"The more power a government has the more it can act arbitrarily according to the whims and desires of the elite, and the more it will make war on others and murder its foreign and domestic subjects. Power will achieve its murderous potential. It simply waits for an excuse, an event of some sort, an assassination, a massacre in a neighboring country, an attempted coup, a famine, or a natural disaster, to justify the beginning of murder en masse."
R. J. Rummel, Mass Murder and Genocide, 1994
"A JPMorgan Chase & Co. unit took delivery of almost 1 million metric tons of raw sugar, the most for the commodity since 2009, to settle the expiring March futures contract in New York. JPMorgan Futures accepted delivery on 18,748 sugar contracts, or the equivalent of 952,398 tons, ICE Futures U.S. said yesterday on its website. That represents 9.2 percent of the current year’s U.S. consumption as estimated by the government. Prices climbed to the highest level in almost three weeks in New York trading today."
I said cream, no sugar, Blythe. And use the silver service next time please. Oh sorry, I forgot you have sold it, and several times over.
Seriously, is this one of those trading positions one occasionally has that turns into an investment? Or is JPM just doing the buying for Krispy Kreme, Coca-Cola, et al. It could have been a legitimate hedging outcome as agent. I would hope it is not hoarding in times of shortage, or even worse, to promote food shortages.
Not so with silver I think, where they sell what they do not have, unless some of the miners have lost their minds, and are likely to be lynched by their shareholders.
Gold and silver were spiking higher today, but managed to get pushed down into the close for modest gains. I think they might be coiling for a move through the overhead resistance that is holding them back a little here.
For as low as the VIX remains, these markets seem to be on a knife edge. Seems like only Benny is holding the line, casting his paper upon troubled waters.
Watch for the action on Friday with Non Farm Payrolls and a potentially shaky weekend in the Middle East, and maybe even in the Midwest.
I was wondering if the some of the commentators on Bloomberg TV today snorting some of that JPM sugar for lunch. Certainly enjoying the high life.
I could be wrong, but this summer looks like it might be shaping up for another rough time in the markets.
Excuse me, I am still trying to regain my composure. A fund manager on Bloomberg named Matt just said that high oil prices will be no problem, because the US economy is booming, and everyone will just go out and buy new, more fuel efficient, cars. He said he went to the mall in Chicago and it was packed, and the best deal there was the $6 valet parking at Nordstrom's.
I wonder how many moons revolve around his planet. Maybe he is right. How does that track with your experience? Perhaps I should run a poll for the Yanks.
See, no problem. Buy stocks. Get them while they're hot.
I am a little more of the camp that thinks that unless the Fed can trigger a self-sustaining inflation, as soon as Benny and his Merry Pranksters stop buying through QEn, stocks and bonds will take a dive, because they and their cronies are the only ones buying this market.
But that's just my opinion and I could be wrong. Let's see if Benny can blow another bubble. Judging by some of the internet wunderkinds' valuations, he might be on his way. Tweet your magic twanger, Ben.
I am getting a few more emails taking me to task for being 'negative' and 'bitter' and being a spoilsport for the new good times.
I don't get around much anymore. Maybe everything is coming up roses in the US and I just don't see it. But it doesn't appear yet in any metrics that I watch closely and in which I have any confidence.
I have to admit that Benny shook me up a bit today in his lame testimony before the Congress. The less likely outcomes of deflation and hyperinflation just went up several notches in my book, especially on the inflationary side. He seems in denial to me, and kind of nervy.
Gold and silver surged higher today on the expanding troubles in the Middle East, and the faltering US dollar reserve currency. Buying from Asia remains very strong, particularly in China.
I flattened out my positions and am sitting in cash, waiting for another opportunity to enter a trade. As always, I do not touch my long term positions. That was a big move down in the stock indices and a big move up in the metals. No need to tempt fate when both sides of a pair trade work for you.
"Actually as I said what we are experiencing is an ongoing debasement of the dollar and I don’t mean to bang on the same drum, but this is the reality and it is critical for readers to understand this important fundamental. This is why all risk assets are rising in price. The increase in the S&P 500 in this case is a precursor to a potential hyper-inflationary event. This befalls a country which runs such high expenditure to deficit ratios. All things equal, this will end badly.”
Ben Davies, Hinde Capital
As you know I still believe that stagflation is the most likely outcome for the US, as the result of the policy failure created by a credibility trap that prevents the government from making the necessary reforms to its political and financial systems. Hyperinflation and Deflation are both possibilities, but remain outliers for now.
