SP 500 and NDX Futures Daily Charts - Reindeer Games

A divergence of sorts between the SP 500 and big tech NDX.

This is a year end bonus rally.

And it is a reasonable bet that it ends in tears, and a TARP-like showdown over the so-called fiscal cliff.

Gold and Silver Smackdown: Same Time Last Year

The takedown in gold and silver is fairly obvious, so much so that all but a career bureaucrat might have trouble not noticing it.

So how does one explain it away.

Who is selling this time? Soros? Paulson? And for what reason? Liquidation, redemptions, profit taking, tax selling?

Tax selling is fruitless unless you see a big change in the position coming anyway and are going to sell in the short term, because you sell and then have to buy back in.

Its possible to do it for pure capital gains considerations, but you have to be able to time/set the market price to suit yourself to allow a buy back in without losing on the price. Or you could shift assets from one market to another more adeptly without incurring the wash rule, that is, derivatives and stocks, playing the same fundamental direction if the regulators are asleep at the switch and don't have a look across your positions.

I have been hit several times in the past three weeks by people who claim to have talked to a insider friend who heard from 'high level money managers' in NYC, London, or Tel Aviv, that say that Paulson is facing redemptions and is selling off his GLD position. Everyone wants to be 'in the know.'

Well, I should like to think that these fellows are not cretins, just dumping positions carefully timed in ways to maximize the downside price movements. Unless of course it is purposeful, which there is almost no doubt in my mind that this is. There could be a squeeze on, and front running of forced sales, but the timing makes this a little problematic in my mind.

More likely this is the same thing which we saw last year. The bottom two charts are for gold and silver from last year.

There are any number of ways to explain this.

The one which I favor is that if a certain party is carrying a enormous, and losing, short position, one of the ways to manage the end of year mark to market would be to smack the price down as much as possible, and cover at least part of the short position going into year end, ending around Dec 26 or 27 given the "Buy to Close" rules.

This also provides a method of gaming that long term short position. Not only do you get to mark it at a lower price, but you can 'trade around it,' picking up metal on the cheap as weaker longs capitulate and toss it at the bottom. And the momentum wise guys get in on the action, the trading desks start spreading their rumours and deploy their useful idiot analysts and talking heads, and we have a major price bottom in the making.

For this and some other reasons, I think we see the usual rally in January, as the market starts to correct back to something roughly reflecting physical reality.

The complicating factor is that this time we have the 'fiscal cliff' to consider, and the potential for a liquidation event. That is a littler harder to play.

But Jesse, wouldn't other players in the market see this obvious manipulation and buy against the artificial price declines?

Yes in a theoretical model of independent players in an efficient market with transparent information and the rule of law this would happen. And how many moons orbit your planet, if you think this is reality given all that we have seen in the past five years?

How many scandals do you have to see and try to ignore before you 'get it.' The financial system is broken and corrupted.

As for now, there may be more downside, but most of it is over. Currency manipulation tends to overshoot. And this looks like a manipulation given the way in which all the usual correlations were pitched, and the downward movements were played in dull markets with concentrated selling. 

And I suspect we will be seeing the same thing next December, if the 'big shorts' in the metals are still on and being held by two or three of the big banks. As I recall HSBC is one of the big shorts.  A bank of their size and reputation could not possibly be involved in anything dodgy, with the officials turning a blind eye, could they?

So as always, the message is one of reform. Until there is justice and transparency and the rule of law, you may as well get used to this sort of thing, affecting an increasing portion of your daily lives. Not just precious metals, but the price of gasoline, electricity, natural gas, food, water, other staples, and your children's education.

And they will use their media to turn your anger against---  regulation and the rule of law.

This is not the abuse of 'big government' but the partnership of the monied interests and a corrupted government that is also known as corporatism, or deep capture. And where their interests align, the people should beware. They are becoming ever more open in their actions. And if you wake up and object they say, 'So what? How are you going to stop us?' It is an audacious oligarchy.

There will be no sustainable recovery until the financial system is reformed and the grip of big money on the politicians and bureaucrats is removed.

"It is the neo-liberal idea that has given us deregulation and de-supervision; that has given us the notion that markets can function on their own without breaking down or blowing up..

