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Andrew Maguire's interview with KWN was released today and you can read my comments and listen to the interview from here.
Both gold and silver were hit by a sharp bear raid starting around 10:30 NY time, as an intro to Obama's press conference on the US debt ceiling folderol.
I think that deal is all but done, and we are in the theatrics stage now, as both parties wish to impress their respective constituents and frighten them into complacent acceptance.
Mr. Obama is a skillful negotiator and rather crafty, but seems to lack a moral compass. In other words, a consummate politician, but not a leader for a global crisis, in the manner of a Kennedy, Churchill, or Roosevelt.
I do not wish to be rude, but alas, the other choices amongst his peers of both parties do not seem particularly enticing. There seem to be few attractive alternatives these days in that venal and craven Munchkinland called the US intellectual and political leadership, amongst all the self-seeking opportunists, corporate sock puppets, narrow ideologues, mean spirited frat boys, and servile sycophants.
The equity markets pulled back sharply today, down to our support levels, as they had a bit more difficulty ignoring the debt situations in Europe and the US.
The key pivot level on the SP Futures is from 1305 to 1307.50.
Let's see if this support level will hold. Alcoa reported a revenue beat and an earnings miss after the bell. Earnings news from individual companies will present a set of cross currents to the macro developments.
So we might have a stock picker's market with the important caveat to watch the overall global situation and be prepared to react to it.
I am fairly confident that Obama and Boehner have already reached a deal of sorts, with some details still to be provided closing some tax loopholes and allowing tax cuts to expire in a couple of years, with overall budget cuts around 2.5 trillion or so. It remains to be sold to the House, and the Senate will approve.
Both sides will claim victory.
No real problems will be solved.
The actual resolution will come as a response to the next financial crisis. It will probably be messy, and sub-optimal, but seemingly the only choice left on the table.
Until then they will continue to serve up politically based and increasingly bizarre concoctions for Benny and the real economy to watch, increasingly in despair of something worthwhile and substantial.
Watching these jokers at work is emotionally draining, like prune juice for the soul.
An interesting discussion about the opening of the China-based Pan Asia Gold Exchange and its potential impact on the global gold, silver, and currency markets.
My own expectation is that it will be met by concentrated gaming from the paper trade on the various exchanges, until things eventually sort themselves out and the market finds a truer price discovery based on actual supply and demand.
I suspect there will be an initial surge, and then a great push back, and finally a tug of war until the paper trade capitulates and leverage is resolved. Do not forget that this leverage and the existing imbalances were built up over a period of twenty years, and they have only been ten years in the unwinding so far, and are caught up in what I have called the currency wars.
The timing will be highly dependent on the context of the other markets and sovereign debt. I suspect that once the financiers are done messing about with Europe, they will turn once again to Asia.
I concur with Andrew's analysis of how the short side leverage will break down. One may choose not to participate in the metals investment, but I think it is becoming almost insane to short it, except perhaps on a day trade. The danger of a market dislocation is becoming too large for all but the TBTF firms to bear.
And although the percentage gains may ultimately be greater in the instruments such as miners, with of course the commensurate increased risk, I think bullion will continue to lead the way, since the reform of the naked shorting of equities will be dependent on changed demanded as the result of a breakdown first in some other market scheme, like the metals paper manipulation with the excessive use of leverage and the abuse of market pricing.
And although the Comex seems to be the focal point of all this discussion, there are some things that suggest that scandals may rock the London and even the Canadian exchanges and their banking systems, reaching perhaps to the higher levels of government. There seems to be a new Triangle Trade in fraudulently misrepresented financial instruments going across the Atlantic, which includes the Caribbean and some of the other tax havens.
Andrew Maguire Interview on King World News.
Gold soared this morning on a flight to safety from the European debt crisis.
Then suddenly it started dropping sharply around 10:30 NY time.
What could have happened?
Oh, the Bloomberg is reporting that Obama will be addressing the nation in a Press Conference around 11:00 AM.
It doesn't get much more obvious than this.