I could definitely see some improbably lunatic outcomes in the States, given the hubris of wealthy purveyors of propaganda and their shills who are leading their sleep-walking electorates to ruin. The US now has the worst unemployment of the ten major developed countries, depending on which deceptive government statistics you might favor.
If there was a double dip and a major depression there is some sizable minority segment of the US public that would either deny it was happening on ideological grounds, or simply fail to notice it was happening until they either starved to death or were overwhelmed by hordes of crazed zombies, as long as the electricity remained on and the mainstream media was continuing to dish out mindless pap for a diversion and corporatist propaganda for the news.
There is a commonplace saying that most conspiracy theories cannot be true and 'fall apart' because of the many people who would have to be involved, and who cannot be all that clever and also keep things secret. I think that is wrong. Many conspiracy theories fall apart under skeptical and rational examination and factual inquiry. But some do not. The Madoff Ponzi scheme was certainly a conspiracy. What is not known is its breadth, how many insiders there there, and what happened to all the money.
Conspiracies are possible because too many people can be persuaded to become self-delusional idiots and true believers who allow themselves to be badly used by a very few clever men, who themselves are quite capable of making plans and keeping secrets with an impressively ruthless determination.
And excepting for the inner circle which often quickly flees the scene or remains completely unknown, after a major conspiracy reaches a bad end and is exposed, the majority of those involved will deny that it ever happened, and that they even did the things that they undeniably did. Or at least, that they never intended any harm, or ever meant to commit outrageous acts against decency and common sense. And they will be outraged if you dare to hold them to account for their crimes. And when they are finally forced to see the enormity of their actions for the first time, they are dumbfounded and seek to either skulk away, shrug it off, or remain in obstinate denial, seeking to punish someone, anyone, excepting themselves.
This is the backstory of the US financial crisis, and the credibility trap in which its government and intellectual elite are caught today.
Tumble on the markets today as oil and the metals surged higher with the troubles in the Middle East spreading towards Saudi Arabia.
The market is looking to the ADP employment report tomorrow morning, as an forward indication of the Non Farm Payrolls report on Friday. It has a mixed record.
Weak market, but it held key support for now.
Lots of hand-wringing and wonderment amongst the financial demimonde today as a former McKinsey and Goldman Director with a Harvard MBA Rajat Gupta was charged with the widening insider trading case, for disclosing the Buffett investment in Goldman a minute after it was disclosed to the board, among other things. I smell a hand slap on this one, but the scapegoat pedigrees are getting a little tonier, but still not part of the real in-crowd.
Let's see if the SP futures can hold the important support around 1295. Below that support is indicated on the chart. If stocks fall below the Pivot things could get dicey.
Antics intraday with a funny kind of a bear raid in silver that also hit a couple of the mining stocks exceptionally hard. I actually stepped in and bought some mining positions from my watch list because the prices became almost silly, and the volume indicated selling motivated not for profit but for a lower price. I can surmise that some of the new regulations intended to constrain naked short selling of non-SHO stocks are making some of the fundies 'edgy.'
Trapped shorts are often creative in their desperation. And of course the TBTF giants have huge daily needs, and in these thin markets it becomes harder and harder to make the standard plays pay. Just look at what the easy spreads drying up led Bernie Madoff to do.
This is the first delivery week for silver and the Comex shorts are squirming.
Stand and deliver, or as the famous bear Daniel Drew once said:
He who sells what isn't his'n,
Must buy it back, or go to prison.
Unless of course you have blind regulators, ETFs, and an exchange always willing to facilitate cash settlements for their friends.
Still, all in all, the noose appears to be tightening.
“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.”
Here are some brief excerpts from a story in New York Magazine called The Madoff Tapes. The story runs to nine pages, so consider this just a taste and read the whole thing when you have the time. I thought Steve Fishman did a terrific job of letting Bernie talk and of presenting his thoughts in a orderly manner without a lot of interpretation and editorial intrusion. He has real talent as an interviewer, and seems a natural reporter.
But while you read this bear in mind that you are seeing reality interpreted through the eyes of Madoff, a master manipulator and pathological liar, an individual perhaps in deep denial, but the question is, to whom.
His psychiatrist in prison tells him he is not a sociopath because he has remorse. I think his major remorse is that he was caught. The article implies that he is a narcissist. I think he is all of the above, and much, much, more.
