight to safety there.

VIX ticked up slightly.

Bitcoin continued its selloff.

What will they think of next?

Have a pleasant evening. 

 

Stocks and Precious Metals Charts - A Thin Veil of Cruel and Shameful Acts

 

"Under democracy one party always devotes its chief energies to trying to prove that the other party is unfit to rule — and both commonly succeed, and are right.  The United States has never developed an aristocracy really disinterested or an intelligentsia really intelligent. Its history is simply a record of vacillations between two gangs of frauds."

H.L. Mencken, Minority Report, 1956

"A body of men, holding themselves accountable to nobody, ought not to be trusted by anybody."

Thomas Paine, The Rights of Man, March 1791

“War is the parent of armies; from these proceed debts and taxes; and armies, and debts, and taxes are the known instruments for bringing the many under the domination of the few.  In war, too, the discretionary power of the Executive is extended; its influence in dealing out offices, honors, and emoluments is multiplied; and all the means of seducing the minds, are added to those of subduing the force, of the people.

The same malignant aspect in republicanism may be traced in the inequality of fortunes, and the opportunities of fraud, growing out of a state of war, and in the degeneracy of manners and of morals engendered by both.  No nation could preserve its freedom in the midst of continual warfare.”

James Madison, Political Observations, 20 April 1795

“If the very rich are naturally so much more capable than the rest of us, why must they be provided with so many artificial privileges under the law, so many bailouts, subsidies and other special considerations - at our expense?”

Michael Parenti, Blackshirts and Reds, 1997

“If you only notice human proceedings, you may observe that all who attain great power and riches, make use of either force or fraud; and what they have acquired either by deceit or violence, in order to conceal the disgraceful methods of attainment, they endeavor to sanctify with the false title of honest gains."

Niccolò Machiavelli, The Prince, 1532

“History is a thin veil of cruel and shameful acts in which a few drops of purity sparkle at long intervals.”

Simone Weil, The Need for Roots, 1949

When Stalin held Russia in his iron grip, people used to see acts of corruption and injustice and say, 'If only Stalin knew about this.  He would correct this and punish the guilty.'

And as we now know, as one might have suspected then, this was foolishness.  Because Stalin and his cronies knew all of it, and were benefiting from it.  And so it continued.

And today, as most days, I hear 'if only the President knew what was being done, that is being hidden from him by the people around him, he would change it.'

If only the top management of XYZ bank knew what their traders were doing, putting the firms at great risk for quick profits, they would soon put a stop to it. 

You can never go wrong by overestimating the gullibility of those who need to believe, no matter the nature of their underlying beliefs.  

They have become personally invested in the myth, and then blinded themselves willingly.   

Freedom is founded on the three principles of a free society:  transparency, equality, and accountability. 

And so our freedom is foundering, on the whims of an unaccountable elite. 

Stocks wobbled around.  It was a strong overnight with the usual faltering on the real market volumes.

Uncle Buck took back the 98 handle.

VIX laid back down into its comfortable complacency.

Gold and silver were under a bit of pressure.  Silver finished slightly positive, gold slightly negative.

And the band played on.

Have a pleasant evening.