This is the great illusion of the last generation, and it fostered a form of economic growth that was intrinsically unstable and unsustainable. Why?...

To put it in simple terms, it was based upon financial fraud, on the most massive wave of financial fraud that the world has ever seen."

Jamie Galbraith, IG Metall Conference, Berlin, 6 Dec 2012

Hedrick Smith: Who Stole the American Dream?

"Pulitzer Prize winner Hedrick Smith’s new book is an eye-opening account of how, over the past four decades, the American Dream has been dismantled and we became two Americas.

This is a book full of surprises and revelations—the accidental beginnings of the 401(k) plan, with disastrous economic consequences for many; the major policy changes that began under Jimmy Carter; how the New Economy disrupted America’s engine of shared prosperity, the “virtuous circle” of growth, and how America lost the title of “Land of Opportunity.”

Smith documents the transfer of $6 trillion in middle-class wealth from homeowners to banks even before the housing boom went bust, and how the U.S. policy tilt favoring the rich is stunting America’s economic growth.

This book is essential reading for all of us who want to understand America today, or why average Americans are struggling to keep afloat.

Smith reveals how pivotal laws and policies were altered while the public wasn’t looking, how Congress often ignores public opinion, why moderate politicians got shoved to the sidelines, and how Wall Street often wins politically by hiring over 1,400 former government officials as lobbyists."

Are people really waking up to what is going on? I don't think they are, except perhaps here and there. And that is to be expected. People go mad in crowds, but come back to their senses one at a time.

If anything contrary to prevailing opinion is revealed, most people run away rom it as quickly as possible, and bury their noses in some reality show, or a safely doctrinaire 'news channel' that comforts them, even if what it says is widely divergent from what is really happening.

It is no wonder reformers and progressives can become discouraged.

Michael Hudson: The Financialization of the Economy

I enjoyed this recent essay by Michael Hudson. It is a nice overview of the financialization process, and how the economic hitmen, who had ravaged the Third World, started coming home.

Of course I do not necessarily agree with everything in it. But the things he says make some real sense, and provide a balance to the prevailing economic mythos, and some would say propaganda, that comes out of the mainstream media in support of the financialization process.

Reality economics

December 19, 2012

By Michael Hudson

A review of Norbert Häring and Niall Douglas, Economists and the Powerful (London: Anthem Press, 2012).

“Whom the gods would destroy, they first make mad.”

And if they would destroy economies, they first create a wealthy class on top, and let human nature do the rest. The acquisition of power soon leads to its abuse, to economic and social hubris. By seeking to protect its gains, perpetuate itself and make its wealth hereditary, power elites lock in their position in ways that exclude and injure those below. Turning government into an oligarchy, the wealthy indebt and shift the tax burden onto the less powerful.

It is an ancient tale. The Greeks got matters right in seeing how power leads to hubris, bringing about its own downfall. Hubris is the addiction to wealth and power, an arrogant over-reaching that involves injury to others. By impoverishing economies it destroys the source of profits, interest, capital gains, and even recovery of the original savings and debt principal.

This abusive character of wealth and power is not what mainstream economic models describe. That is why economic theory is broken. The concept of diminishing marginal utility implies that the rich will become more satiated as they become wealthier, and hence less addicted to power. This idea of progressive satiation returns gets the direction of change wrong, denying the basic thrust of the past ten thousand years of human technology and civilization.

Today’s supply and demand approach treats the economy as a “market” in a crudely abstract way, as quantities of goods (already produced), labor (with a given productivity) and capital (already accumulated, no questions asked) are swapped and bartered with each other. This approach does not inquire deeply into how some people get the capital to “swap” for “labor.” To top matters, this approach gets the direction of technological growth and basic business experience wrong, by assuming conditions of diminishing returns and diminishing marginal utility. The intellectual result is a parallel universe, whose criterion for economic excellence is merely the internal consistency of its abstract assumptions, not their realism.  (Life imitates models lol - Jesse)

Häring and Douglas show that the economics discipline did not get this way by accident. They are leading organizers of the World Economic Association, which emerged from the Post-Autistic-Economic movement intended to provide an alternative to mainstream neoclassical and neoliberal economics. (Häring is co-editor of the World Economic Review.)