Always full of self-pity and the quick deflections of a classic con man, he seems to blame his corruption on the failure of his father's business, and a personal vow never to let it happen to him, a resolve that became an obsessive compulsion. Besides, everyone was doing it. He just did more of it, more quickly and with an automated efficiency that turned into raw fraud when the easy gains evaporated. It is a microcosm of the US financial sector today.
Sometime in the future someone is going to do a thorough analysis on what was common in the background of these fellows who were drawn to Wall Street in the 1980's and beyond, and what made them the way they are. But we can discover what set them free to do their worst, and that was the undermining of regulation, of the government, and the 'regulation is bad and greed is good' meme that has brought an entire society to its collective knees in a number of countries. Once the monied interests have traction with the government the corruption gets rolling and the feeding frenzy begins.
“Our government teaches the whole people by its example. If the government becomes the lawbreaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy.” Judge Louis D. Brandeis
At times Bernie Madoff sounds like a less articulate version of a former Fed Chairman, that is, less able to rationalize his way, with a prideful sneer, out of nearly anything and everything, with a practiced verbal acuity and evasiveness.
I think he is emblematic of an empire in decline, a decline that found a voice and became respectable with Thatcherism and Reagonomics, and into full flower with the repeal of Glass-Steagall and the undermining of the regulators, in a campaign led by a few New York bankers using plenty of lobbying money and sophisticated public relations campaigns, with the resulting institutionalization of fraud and mass plunder by the financial interests that continues today. No one wants to be the one eyed man in a land of those blinded by greed, especially when the greedy are holding most of the carrots and the sticks. So even the seeing pretend to be conveniently blind. Go along to get along.
The only difference between Madoff and many of the others like him on the Street is that Bernie ran out of rope, and was caught. The others seem to be hanging on and are trying to bluff their ways out of similar predicaments by keeping the game going, at any cost to the country, unto the destruction of the dollar and bond, the misery of families, and the pure corruption of all that has made America great. It is almost never the money; it's the will to power, and pride.
The rationale will be like the one offered by Madoff: a cheap apology, a spreading of blame to everyone and therefore to no one, the enablers and beneficiaries knew something was wrong, and they took the deals anyway. There will be other lower level financial men offered up to the the law as a diversion for the crowd, and if is gets worse some of the oldest scapegoat cards in history may yet be played, an unforgivable act. And it will be a shame, because the men behind the scenes will live on to roll out their frauds once again on a new generation of the unsuspecting.
“How could I have done this?” he asks. “I was making a lot of money. I didn’t need the money. [Am I] a flawed character?”
“Everybody on the outside kept claiming I was a sociopath,” Madoff told her [his prison therapist] one day. “I asked her, ‘Am I a sociopath?’ ” He waited expectantly, his eyelids squeezing open and shut, that famous tic. “She said, ‘You’re absolutely not a sociopath. You have morals. You have remorse.’ ” Madoff paused as he related this. His voice settled. He said to me, “I am a good person.”
As he [Andrew Madoff] tells friends, his rage at his father, far from dissipating, has metastasized. To friends, he’d described his father as a bully and a gifted manipulator. Madoff was a family man, yes, but to Andrew, that was yet another manifestation of his narcissism. The family served the needs of Bernard L. Madoff.
I had more than enough money to support my lifestyle and my family’s lifestyle. I allowed myself to be talked into something, and that’s my fault. I thought I could extricate myself after a short period of time. But I just couldn’t.
From the beginning, Madoff, who’d moved to Queens at age 7, had a chip on his shoulder, along with a certain contempt for the industry [securities] he’d chosen. “It was always a business where you had to have an edge, and the little guy never got a break. The institutions controlled everything,” he said in a voice surprisingly thick with emotion. “I realized from a very early stage that the market is a whole rigged job. There’s no chance that investors have in this market.”
By 2000, as spreads and profits were squeezed in the market-making business, Madoff had a chance to sell for $1 billion or more. But he refused. “As far as my sons and brother and my wife were concerned, they thought I was nuts for not selling out,” he told me. His family was “livid,” and he didn’t dare explain it to them. “I couldn’t at that time, because it would have uncovered this other problem [the fraudulent nature of his business] I had.” (Nice illustration of the credibility trap that now hampers the entire US economy from the top down - Jesse)
The boys had their separate spheres, but Bernie didn’t hesitate to get involved. “He didn’t have a filter,” as one observer put it. He’d say things to his sons that other employees thought shocking, even abusive. His version of an explanation was, “Because I said so.” More than once, the boys thought, 'He’s a bully.'
