Stocks and Precious Metals Charts - This Attractive But Deceitful World - Dr Evil Followed Up By Mini-Me

 

"The wealthiest 1 percent of Americans are the nation’s most egregious tax evaders, failing to pay as much as $163 billion in owed taxes per year, according to a new Treasury Department report released on Wednesday.

The analysis comes as the Biden administration is pushing lawmakers to embrace its ambitious proposal to invest in beefing up the Internal Revenue Service to narrow the 'tax gap,' which it estimates amounts to $7 trillion in unpaid taxes over a decade. 

The White House has proposed investing $80 billion in the tax collection agency over the next 10 years to hire more enforcement staff, overhaul its technology and usher in new information-reporting requirements that would give the government greater insight into tax evasion schemes.  The proposals have been met with deep skepticism from Republicans and business lobbyists." 

DNYUZ, The top 1 percent are evading $163 billion a year in taxes

 

"Ayn Rand's 'philosophy' is nearly perfect in its immorality, which makes the size of her audience all the more ominous and symptomatic as we enter a curious new phase in our society.  Moral values are in flux.  The muddy depths are being stirred by new monsters and witches from the deep.  Trolls walk the American night.  Caesars are stirring in the Forum.

To justify and extol human greed and egotism is to my mind not only immoral, but evil. "

Gore Vidal,  Comment, Esquire, July 1961

 

"But there is a sort of 'Ok guys, you're mad, but how are you going to stop me' mentality at the top." 

Robert Johnson, Audacious Oligarchy

 

Gold and silver were hit again today down to trend resistance, but managed to bounce back a bit into the close.

Not a Dr Evil class market swindle as we saw a week or so ago, but maybe a 'mini-me.'

Stocks were lower, even the storied big cap tech stocks.

The Dollar moved a little higher.

Again this looks like a very technical trade.

But we are entering what has proven historically to be a volatile season for stock bubbles.

Let's see what the rest of the week brings.

Have a pleasant evening.

Stocks and Precious Metals Charts - Stock Bubble III: The Great Unraveling - Stock Option Expiration Friday

“Realize that narcissists have an addiction disorder. They are strongly addicted to feeling significant. Like any addict they will do whatever it takes to get this feeling often. That is why they are manipulative and fakers. They promise change, but can't deliver if it interferes with their addiction.”

Shannon L. Alder


"As a dog returns to its vomit, so a fool returns to his folly."

Proverbs 26:11


"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


"Remember that there will be trying times in the last days.  For people will love only themselves and their money.  They will be boastful and proud, scoffing at God, dishonoring their parents, and ungrateful.  To them nothing is sacred.  They will be unloving and unforgiving; they will slander others and have no self-control. They will be cruel and despise what is good. They will betray their friends, be reckless and proud, and love pleasures of the world more than God. They may talk like they are religious, but they will reject the power that could make them godly.  Shun them."

2 Timothy 3:1-5

Stocks had another ranging day that ended up largely unchanged.

Trumpolini had his long-awaited signing ceremony with a Chinese delegation for the Trade-Lite Deal.  His speech was embarrassingly in character.

Gold and silver finished higher, and the Dollar closed a bit lower.

The stock market is now at bubble levels not seen since the Tech Bubble.

A reckoning with reality is on deck, most likely to arrive later this year. How much later is a very good question.

Protect yourselves, your hearts and minds as well as your money.  For the love of most has already gone cold.

Are we truly in the last days as some think?

As Newman observed, most centuries have thought that their times are the worst.  Pride inflates our view of ourselves in many ways.

No one can truly know when the end is coming, as you may recall.

But it seems as though an end of something, thought to be unassailable, is fast approaching.

And the consequences of this failure of pride, and the reaction its fanatical true believers, may be notable, for many years to come.

Try to not become swept up in the madness, remembering who you are and why you are here.

Have a pleasant evening.

Stock Share Risk Measure Rises To Highest Ever: What Time Is the Next Black Swan?

"Narcissus so himself, himself forsook,
And died to kiss his shadow in the brook."

William Shakespeare, Venus and Adonis

Tony Sanders has a very interesting column today pointing out a remarkable spike higher in 'skew risk' for the SP 500.