Toward this end they provide a wealth of references tracing how economics was turned into a propaganda exercise for financiers, landlords, monopolists, insiders, fraudsters and other rent-seeking predators whom classical economists sought to tax and regulate out of existence. This state of affairs reflects the century-long drive of these free lunchers to fight back against classical economics by sponsoring self-serving fictions that depict them as earning their fortunes not in predatory and extractive ways, but by contributing to output as “job creators.”

Any given distribution of wealth and income is treated as an equilibrium reflecting voluntary choice, without examining the organizational and social structures of workplace hiring, production and distribution. The authors provide an antidote to this tunnel vision by pointing to the real invisible hands at work: insider dealing, anti-labor and anti-union maneuvering, and outright looting and fraud. What they mean by power is employers hiring strikebreakers, lobbying for special favors and insider deals, and backing the election campaigns of lawmakers pledged to act on behalf of the 1%.

Criticizing the textbook theory of the firm, they point out that that most production has increasing returns. Unit costs fall as fixed capital investment is spread over more output. As a producer with nearly zero marginal cost, for instance, Microsoft obtains a rising intellectual property rent on each program sold. On an economy-wide level, raising the minimum wage would enable most firms to benefit from increasing returns, by increasing demand.

Firms use political leverage to make sure that anti-labor referees are appointed to the courts and arenas that arbitrate disputes about employment, working conditions and firing. Capital-intensive industries outsource low-skill jobs to small-scale providers using non-union labor. Privatizing public utilities also aims largely at breaking labor union power. Marginalist supply and demand theory implies that each additional worker that is hired increases wage rates, prompting business to oppose full employment policies in order to keep wages low, even though this limits the market for their output.

So technology and diminishing terms are not the reason why wages have been pressed down – or why financial and other non-production costs have been rising for most Western economies. These cost increases are headed by debt charges for leveraged buyouts and corporate raiding, plus CEO salaries, bonuses and stock options. Labor also faces high costs of living as a result of the soaring mortgage debt taken on to obtain housing, student loan debt to obtain an education as a precondition for middle-class employment, and credit-card debt to maintain consumption standards, and rising wage withholding for Social Security and Medicare as taxes become regressive.

This personal debt service (including housing costs) and various taxes absorb more than two-thirds of the typical paycheck. So even if workers did not have to buy any of the goods and services they produce – food, clothes and other basic consumer needs – they still could not compete with labor in less financialized and debt-ridden economies.

At the corporate level, financial engineering is more about raising stock prices than new tangible capital investment. Even this is not being done in ways that serve stockholders’ long-term interest or that of the economy at large. Häring and Douglas give a scathing review of “motivating” managers by paying them in stock options. Managers maximize the value of these options by spending corporate revenue on stock buy-backs instead of new direct investment to expand their business. Even worse, companies borrow to buy their stock or even to pay out as dividends to bid up its price. The “capital” in this gain is financial, not industrial. It also turns out to be anti-labor, as loading companies down with debt enables corporate raiders use the threat of bankruptcy to demand pension downgrades and wage givebacks.  The problem with financial planning is its short hit-and-run time frame aiming at extracting income rather than taking the time to invest in new production and develop markets. Concealing this short-termism with Enron-style “mark to model” accounting fictions, managers take the money and run, leaving bankrupt shells in their wake.

Debt leveraging is encouraged by taxing asset-price gains at much lower rates than earnings (wages and profits), and permitting interest to be tax-deductible. This fiscal subsidy is by no means an inherent feature of markets. It reflects the financial sector’s capture of tax policy, along with regulatory capture to disable the government’s oversight so as to make fortunes by deregulating, privatizing, and popularizing the idea that economies can get rich by going into debt. Neoliberal doctrine demonizes government as the only power able to regulate and tax unearned income and prosecute fraud. This inverts the idea of free markets away from the classical meaning of markets free from unearned economic rent, to connote today’s arena free for predatory rentiers.

This strategy is capped by the power to censor. The misleading and deceptive depiction of the economy drawn by financiers, real estate speculators and monopolists is careful to conceal their own behavior from sight. This is the ultimate power of today’s mainstream economics: to shape how people perceive the economy. The starting point is to distract the public from noticing (and hence regulating or taxing) the real-world power structures at work. They prefer to make themselves invisible, above all the financial power to indebt the economy. It is by financial means, after all, that finance has shifted economic planning out of the hands of government to Wall Street and similar banking centers abroad.