Later, they wondered what fraction of that love was sincere. They’d always known their father was a master manipulator, one quality that had helped him succeed on Wall Street.
Madoff says that he waved red flags, issued caveats that should have been obvious to even an unsophisticated investor. “They were all told by me, ‘Don’t invest any more money than you could afford to lose. This is the stock market. There’s always stuff that can happen. Brokerage firms can fail. I could go crazy and do something stupid. If you want a [safe thing], put your money in government bonds. So everybody understood this. “Everyone was greedy,” he continues. “I just went along. It’s not an excuse.” In his mind, the hedge funds and the banks were little more than marketers, skimming their 1 to 2 percent off the top, a fee for their supposed “due diligence,” though they exercised little oversight. “Look, there was complicity, in my view,” Madoff told me.
Through the nineties, Madoff dreamed of climbing out of the hole he’d dug. “I kept telling myself that some miracle was going to happen or that I was going to be able to work my way out of it. I just didn’t know when that was.” By around 2002, he realized this was a fantasy. “By then, the number was so astronomical I didn’t know what I was hoping for, quite frankly.” So he continued. The scheme demanded endless funds. Money flowed out almost as quickly as it came in, at points. (A certain global reserve currency comes to mind - Jesse)
And then the family that had for so long been a source of pleasure and support was gone. The boys had cut off their mother—a situation for which Madoff blames the lawyers but which was also the boys’ preference.
He sees himself at this stage as a kind of truth-teller. He has disdain not only for the industry but for the regulators. “The SEC,” he says, “looks terrible in this thing.” And he doesn’t see himself as the only guilty party on Wall Street. “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.” (Name some names Bernie if you have true remorse, and wish to be remembered as anything except a fraud and cheap con man - Jesse)
I am seeing this same sort of 'gaming the markets' across many markets and stocks that the author notes below, especially in those markets amenable to leverage and electronic manipulation such as indices driven by futures, options markets, and ETFs which more closely resemble carney games than investment vehicles.
There has always been some element of this, but it is starting to become predominant and is driving out the honest trade and investment which cannot compete, in the same manner that the mortgage frauds corrupted and distorted a major sector of the economy and drove out conventional investment, regulation, checks and balances, regulatory oversight, and finally common sense.
It is getting to be a bit much, and is going to end badly. It will end badly because, like the shadow economy which has been crafted by the same makers, it is hollow, a facade, set up for the benefit of a few who transfer wealth to themselves from the many. As someone wrote to me today:
"There aren’t really many good options for people who just want to save some money for retirement and live their lives in the meantime. Not even social security or pensions for 30-year veteran teachers are safe from pirate raids and partisan deconstruction. Everything else available to the ordinary retail and retirement saver has become a Wall Street killing floor."
This is no accident. This is no error in judgement. This is not philosophy. It is a calculated white collar crime, that has co-opted many elements of society. It hides behind slogans like 'small government' and 'libertarianism' and 'free markets' but its real intent is to subvert the law and corrupt the processes of the economy and society. It is a type of financial coup d'etat.
The problem is not that there is too much government, but rather, the government which you have is tainted with corruption and needs a thorough cleaning and reform. Knock down all the fences if you will in the name of an unsustainable ideal, and give the ravening wolves free range for their plunder. And then be surprised.
Anyone who believes that not enforcing the rules, or even simply eliminating them, will result in the natural and efficient flow of productive activity has never driven on a modern freeway. This notion is just another version of a belief in the noble savage, the view that people are naturally good and rational, but are corrupted by rules and society. And those people who espouse this think that they are cavorting in some magical world with Peter Pan, instead of with some of the oldest and basest forms of evil against which good people have continually come together throughout history for their mutual protection.
And when the next financial crisis comes along, perhaps the people will not be so complacent and gullible, and see the real culprits behind the ideological scapegoats and fog of talk show hosts. But I'm not betting on it.
Editorial comment: It’s becoming increasingly annoying watching dealers buy calls and sell puts the day before we rally $20, and then the next day buy put and sell calls before we drop $20.
Yesterday’s sell off from the 1415 area seemed almost orchestrated. At the very least, the futures selling came in during the thinnest trading hours.