Here is the definition of skew risk from the the Chicago Board of Options Exchange:

The crash of October 1987 sensitized investors to the potential for stock market crashes and forever changed their view of S&P 500® returns. Investors now realize that S&P 500 tail risk - the risk of outlier returns two or more standard deviations below the mean - is significantly greater than under a lognormal distribution. The CBOE SKEW Index ("SKEW") is an index derived from the price of S&P 500 tail risk.

Similar to VIX®, the price of S&P 500 tail risk is calculated from the prices of S&P 500 out-of-the-money options. SKEW typically ranges from 100 to 150. A SKEW value of 100 means that the perceived distribution of S&P 500 log-returns is normal, and the probability of outlier returns is therefore negligible.

As SKEW rises above 100, the left tail of the S&P 500 distribution acquires more weight, and the probabilities of outlier returns become more significant. One can estimate these probabilities from the value of SKEW. Since an increase in perceived tail risk increases the relative demand for low strike puts, increases in SKEW also correspond to an overall steepening of the curve of implied volatilities, familiar to option traders as the "skew".

The original posting in complete is below.  I did want to take a moment to try and put this skew reading in a better context for the average reader.

As you can see from the chart below the spikes in skew are more of an 'early warning' indicator with several steps in the two prior instances of crashes, associated with the tech bubble in orange and the housing bubble in red.  I imagine history will find a similarly snappy name for our current bubble which is encompassed in light green.

I wish to stress that there is no simple linear relationship, ie a spike in skew is followed by a crash within six months, with any certainty.  In other words, seeing this spike in skew and then selling all your stocks and going short the market with triple leveraged ETFs is probably not a good idea and is not likely to be fruitful, timing and market decays being what they are.

The spike in skew is more of an indication of trouble, of a stress and fear in the system perceived by some of the more sophisticated in the market who presumably also have superior access to information.

I do believe that in the two prior cases here the continuing rally of SP 500 index after a spike in skew was at least partially a result of the 'Greenspan put' and the 'Bernanke put'.

That is, in reaction to fear and instability in the equity markets, the Fed modified its policy actions that had the effect of supporting the extension of what were at heart a mispricing of risk attributable to credit bubbles.   The Fed is not the only actor in this.  The regulators and the custodians of the public trust are very much involved in these sorts of macro mistakes.

What made this even more damaging was that, particularly in the latter case, these bubbles were wrapped around a core of extensive control frauds and intentionally mismanaged perceptions of risk, with quite a few enablers both on the Street and within the media and the regulatory bodies, either passively or actively.

I am not saying that all the motives of all the actors were malevolent.  But some were.

The notion that the market is infallible is rank romantic nonsense because it will always be within the domain of human action, and is therefore a product of human nature and subject to monopoly and manipulation without the conscious efforts of 'referees.'

N’en déplaise à ces fous nommés sages de Grèce,
En ce monde il n’est point de parfaite sagesse;
Tous les hommes sont fous, et malgré tous leurs soîns
Ne diffèrent entre eux que du plus ou du moins.

In spite of every sage whom Greece can show,
Unerring wisdom never dwelt below;
Folly in all of every age we see,
The only difference lies in the degree.

Nicolas Boileau-Despréaux, from Mackay's Madness of Crowds

And I fear that as so often in the past, though 'this may be madness, there may also be a method in it.'

I would take this spike in skew as more of an indicator of a probability. Notice that the skew spiked earlier in this latest phase, and then dropped as the market continued to rally higher.

There is nothing to say that this will not happen again.  Why?  Because there are a number of exogenous variables at play in any major market movement to say the least, as noted above in the policy actions of the Fed for example.  As Walter Bagehot observed, 'life is a school of probabilities.'

I can easily feature a plaintive response from the economists, 'well what are we supposed to do?'

Reform the market.  Get it back to a more stable and less fragile and conductive construction as we had in the 60 or so years following the reforms of the New Deal, which were overturned with the active involvement of so many economists, politicians, and Fed members in the 1990s.

But until that happens I am afraid we will see a series of bubbles and crashes, what I and others have called 'bubble-nomics.'

It is not the 'new normal.'  It is an aberration that seeks to sustain itself as the status quo.  It is a miscarriage of justice, as old as Babylon and as evil as sin.

It does seem to be a reasonable bet that the ruling classes, existing as they do in an echo chamber of their own illusions, will do nothing to change this without exterior motivation, or compulsion.