Lobbyists for the 1% popularize a view that today’s economy is a fair and indeed natural inevitable product of Darwinian evolution. As Margaret Thatcher put it: There Is No Alternative (TINA). This narrow-mindedness is enforced by a censorial policy: “If the eye offend thee, pluck it out.” Häring and Douglas describe the academic process of weeding out any offending eyes that might introduce more realism when it comes to predatory behavior and rent seeking.

The prime directive is to depict financial planning as better than that of public agencies. In contrast to the Progressive Era’s endorsement of public infrastructure keeping costs down so as to better compete in global markets, the financial sector seeks to privatize public enterprises – on credit, preferably at distress prices to create new fortunes. The task of today’s mainstream economics, as the authors describe it, is to distract attention away from Balzac was more realistic, in observing that behind every family fortune lay a great, usually long-forgotten theft.

They focus on domestic power rather than spelling out the international dimension of how economic power is wielded. The IMF, U.S. Government and European Union bureaucracy wield foreign-debt leverage to impose the neoliberal Washington Consensus. This is how the European “troika” imposes austerity on Greece to replace democratic government with “technocrats” whose policies serve the 1% in today’s class war. This path leads in due course to the targeted assassinations by which the Chicago Boys imposed their kleptocratic “free market” on Chile under Pinochet, elaborated by Operation Condor assassinating labor leaders, land reformers and Liberation Theology priests and nuns throughout Latin America and in the United States itself. But I can understand that the authors evidently decided that they had to draw the line between economics and its military tactic somewhere, focusing on the economic core itself.

Finance has become the modern mode of warfare. It is cheaper to seize land by foreclosure rather than armed occupation, and to obtain rights to mineral wealth and public infrastructure by hooking governments and economies on debt than by invading them. Financial warfare aims at what military force did in times past, in a way that does not prompt subject populations to fight back – as long as they can be persuaded to accept the occupation as natural and even helpful. After indebting countries, creditors lobby to privatize natural monopolies and create new monopoly rights for themselves....

Read the entire essay here.

Gold Daily and Silver Weekly Charts

Just another day in the 'hood with the hoods.

I thought it was interesting that China has finally relaxed their ban on the movie 'V for Vendetta.' Stephen Leeb says that a diplomat told him that China Is Accumulating Gold to Back the Yuan.

Other than that, most everything else was noise, and that condition might remain until the end of the year.

The US markets as effective a discounting mechanism for the real economy as a three card monte game on Sixth Avenue.

Here is an interview by Tekoa Da Silva which you might find to be of interest.

Technical Gold Trader Gary Savage: “Big Players Use Panic Selling Events To Enter Billion Dollar Positions In Gold & Miners"

And in this video Lauren Lyster interviews Chris Powell and Bill Murphy of GATA

SP 500 and NDX Futures Daily Charts - Jamie Galbraith: Global Economic Crisis

The sound and fury of the pigmen, signifying nothing.

Have a pleasant evening.

Here is an excerpt from a recent talk by Jamie Galbraith:

"Five years ago when the great financial crisis broke into public view, those who claimed falsely that no one could have predicted it also claimed that our economies would recover. Standard forecasts foretold rapid growth and high employment within five years. Banks in America would start lending again. Confidence would return in Europe.

Those of us who said no, that there would be no return to normal, were for the most part ignored. Yesterday we heard Professor Nouriel Roubini give a magisterial and very high speed tour of the world situation making it clear of course that the promised recovery has not occurred. But if Nouriel is Sir Isaiah Berlin’s fox, who knows many things, let me try this morning to be the hedgehog who knows one big thing, and that one big thing is that what we are experiencing is a single, unified, global crisis of the economy and of the financial system.

It is not a cluster of distinct and separated events; a subprime crisis in the United States; a public debt crisis in Greece; a bank crisis in Iceland; a real estate bust in Ireland and Spain; nor are there distinct U.S. and European crises, nor can the financial be separated from the real, nor is Germany a country to which crisis has not yet come with the suggestion that there might be some separate way out. There is one crisis, only one crisis, a deeply interconnected crisis of the world system. This crisis has, I think, three deep sources going back not twenty years but forty years to the early 1970s and the end of what we sometimes call the “golden age,” the “glorious thirty” years in the immediate aftermath of the second World War...