While exchanges herald the benefits of electronic trading there is one thing wrong with it. Electronic trading minimizes the information leakage associated with using brokers, for sure, but it is also allows oligarchic organizations to anonymously manage price movement while hiding behind digital displays.
We won’t use the word manipulate, in part because of our libertarian bent, but it’s getting ridiculous. Where there used to be 50 5-lot thieves on the floor now there are five Too-Big-To-Fail banks with infinite fed-sponsored balance sheets doing whatever they please. The idiot locals on the floor, fragmented as they were, served to keep the big banks in check because there was transparency of price and to a large extent, the players were known.
This doesn’t exist anymore and we don’t see an end to it. Instead of thinning the forest for the trees, technology, regulatory and economic factors have killed the saplings and destroyed market diversity. This translates to a narrow and deep liquidity pool in trading venues; god forbid if one of them fails.
Never fear. The Big Banks will remain on the Fed's dole, and will be receiving nearly continuous bailouts until the currency and the bonds are exhausted, if things go according to plan. And then the reivers will move on.
A Simple Economic Solution to Hunger, Poverty, and the Problem of the Poor
An old woman came down this way,
She had no bread left to eat they say,
The bread was gobbled by the corporate men,
And she fell in the gutter in the cold and rain,
And was never hungry again.
At that the birds in the forest fell silent,
On every treetop is rest,
In every hilltop can be heard
Barely a breath.
The medical examiners came down this way,
'She is not just putting on,' they say,
The starved old woman was buried six feet deep,
And was never heard from again.
And the examiners smiled for the corporate men.
And the birds in the forest fell silent too,
On every treetop is rest
In every hilltop can be heard
Barely a breath...
Bertolt Brecht, Liturgie vom Hauch, 1927
The CFTC is accepting comments on the silver positions and market structure at the Comex. You may read about it and perhaps comment to the CFTC here.
From the quick bounce back it does appear that the big flash crash in silver in late day thin trading was a bear raid after all. We will know more when the Comex releases final numbers.
I had taken the opportunity on Thursday to buy the dip in silver at its gut wrenching bottom rather heavily, and with positions of leveraged instruments a little less ordinary. Most of those were sold today for a profit, and one must look forward to next week to see which way the markets wish to go. Monday is 'first delivery day' for the current contract and the ugly negotiation for cash settlements will begin in earnest.
The raid yesterday may have been a negotiation tactic. It certainly was a cheap and tawdry affair, obvious to all but the most willfully blind, and those in silent complicity. With the volume drying up in the markets making one's quota on the trade desks must be getting increasingly difficult.
It reminded me of playing a game with the little girl, who cheats in the most clumsy and obvious ways, thinking herself very clever. And if she loses, she complains and pouts incessantly until you cover her losses. Rather like the American crony capitalists, I think.
This goes out to the Boys on the Prop Trading Desks. Nice try this week, but kind of pitchy. And you definitely got no soul.
And as always, for Blythe. Thanks for breakfast, sugar bun.
A Special Request, Going Out To Max Keiser's Silver Liberation Army (SLA).
Stand and Deliver Next Week, Comex Bitchez...
John Williams of Shadowstats provides some interesting insight on the Dollar even as the US equity markets continue their levitation.
U.S. Dollar Losing Its Safe-Haven Status? With political upheaval surfacing in the Mid-East and North Africa, global capital increasingly has been moving into traditional safe-haven investments such as precious metals, or into safe-haven currencies such as the Swiss franc. What is of particular significance here is that flight capital has been seeking shelter outside of the U.S. dollar, which for decades had been the favored safe-haven currency. Against the U.S. dollar, the Swiss franc – another traditional safe-haven currency – hit a record high in the last day or so. Other than for the British pound, the U.S. currency has been losing exchange-rate value against the other major currencies (Australian dollar, Canadian dollar, Japanese yen and even the euro) during this period of mounting political instabilities. Gold has neared its all-time high, while silver recently has set a multi-decade high.
Oil prices have spiked in response to the various crises, adding further upside pressure to U.S. consumer inflation from oil supply fears and ongoing dollar weakness. As with the dollar-debasement efforts of the Fed, these inflation pressures reflect factors other than strong economic demand.
At the same time, the fragility of the faux U.S. economic recovery is becoming more obvious to the markets, with economic data increasingly surprising consensus forecasts on the downside, as seen in this week’s home sales and GDP revision reporting. In the months ahead, an intensifying “renewed” decline in broad economic activity should gain increasing market recognition.