It will be an interesting race to see which market blows up first, the stock market or the precious metals markets.  Today Denver Dave asks if there is a scandal brewing in the paper gold and silver market.  I would say again, and as I am sure that Dave and others have said and would agree, that there is a high probability, based on some easily observed factual data, of a serious scandal, so much so that it is merely a question of when that particular pot boils over if nothing changes.

And it may be diverting to observe the increasingly obtuse actions that the plutocrats and their bureaucracy may take to 'save the system.'   Or perhaps, at long last, one small crash will serve as the catalyst for many in a grand bonfire of the vanities.  But if not, there will be more.

"Make no mistake about it, just as Lehman Brothers was set up to take the fall for triggering the 2008 collapse, China is being groomed as the new scapegoat for the coming crisis. But China’s economic slump is only a symptom, not the disease...

The reality is that the repeal of Glass-Steagall ushered in the greatest wealth transfer scheme in the history of America, allowing six mega banks in America to control the vast majority of insured deposits, use those taxpayer-backed deposits to gamble for the house, loot the bank from the inside by paying billions of dollars to select employees and customers and then hand the gambling tab to the taxpayer when the casino burns down. This model is a staggering headwind on both U.S. and global growth because it has created the greatest wealth and income inequality since the Great Depression.

Pam and Russ Martens, The Real Reason Global Stocks Are Flashing Red this Morning

So in sum, as I seem to have to say so often lately, 'timely caution is advised.'

Here is the original article from Confounded Interest.

SKEW (S&P 500 CRASH RISK) RISES TO HIGHEST LEVEL EVER!

The CBOE Skew index, a measure of tail risk for the S&P 500 index, just exploded.

It is now at the highest level on record.

It looks like an S&P 500 index downturn follows the SKEW breaching the 140 level.

This is not surprising given how much air has been pumped into asset markets like the S&P 500 index.

Moral Hazard: The Abysmal Failure of the Doctrine Of Selective Justice For Finance

Moral Hazard - In economic theory, a moral hazard is a situation in which a party is more likely to take risks because the costs that could result will not be borne by the party taking the risk. In other words, it is a tendency to be more willing to take a risk, knowing that the potential costs or burdens of taking such risk will be borne, in whole or in part, by others. A moral hazard may occur where the actions of one party may change to the detriment of another after a financial transaction has taken place.

Wikipedia says that Economist Paul Krugman described moral hazard as "any situation in which one person makes the decision about how much risk to take, while someone else bears the cost if things go badly."

Moral hazard is not only the misallocation of risk, but the mispricing of risk without significant consequences as well.  This also speaks to the misallocation of risk. As in a bubble.

In our most recent financial crisis we saw both the mispricing of risk in the initial collateralized debt obligations that fed the housing price bubble, and in the aftermath, where much of the consequences of the ensuing financial crisis were allocated to the taxpayers after the fact and without an explicit prior agreement to do so, under duress.

A rather sophistic defense of that approach and subsequent policy was provided by Larry Summers who in September of 2007 wrote an article entitled Beware of Moral Hazard Fundamentalists:

"In the financial arena the spectre of moral hazard is invoked to oppose policies that reduce the losses of financial institutions that have made bad decisions. In particular, it is used to caution against creating an expectation that there will be future 'bail-outs'."

As an aside, when I saw the new 'reform President' bringing in Timothy Geithner, Hank Paulsen, and Larry Summers to key posts in his administration, I suspected that the people's mandate for reform had been deflected, although there was the prior example of FDR bringing in Joe Kennedy to spearhead the SEC.  But, alas, Obama quickly turned out to be no Franklin Roosevelt, but a loyal member of the Wall Street wing of the Democratic Party.

And here we are, SEVEN years later. Forget 'future bailouts.' We have what seems to be never-ending bailouts, and subsidies, and special arrangements, and deals benefiting Wall Street, to the detriment of almost everyone else.

Here is a video of Senator Elizabeth Warren from yesterday's testimony in a hearing chaired by Senator Tim Johnson (D-SD) “Wall Street Reform: Assessing and Enhancing the Financial Regulatory System.”  

She begins by questioning Fed Governor Daniel Tarullo.  As you may recall, the Fed is one of the primary banking regulators, acquiring even more and broader regulatory powers in the aftermath of the 2008 financial crisis.