As the news commentators just noted, gold is flat and the Treasuries are rallying, so why worry?
My stock index shorts from Friday are doing well as this overextended rally continues to pull back. I took a portion of them off the table as the SP futures reach down to support around 1312. I also took the miners off in the first hour, and trimmed back the bullion plays a little after that.
I suspect the major players will reach some agreement on the debt ceiling by July 22, and throw a portion of the American public under the bus, to everyone's relief that a horrible crisis has been averted, while largely maintaining the real status quo and the primacy of the Wall Street monied interests.
It's MMT all the way. Not only Modern Monetary Theory, but Modern Management Theory, and the management of perceptions is everything in the Potemkin economy.
Later: I am watching Obama speak now, and it's pure theater. He said he wants a 'fair and balanced' solution. He is posturing quite a bit, but obviously concerned with giving his Republican colleagues cover with the more vocal wing of their constituency.
I have great sympathy for him, as he has inherited a terrible mess created in large part by his predecessors. The pigmen and their comrades are in a feeding frenzy, and the social fabric is stretched thin. Enough is never enough for them as they are addicted to greed and the will to power.
A bright fellow no doubt, but unseasoned by things like family, tradition, and the personal experience of hardship: a great story teller, a rationalizer, a perpetual outsider, and a thoroughly modern relativist. You have to keep your eye on what he does, rather than what he says. But that is a given with all modern managers.
No wonder gold and silver were hit so hard. They are the untarnished standards that stubbornly resist all rhetoric and relativism.
"...Surely, there is at this day a confederacy of evil, marshalling its hosts from all parts of the world, organizing itself, taking its measures, enclosing the church of Christ as in a net, and preparing the way for a general apostasy from it. Whether this very apostasy is to give birth to Antichrist, or whether he is still to be delayed, we cannot know; but at any rate this apostasy, and all its tokens, and instruments, are of the Evil One and saviour of death.
Far be it from any of us to be of those simple ones, who are taken in that snare which is circling around us! Far be it from us to be seduced with the fair promises in which Satan is sure to hide his poison!
Do you think he is so unskillful in his craft, as to ask you openly and plainly to join him in his warfare against the truth? No; he offers you baits to tempt you. He promises you civil liberty; he promises you equality; he promises you trade and wealth; he promises you a remission of taxes; he promises you reform...
He shows you how to become as gods. Then he laughs and jokes with you, and gets intimate with you; he takes your hand, and gets his fingers between yours, and grasps them, and then you are his."
J.H.Newman, The Times of Antichrist
The divergence between gold and the broad stock indices is highly encouraging that the precious metals have put in at least a short term bottom, and may threaten to break out over the next couple of weeks.
This is still a very slow time of the year, and seasonally weak for precious metal investments. But favorable winds are just around the corner.
On a breakout, the intermediate target for gold will be around $1755, with some pauses and at least one larger pullback along the way.
Fairly disappointing Jobs Report, but Wall Street has its eye on earnings season and the puffed up corporate numbers that will start rolling out next week.
Watch out for the short term noise, and keep your attention focused on guidance, rather than current numbers which are two parts accounting fluff and three parts Fed subsidies.
If the consumer is not healthy, American business will not be healthy. The effects may just show up with a lag.
Additionally, I have included the daily cash charts of the SP 500 and the NDX with some indicators that seem to suggest that the markets are overextended for the short term, and are ready for some consolidation and perhaps a pullback after this amazing run higher. It can of course become even more overbought in the short term.
A weak report, but not as tragically dramatic as the silly revisions higher that preceded it based on the ephemeral ADP report.
Traders and politicians like the volatility that emotions bring to the decision making process. Jolting the herd from here to there serves to distract them while moving them along in the desired direction.
The recovery is weak, returning to the weak job growth that was evident prior to the crash of 2008, within the bounds of 2005-2006 for those wearing their Bush goggles. The economy is sick, and could possibly take a turn for the worse. It badly needs a structural reworking, and unfortunately that discussion is not even on the table. The monied interests are setting the agendas and shaping the news.