Irrespective of whether the political turmoil spreads or dies down, irrespective of Saudi efforts to help contain panicked oil price rises, irrespective of short-lived fluctuations in exchange rates and precious metals prices, the U.S. now stands at a point where it is particularly vulnerable to an evolving global loss of confidence in the U.S. dollar. Heavy selling of the U.S. currency and panicked dumping of dollar-denominated paper assets, which could trigger U.S. financial market upheaval and the early stages of a hyperinflation, is possible at any time with little or no warning. It could be triggered by an unhappy economic or political surprise, or otherwise. Where risks remain high of U.S. financial turmoil unfolding in the months ahead, the onset of a hyperinflation still has an outside timing estimate of 2014.
Do You Need To Buy a Vowel? M_NETIZATION
Global Economic Recovery Plan 'B' - Seek Safe Havens For the Elites, Ignite the Derivatives, and Then Wait a Couple of Decades...
The reason for the bailouts and the debasement of the currency is not to promote an economic recovery in the US. Far from it.
The objective is the same as it is in other countries around the world dominated by monied interests, such as Ireland.
The purpose is to save the banks and their bondholders, and the financial status quo. To this end the peoples' interests will be sacrificed if they allow it.
The US government is caught in a credibility trap. They cannot inspire confidence and re-establish the soundness of their economy, because they are not able to make the necessary reforms that would actually justify such a renewed confidence, to make it credible and real.
They cannot make these reforms because to do so would shatter the facade of the status quo which is corrupted and complicit, and includes far too many of them both directly and indirectly. This they fear more than anything else.
So they try to bluff their way out of it, hoping for a break, engaging in even more fraud and deception and debasement. And the financial looting continues while the real economy declines and the ordinary person suffers.
And it is working, because some vocal portion of the public shows itself to be easily led by slogans, faux news, financial carnies, and the manipulation of their lowest emotions, even to their own destruction. And the rest seem too often dulled by apathy and diversion.
“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public..." Adam Smith
"Today was the option expiration on the Comex, and those options which are 'in the money' and have not been settled for cash are now converted to March futures positions.
Depending on the size and distribution of those conversions we may see some 'action' in the front month because they are sometimes notoriously weak hands and will receive at least one 'gut check.'"
And a gut check to run the stops was very obviously delivered in the afternoon trading session at the Comex and across the monthly contracts.
This is remniscent of the 'Dr. Evil' strategy that got Citi warned and fined in Europe a few years ago. Memories of Citi's Eurobond Manipulation At the time one of the defenses offered by an ex-pat trader was 'in the US everybody does it.' Has JPM taken up the trading strategy that Citi once made infamous? And why would banks be trading for themselves in markets with players they help to finance, and with public money?
Large players can come into a relatively small market and drive the price by selling in size, running the stop loss orders which they often can 'see' through probing orders and positional advantage, and essentially bomb the market, manipulating the price in the short term to their advantage. The profit is made through derivative and correlated bets that depend on the price of the metal, index, or bond such as shorts on mining stocks, currencies, bonds, etc.
This is why the 'uptick rule' in stocks served a purpose, and why regulators are in place to keep an eye on big players with deep pockets and a far reach. In a properly regulated market the CFTC would immediatly pull the trading records for today and track the big sellers, and inquire as to the reasons for their sudden selling in a quiet market.
It *could* have been a hedge fund margin call. It could even have been a margin call provoked by a bank tightening credit lines with one hand while playing the market with their other hand. There were rumours being spread all week keying in on the day after expiration. I do not have any inside information, no special knowledge, only the advantage of experience and a watchful eye on the markets.
And so there it all is. I was ready for it. I may or may not make money from it, but at least I had flattened my positions as I had said earlier this week and did not lose from it. But it sickens me to the heart nonetheless, to see a once great government fallen so low.
Today was the option expiration on the Comex, and those options which are 'in the money' and have not been settled for cash are now converted to March futures positions.
Depending on the size and distribution of those conversions we may see some 'action' in the front month because they are sometimes notoriously weak hands and will receive at least one 'gut check.'
The trends remain as they are, without regard to the short term 'wiggles.'
I made the call for gold, and slightly thereafter silver, based on a fundamental analysis of the US economy and the actions of the Federal Reserve. This was when the prices were 275 and 4.50 respectively. I see no reason to change anything yet.
