Gold Daily And Silver Weekly Charts - New All Time Highs - We're Flying!

 

Nothing else matters now, because We're flying!!

 

This is the combined precious metal and stock market commentary for Friday the 13th.

 

A fresh new bubble in stocks has achieved liftoff.  What could go wrong?

 

Shaking off the very weak economic news from the real economy in the latter part of this week, stocks took the opportunity to break out higher on relatively low volumes ahead of a three day weekend because of President's Day on the 16th.

What sparked this rally is the 'new ceasefire' between the Ukraine and Russia, and perhaps even more importantly, the continuation of talks between the troika and Greece with regard to the debt crisis there.

 

And mostly, because they could.  Motive and opportunity.

This is a hot money bubble. The Wall Street wiseguys had the opportunity for a new high and they have taken it, consequences be damned.  The political animals will look the other way, as long as the campaign handouts keep coming, and justice is especially blind given the right career incentives.

The strong dollar may be painful for the real economy, but the benefit is that it attracts foreign investment in paper, and gives the Banks and the hedge funds the ability to buy up assets on the cheap.  It increased the consolidation in commercial business, especially in the healthcare field which is ripe for the plucking. 

 

It helps to inflate dollar denominated financial assets.  It is a boon to Wall Street.

 

The Fed does not have to tighten interest rates to put some reins on this.  They have always had the discretion to raise margin requirements and a variety of other tools as the primary bank regulator for which they volunteered after the last crisis in which they were instrumental.

The Fed and the regulators and Wall Street are wholly responsible for this.   We are caught in a boom and bust cycle thanks to the distortions from an oversized financial sector and a corrupt political system and the acquiescence of the media and the professional classes.

It will end badly. Make no mistake.  When it does, everyone will be amazed because 'no one saw it coming.'

Serial policy errors. But it is swelling the net worth of the one percent, and so nothing will be said.

 

But in the meantime, we're flying!

 

Have a pleasant weekend. See you on Tuesday.

 

 

 

 

Bubble-nomics: The Federal Reserve Balance Sheet and the SP 500

"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."

Bernie Madoff


"Unfettered capitalism is a revolutionary force that consumes greater and greater numbers of human lives, until it finally consumes itself."

Chris Hedges


"I preyed upon the weak, the harmless and the unsuspecting. This lesson I was taught by others: might makes right."

Carl Panzram, psychopath, serial killer

Not much is going to the real economy and the 99 percent, so it has to be going somewhere.

The creation of financial asset bubbles using the power of selective monetary inflation is 'trickle down' at its finest.

But certain assets may blurt out unpleasant truths, if they are allowed to speak.

This is not sustainable. What are they thinking?

Entitlement, indeed.

Rising Margin, Negative Guidance, Madness of Crowds

Early this morning one of my compadre's asked me, 'Is there some reason for this rally?'

And I answered, somewhat glibly, 'Yes, it's rally Tuesday.'

Stocks will have rallied 20 Tuesdays in a row in the US if they rally again today.

And that is as good an answer as any, although the already rallying market 'got some jets' when the Consumer Confidence number came out better than expected at 10 AM.

The Conference Board confidence number is highly correlated, as a lagging variable, to the stock market price. In other words, consumer confidence follows the market, and not the other way around.  It is less a reason for a stock rally than an excuse.   Rising stocks tend to give some people a good feeling about the economic outlook.  And don't think for a minute that the financial planners do not know this.

The underpinnings of this marvelous rally are not substantial to say the least, despite the usual assurances of economists that this is not a stock bubble. Or that there is no bond bubble which is a real howler given the Fed's steady non-market-priced buying of billions of bonds each month.   I suppose that is why the Primary Dealers had to take down 65% of today's two year auction.  Let's not notice the man behind the curtain so we can feel 'confident.'

Bubble or not, new era or not, QE or not, at some point price reverts to the mean, to the fundamental and sustainable market equilibrium, every time.  And it will do so despite the hubris of the modern monetary theorists, from Bernanke to Krugman to Mosler.   Reality is not whatever we say it is, even if one is able to persuade a large number of people to believe it, for a time.

If this falsehood is held in place long enough, even by force, the reversion will occur in extremis through a collapse of the currency.  This is what we saw in the fall of the old Soviet Union.

Here is an interview with Jim Grant that I found to be interesting.   I do find his belief in the efficiency of markets to be curious, if not obtuse, when he says that there can be no manipulation in gold because otherwise everyone would know it.

People have a remarkable ability not to see things when their paycheck depends on their not seeing it.  And a belief in the system remains stubborn amongst those who have basically honest hearts.  They cannot believe in a perfidy so great amongst people sworn to uphold the public interest. 

How else would you explain the fact that so few saw the housing bubble, the widespread fraud in the credit markets, and the mispriced risks and co-dependencies of the insolvent in the financial system that so recently caused world markets to collapse?

The release of gold into the markets by western central banks, through both overt sales and leasing to bullion banks, is beyond all doubt, except for the opaquely hidden details and the refusal to admit them to audit.  And the odd positions in the futures markets are knowable, but also shrouded behind a stonewall of regulatory intransigence. But otherwise he raises a number of excellent things to think about.

All things will be revealed with time.

And here below are two charts that someone sent my way which I found to be disconcerting.

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.   Until this is done, neither stimulus nor austerity will have any lasting, meaningful, and positive effect.