Simple short term stimulus will not 'fix it,' and fiscal austerity is snake oil from the same con men and grifters that brought you the financial crisis with a sick, unbalanced economy on its way to third world status. What is the 'industrial policy' of the US. I would submit that it is still deregulation, the deification of ideal markets that do not exist, and the shifting of more capital to the few in hopes of a trickle down effect that never really occurs. The funds are used to further bind the real economy with artificial impediments and rents.
From budget surplus to death spiral in a little more than a decade. Gee, where did we go wrong?
You all know what needs to be done. But there is not nearly enough to slake the greed of the powerful. So down this road we must go.
Here's one for those who favor giving tax breaks on offshore funds for multinationals who use accounting gimmicks and loopholes to realize their income in tax haven countries. The program allows corporations like GE to repatriate their stashed cash on the cheap, and pay it out in tax free dividends to wealthy shareholders and bonuses for their executives.
It is a powerful incentive to send even more employment and economic activity offshore, and for countries to engage in state directed mercantilism. There are no Porterian 'natural competitive advantages' involved, but there is a strong artificial disincentive to allow domestic consumption and advancement of the mercantilist's own middle class. There is, at the end of the day, the least common denominator of the health and freedom of the many as the unifying corporate objective, and the principle of one world government.
Trickle down is a canard. Globalization and 'free trade' is a means of beating down all independent public policy and local sovereignty. There is no purely objective macroeconomics without major policy assumptions as to the public 'good.' Naturally efficient and rational markets are the economic equivalent of Piltdown Man.
And there is no such thing as sustainable 'free trade' between independent political entities under fiat currency regimes, without assuming a perfectly rational system run by angels. The game is rigged and the regulators and politicians are bought, always and everywhere, under this type of artificial construct, with a nationless oligarchy as its ultimate objective.
In case you were wondering what the Congress and the Administration were doing with all those faxes, cards, phone calls, and letters you were sending in about the need for financial reform and tougher law enforcement, they decided to make it official policy not to aggressively prosecute the laws against white collar crime in 2008. Another innovation in outsourcing justice through extended self-regulation.
Apparently they told this privately to the Wall Street banks and their lawyers in 2008, but neglected to copy the American public on the memo.
Some have noticed the lack of reform, but the monied interests have done quite a successful PR job in refocusing the national discussion on priorities involving social issues, and the reform of the support systems for the weak, the unfortunate, and the elderly. Turning one group against another, and objectifying your intended victims through slogans and stereotypes, has always been an effective method of bending the herd to your will. Score one for Edward Bernays.
As W.C. Fields said, 'Never give a sucker an even break.'
How about it, feeling more confident yet? We know some people who are.
At least they have not overtly played the disability or the race card - yet. But things are relatively calm, and why be glum, the night is still young.
New York Times
Behind the Gentler Approach to Banks by U.S.
By GRETCHEN MORGENSON and LOUISE STORY
July 7, 2011
As the financial storm brewed in the summer of 2008 and institutions feared for their survival, a bit of good news bubbled through large banks and the law firms that defend them.
Federal prosecutors officially adopted new guidelines about charging corporations with crimes — a softer approach that, longtime white-collar lawyers and former federal prosecutors say, helps explain the dearth of criminal cases despite a raft of inquiries into the financial crisis.
Though little noticed outside legal circles, the guidelines were welcomed by firms representing banks. The Justice Department’s directive, involving a process known as deferred prosecutions, signaled “an important step away from the more aggressive prosecutorial practices seen in some cases under their predecessors,” Sullivan & Cromwell, a prominent Wall Street law firm, told clients in a memo that September.
The guidelines left open a possibility other than guilty or not guilty, giving leniency often if companies investigated and reported their own wrongdoing. In return, the government could enter into agreements to delay or cancel the prosecution if the companies promised to change their behavior.
But this approach, critics maintain, runs the risk of letting companies off too easily.