When the fundamentals change and information becomes more universally disclosed, then the market will clear and reach stability. Until then the safe havens from the dollar credit bubble will continue to go higher in spite of the gimmickry and perception management of the monied interests and their financial engineers. They have been caught with their hands in the cookie jar, and are trying to bluff and rationalize their way out of it to their personal benefit, as they have done throughout their lives.
Here comes the most important test for US equities, for the rest of the week and especially over the weekend.
They have fallen to levels that have typically sparked a new round of buying in this protracted liquidity rally for another melt up higher on thin volumes.
The end of this will come, but perhaps not yet. The market must tell us what is hidden and must be revealed.
This strikes to the heart of what I have called the credibility trap.
The US government cannot effectively deal with the financial crisis and the required credible reforms because in fixing the problems they would necessarily expose the underlying fraud, and endanger the very powerful status quo that funds them and their political campaigns.
This is more difficult to manage than a liquidity trap because the very means of remedy have been co-opted. The doctors caused the illness, and cannot pursue a cure without admitting their malpractice, which may not have been done in simple error but with complicity.
So this malaise and period of selective recovery will continue until there is a another, more destructive crisis that finally clears away the fog of corruption. Or there is some exogenous event to distract the people to some other problem, to change their focus. 'Never waste a crisis' as they say in the Washington Beltway.
"It is not those who advocate, but those who prevent, stabilizing transfers of purchasing power, who are the true Marxists. These self-styled capitalists do not espouse Marx’s theories, but they do something much worse: They perform them. They behave in precisely the way that Marx expected capitalists to behave. They cripple the American system’s greatest strength — its ingenuity, flexibility, adaptability. They prevent the sort of collective action through which earlier generations proved that capitalism could made be consonant with decent, stable, and broadly prosperous societies. In doing so, they risk proving Marx right."
Steve Randy Waldman said this here and I think he is brilliantly right. This is becoming less a struggle to recovery as it is an obsession with personal greed and the will to power gone horribly wrong, corrosive to social structure through corruption, and veering towards the dangerously self-destructive.
Are fellows like Governor Walker of Wisconsin and his backers the Koch brothers 'performing Marxists?' lol I have often wondered if Greenspan was a Randian fifth columnist leading fiat money to its ideological conclusion, but certainly not a Marxian.
Or could it just be that current events and crises bring out and show us who we really are, and hopefully, offer to change us? Those who hold other people in contempt are ever more contemptible, the would be masters ever more deceitful, and obsessive greed leads the few into rough hands and dark cellars. How much wealth did Mubarak and Gaddafi really need after all? Is there not some pathology clearly in evidence with these man-gods, and even in the minor deities on Wall Street? Sad little boys and broken men become dark spirits, seeking to fill the hole in their beings with things, people, all possessions without savour, a wreckage of devices. And even more sad the husks and shadows of people, never at peace, who follow after in their wake, like swirling leaves pulled fitfully along with the wind.
Hell is truly the inability to feel love, empathy, and compassion, knowing the price of everything, but the value of nothing.
Strange days, I am sad to say. Change is in the wind, and is starting to blow like a hurricane, as cycles come round again.
"Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity...
And what rough beast, its hour come round at last,
Slouches towards Bethlehem to be born?"
W. B. Yeats
Both austerity and stimulus will falter in the mire of imbalanced, broken systems and corruption. The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustained recovery.
Did we mention that this is an option expiration week at the Comex? Tomorrow is the day.
Silver was reaching for a definite high note while Uncle Thug was on vacation yesterday. And the sell off in equities helped to shake it back down on profit taking to the strong hands. So far normal market action.
If you do not care for volatility you will not like silver. It is tough to sit it out, because if there is a break in the commercial positions known as a 'commercial signal failure' the price could easily go up several dollars per day.
In this case given the insiders who are short, and the semi-official backing which I suspect they have, I doubt they will fail all at once, but in stages and over time, and so the price will continue to creep higher until the market clears.
Let us pray for those whose hearts are hardened against His grace and loving kindness by greed, fear, and pride, and the seductive illusion and crushing isolation of evil.
We pray that we all may experience the three great gifts of our Lord's suffering and triumph: repentance, forgiveness, and thankfulness. And in so doing, may we obtain abundant life, and with it the peace that surpasses all understanding.
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