Her second question about the TBTF Banks and failure resolutions goes to FDIC Chair Martin J. Greenberg.

Near the end is a long statement/question from Senator Richard Shelby of Alabama. 

I bring this to light, in order to respond to those who say that the banking system has already been reformed.   It has not.

It is only 11 minutes in length and is worth watching. You can see it in its entirety here.

Special thanks go to Pam Martens for bringing these quotes to light in her excellent article, Jamie Dimon Gets $8.5 Million Raise for Illegal Conduct at JPM. I had not yet found a proper transcript. Pam's articles are consistently timely and of high content value.

“As Judge Rakoff of the Southern District of New York has noted, the law on this is clear. No corporation can break the law unless an individual within that corporation broke the law. (unlike some recent delusions from the Supreme court about the inalienable rights of soulless, disembodied Corporations which are constructs merely of common law with no superior claim to a higher authority equal to an individual's rights - Jesse)

Yet, despite the misconduct at these banks that generated tens of billions of dollars in settlement payments by the companies, not a single senior executive at these banks has been criminally prosecuted. Now, I know that your agencies can’t bring prosecutions directly, but you’re supposed to refer cases to the Justice Department when you think individuals should be prosecuted. So, can you tell me how many senior executives at these three banks you have referred to the Justice Department for prosecution?...

After the savings and loan crisis in the 1970s and 1980s, the government brought over a thousand criminal prosecutions and got over 800 convictions. The FBI opened nearly 5,500 criminal investigations because of referrals from banking investigators and regulators.

The main reason we punish illegal behavior is for deterrence; to make sure that the next banker who’s thinking about breaking the law remembers that a guy down the hall was hauled out of here in handcuffs when he did that.

These civil settlements don’t provide deterrence. The shareholders for the company pay the settlement; senior management doesn’t pay a dime. And, in fact, if you’re like Jamie Dimon, the CEO of JPMorgan Chase, you might even get an $8.5 million raise for negotiating such a great settlement when your company breaks the law.

So, without criminal prosecution, the message to every Wall Street banker is loud and clear: if you break the law you are not going to jail, but you might end up with a much bigger paycheck.

No one should be above the law. If you steal a hundred bucks on Main Street, you’re probably going to jail. If you steal a billion bucks on Wall Street, you darn well better go to jail too.”

Greenspan: No Irrational Exuberance, Stocks 'Undervalued' - The Rake's Progress

 

“I recognise that there is a stock market bubble problem at this point, and I agree with Governor Lindsey that this is a problem that we should keep an eye on....We do have the possibility of raising major concerns by increasing margin requirements. I guarantee that if you want to get rid of the bubble, whatever it is, that will do it.”

Alan Greenspan, September 24, 1996 FOMC Minutes


"Where a bubble becomes so large as to pose a threat the entire economic system, the central bank may appropriately decide to use monetary policy to counteract a bubble, notwithstanding the effects that monetary tightening might have elsewhere in the economy.

But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade? And how do we factor that assessment into monetary policy? We as central bankers need not be concerned if a collapsing financial asset bubble does not threaten to impair the real economy, its production, jobs, and price stability."

Alan Greenspan, December 5, 1996, Speech to the American Enterprise Institute


"American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage. To the degree that households are driven by fears of payment shocks but are willing to manage their own interest rate risks, the traditional fixed-rate mortgage may be an expensive method of financing a home."

Alan Greenspan, February 23, 2004, Speech to Credit Union National Association


"Although a "bubble" in home prices for the nation as a whole does not appear likely, there do appear to be, at a minimum, signs of froth in some local markets where home prices seem to have risen to unsustainable levels...

The apparent froth in housing markets may have spilled over into mortgage markets...

Although we certainly cannot rule out home price declines, especially in some local markets, these declines, were they to occur, likely would not have substantial macroeconomic implications."

Alan Greenspan, June 9, 2005, Economic Outlook


"I was aware that the loosening of mortgage credit terms for subprime borrowers increased financial risk. But I believed then, as now, that the benefits of broadened home ownership are worth the risk."

Alan Greenspan, September 2007, The Age of Turbulence


"...the problem at its root is a flawed business model, and that business model is the product of a government regulatory decision to repeal Glass-Steagall administratively and legislatively, and to seek this tremendous concentration of power; and then the abuse of that power by the investment houses...