And the third great source of our problem is ideological. It is the neo-liberal idea that has given us deregulation and de-supervision; that has given us the notion that markets can function on their own without breaking down or blowing up. It is this notion as applied especially to finance.

This is the great illusion of the last generation, and it fostered a form of economic growth that was intrinsically unstable and unsustainable. Why? Because it was based on declining standards for loans and on lax accounting of the proceeds of those loans. Or to put it in simple terms, it was based upon financial fraud, on the most massive wave of financial fraud that the world has ever seen.

And the world has seen a lot of financial fraud. It was known to be such to the lenders at the time. This was true of housing loans in the United States made by the tens of millions that were known to the lenders as “liar’s loans,” as “ninja loans,” no income, no job, no assets; as “neutron loans” destined to explode leaving the building intact but destroying the people. This was known at the time. These were loans that had to be refinanced or they would default..."

Read the entire speech here.

Report that Russia Has Issued Gold and Silver Coins Which Can Be Used As Legal Tender

Unfortunately I do not read Russian so I have not yet completely verified this, but I thought it was interesting enough to pass along on the face of it, since it is 'making the rounds' of the internet, and some have asked me about it.

Here is the reported document in Russian.

As they are not coins for general circulation but rather coins to commemorate the Russian Olympics I do not see this as signficant perhaps as the blogger quoted below. Also it appears that they will be issued in rather limited numbers so will probably price as a collectible and not as currency. That is how it is with commemoratives in limited edition.

Here is the sentence from the document that provoked such a strong reaction in some circles.

"The coins are legal tender cash payment in the Russian Federation and must be accepted at face value in all kinds of payments without any restrictions."

I have not yet done all the math to determine the equivalent 'face value' of the coins in other currencies, but I have taken an initial swipe at it.

In the case of the 50 Rouble gold coin, it is 7.78 grams, or 0.25013 troy oz.

At $1700 per ounce, that would make the gold coin worth about .999 x .25013 = .25 ounce of gold, or roughly $425 for a face value coin of 50 roubles.

That is about 8.5 dollars to the rouble. And I don't think many would take that exchange, since the US dollar is now trading at about 30.77 roubles.

Much ado about not too much I am afraid. This strikes me as the $50 face value on the gold American Eagle. I don't even need the legal tender guarantee to make me want to honor that exchange.

Note: A Russian reader informs me that ALL such coins have always been considered legal tender there, as if it matters, given their largely symbolic face value.

Well Aren't These Fine
By Demetrius Tucker
19 December 2012
Tallinn, Estonia

It seems 2012 is not yet done with its surprises. The Central Bank of Russia has issued three values of bullion (300,000 31.1g silver pieces with a 3RUB face value, 300,000 7.78g gold pieces with 50RUB face, & 100,000 15.55g gold pieces with a 100RUB face value) that can be used as legal tender beginning, well, TWO DAYS AGO!

If you don’t yet understand the ramifications of such a move, don’t worry, it’s not too late. But you want to begin reading now – starting with the history of metals as money...

Read the entire report here.

Here is a Google translation of the Russian document.

The Central Bank of the Russian Federation (Bank of Russia)

Department of External and Public Relations

107016, Moscow, ul. Neglinnaya, 12, tel.: (495) 771-4417, 771-4669, fax: (495) 771-4932; http://www.cbr.ru

INFORMATION

On the issue of investment appeal of precious metal coins

Department of External and Public Relations of the Bank of Russia informs that on 17 December 2012 in the framework of the monetary program "Sochi 2014" Bank of Russia issues a bullion coins dedicated to the XXII Olympic Winter Games 2014 in Sochi: 3 Rubles silver, gold nominal 50 and $ 100, with the year of issue "2012".

Investment silver coin of 3 Rubles (fine metal content 31.1 g, fineness 999, catalog № 5111-0247) has a rectangular shape with rounded corners, length 35.0 mm and a width of 23.0 mm.