“If you do not punish crimes, there’s really no reason they won’t happen again,” said Mary Ramirez, a professor at Washburn University School of Law and a former assistant United States attorney. “I worry and so do a lot of economists that we have created no disincentives for committing fraud or white-collar crime, in particular in the financial space."
While “deferred prosecution agreements” were used before the financial crisis, the Justice Department made them an official alternative in 2008, according to the Sullivan & Cromwell note.
It is among a number of signs, white-collar crime experts say, that the government seems to be taking a gentler approach.
The Securities and Exchange Commission also added deferred prosecution as a tool last year and has embraced another alternative to litigation — reports that chronicle wrongdoing at institutions like Moody’s Investors Service, often without punishing anyone. The financial crisis cases brought by the S.E.C. — like a recent settlement with JPMorgan Chase for selling a mortgage security that soured — have rarely named executives as defendants..."
Read the rest of the story here.
The metals continue to move higher, in fairly steady manner, after the coordinated smackdown at the Comex for the July options expiration.
Gold and silver are typically capped and then hit on a US Non-Farm Payrolls report. Today was the capping of price. Let's see if they can hold their own tomorrow. If they do get pushed down hard, it may very well set up a short term entry point, providing the asset markets do not start liquidating based on some failure or exogenous event.
It is interesting to see the strong negative correlation between the dollar and stocks. It almost looks like they are moving asset allocations around the plate, trying to whistle up the wind of retail buying.
The metals will be entering a seasonally stronger period of the year after July based on the last ten years, barring the liquidity panic of 2008.
Major players are reported to be calling around Wall Street to reassure the bankers that the US budget deficit debate is a show piece to allow the politicians to serve up some meaningless symbolic diversions to their various constituents. Not to worry, the deal will be done, with token sacrifices from the wealthy and a further erosion of the economic viability of the middle class, the elderly, and the weak. And remember to send in those corporate donations in time for the 2012 elections.
JPM was found by the SEC, at the prompting of the states and some exceptionally blatant evidence, to be bribing officials and systematically corrupting bond markets over a long period of time.
They have settled with the SEC, and issued a press release blaming rogue traders who operated without the knowledge of management.
JPMorgan Chase does not tolerate anticompetitive activity or other violations of law. The firm assisted the government agencies in their investigations and is pleased to have resolved this matter with its regulators. The majority of the funds being paid under the settlement agreements will be distributed to municipalities and other tax-exempt issuers.
The investigations focused on a small desk that was discontinued and on certain employees who are no longer with the firm. These employees concealed their conduct from management.
The firm's policies -- both now and during the period in question -- expressly prohibit the conduct that gave rise to these proceedings. During the course of the investigations, the firm initiated enhanced supervisory protocols and worked with its regulators to further strengthen its compliance programs in the public finance business. These improvements included
implementing a heightened supervision program, increasing surveillance, and increasing antitrust, ethics and other compliance training. The firm will continue to strengthen these programs.
Under the terms of the settlements, JPMorgan Chase will pay a net amount of $211.2 million as follows: $50.0 million to the IRS; $51.2 million to the SEC; $35.0 million to the OCC; and $75.0 million to the State Attorneys General. Of those funds, $129.7 million will be eligible for distribution to municipalities and other tax-exempt issuers. The settlements are not expected to have any material impact on the firm's earnings.
One wonders if the Justice Department will be pursuing specific criminal charges against these individuals, in addition to banning them from participation in the securities markets, but allowing them to remain free to enjoy their enormous salaries and bonuses.
Stay tuned as more of these control frauds continue to fall apart, and the corporate media and the monied interest's demimonde try to ignore them and move along.
As in the case of the Madoff Ponzi scheme, if trading results are improbably and too consistently good, there is a high likelihood that fraud and corruption is being concealed.
Tomorrow is the Non-Farm Payrolls report for June.
This market rally is over-extended, but it could drift higher in the absence of news founded in economic reality.
There is optimism over the earnings season which starts shortly.
The boyz are quite anxious for mom and pop and a few of the institutions to put some cash in this market. You can't keep passing around a hot potato forever.