What we want to do is clean up the system and hold the individuals accountable, and that is what we have tried to do...But there was an understanding that if we were to seek criminal sanctions against either the institution or the most senior people of the institution, the practical impact in our regulatory environment would have been to destroy those institutions, and then structural reform would be meaningless...because the harm to our economy that would result from eliminating a Citigroup or a Merrill Lynch is enormous, and it's disproportionate to the remedy that we want.....

It was incredible. It was distressing to me how simple and outrageous it was. It wasn't so complicated that you said, "Wow, at least they're smart in the way they're doing it." It was simple. It was brazen. The evidence of it was overwhelming. It's just that it hadn't been revealed to the public, and that's why could get away with it...

Over the past decade we've wanted to deregulate, and we've said, "Let's get government out of the business of looking at these issues, and permit industry to control itself, because we can trust them." Maybe that's been a very good thing in some ways.

One of the things that is eminently clear from our investigation is that all the compliance departments, all the self-regulation is nothing. They watched it, but they did nothing. So we've got to think this through, and it's not only the financial community. There are a lot of sectors where we have said self-regulation is the answer. We've got to think about it."

Eliot Spitzer, The Wall Street Fix, March 16, 2003


"The vast majority of privately negotiated OTC contracts are settled in cash rather than through delivery.

Cash settlement typically is based on a rate or price in a highly liquid market with a very large or virtually unlimited deliverable supply, for example, LIBOR or the spot dollar-yen exchange rate.

To be sure, there are a limited number of OTC derivative contracts that apply to nonfinancial underlying assets. There is a significant business in oil-based derivatives, for example. But unlike farm crops, especially near the end of a crop season, private counterparties in oil contracts have virtually no ability to restrict the worldwide supply of this commodity. (Even OPEC has been less than successful over the years.)

Nor can private counterparties restrict supplies of gold, another commodity whose derivatives are often traded over-the-counter, where central banks stand ready to lease gold in increasing quantities should the price rise.

To be sure, a few, albeit growing, types of OTC contracts such as equity swaps and some credit derivatives have a limited deliverable supply. However, unlike crop futures, where failure to deliver has additional significant penalties, costs of failure to deliver in OTC derivatives are almost always limited to actual damages.

There is no reason to believe either equity swaps or credit derivatives can influence the price of the underlying assets any more than conventional securities trading does."

Alan Greenspan, July 24, 1998, Testimony on the Regulation of OTC Derivatives

Hubris has no shame.

CNN
Greenspan: No irrational exuberance, stocks undervalued
By Chris Isidore
March 15, 2013

NEW YORK (CNNMoney)
Former Federal Reserve Chairman Alan Greenspan said that even with record-high stock prices, investors don't need to worry about "irrational exuberance" this time.

In fact, his current view is that stocks are still "significantly undervalued."

Read the entire article here.

Related: Michael Hudson and Pierre Rinfret: The Myth of Alan Greenspan

China's Extreme Real Estate Bubble: Globalization Is a Fraud, a Castle Built On Sand

Quite a few people know about this, but they really do not understand it.  It is a fraud that surpasses by far any in history, including the South Sea and Mississippi bubbles.

China is an extreme bubble fueled by artificially low wages and an autocratic industrial policy that is distorting the economy of the entire world.

The monied interests of the West have been riding the trend of deregulation and globalization to their personal enrichment and benefit.  But it is an empire of illusion, with a foundation of sand, held in place by the corrupting power of money.

There are some ways out of this that the Chinese leadership might take, but I suspect that their powerful oligarchs will be caught in the same credibility trap that has kept Western leaders from taking the appropriate policy actions for the good of their own people.

This is a story of betrayal, powers and principalities, of the rulers of darkness in this world, and evil in high places.   And the Anglo-American establishment has played a key part in it.

Sorry for the commercials, but the video is worth watching because it carries a visual impact that words alone do not quite capture.

China's richest woman says in a related interview not included on the aired program that the 'Chinese people are craving for democracy.'

So are the Arabic people, and the people of Europe and the Americas, who often have the illusion of choice, from amongst a series of choices allowed by technocrats acting for a ruling elite.

How Can You Tell When Gold Is In a Bubble?

When the junior miners start showing these kinds of returns, you might be in a bubble.

We're nowhere near that point yet.