On the front and back of the coin is raised.

The obverse of the coin features the relief of the State Emblem of the Russian Federation, there are inscriptions in two lines at the top of "the Russian Federation", below face value coins - "RR 3" and the year of issue - "2012", indicate the metal in the periodic table of elements D. I. Mendeleev, fineness, the mint trademark and the fine metal content...

The coins are legal tender cash payment in the Russian Federation and must be accepted at face value in all kinds of payments without any restrictions.

December 17, 2012

Using materials reference to the Department of External and Public Relations of the Bank of Russia is required.

Audacious Oligarchy Reprise - A Question of Balance

Once again, that great summation of the Anglo-American experiment in crony capitalism by Robert Johnson.

If you can do nothing else, stop making excuses for those who promote the oppression of the financial interests, and stop listening to those who do.

Law is how the just associate to protect themselves against injustice and the wickedness of the world.

And if you charge forward, as happens from time to time, to willfully and recklessly tear down the laws in the name of some misbegotten ideology, and you stop and turn round, the winds of oppression that blow across the land will knock you down, no matter who you are, or how self-sufficient and powerful you may imagine yourself to be.

When you take an admirable concept and blind it, taking it to some imbalanced extreme by sticking an 'ism' on the end of it, you all too often unleash the madness, and the whirlwind.

If government has stopped working for the public interest of justice for all you reform it, you do not further weaken and burn it to the ground and destroy it in the vain hope that something better will accidentally come forward from some well-spring of natural goodness in the worst of us who serve only themselves, and the will to power.

You can believe what you will, but you will be accountable for what you believe.

"When bad men combine, the good must associate; else they will fall one by one, an unpitied sacrifice in a contemptible struggle."

Edmund Burke

If there is any significant weakness in this model I have constructed it is that it does not easily represent the extreme position of anarchism, or its little brother, libertarianism. I think that it is because they are 'no model' or rather a model of social disorganization. But I am giving it some thought.

But they stand in no middle ground, but an extreme on another scale. And I say they care naught for individual rights, because they adopts the law of the jungle, that might makes right and that each person stands alone. It is a romantic, almost utopian, view of the world that sounds good to an adolescent, but which one might quickly outgrow as they reach adulthood and start a family.

On the other end of that scale would be total government, or statism, which is part of the basis of the model below. As most extremes, the statists and the anarchists are so off center that they see only one another, and anyone who is not them appears the other. This is how most ideological groups tend to coalesce as they become something self-observing and self-perpetuating.

Gold Daily and Silver Weekly Charts - End of Year Train Wreck Underway

This is part of the end of the year book making. The stock market gaming is equally blatant. Short term these jokers can keep rolling, but longer term they will crash, and then attempt to make someone else pick up their tab.

Making the Innocent Pay for the Crimes of the Elite

Why do they do it? Because in this case, crime pays. And that is crony capitalism.

Geithner Told of LIBOR Manipulation in May, 2008

Below is a video of a train wreck caused by a mudslide in Washington, USA. Do you think they might have had a little more care for the composition of that hillside before it came down on a moving train filled with chemicals?

A mudslide from a hill of overhanging loose earth in a state noted for its precipitation. Who could have foreseen this?

Infrastructure. You don't need it while the profits are rolling in. And when it collapses, declare an emergency and stick the public with bill.

A similar situation is currently underway in the monetary composition of the US dollar. Gold is the video camera.

One major difference is that the jokers who are making the profits from the rail line of fraudulent financial instruments are also placing bets that the mudslide of fraudulent mispricing of risk will derail the train and cause a tragedy in the real economy.

Its a win-win, for them. And a serious loss for many.

How could anyone imagine that powerful, well educated and highly connected people could do such a thing? Have you been sleepwalking for the last ten years?

SP 500 and NDX Futures Daily Charts

This is the update from last night.

Posting may be a bit irregular this week because of the holidays.

The end of year tape painting is hot and heavy.

Net Asset Value Premiums Of Certain Precious Metal Trusts and Funds

Bear raid on the metals this afternoon was hard to miss.

Here is the Comex Metals Calendar for the rest of the year.

Dec. 21 Nymex January 2013 platinum options expiry
Dec. 26 Comex January 2013 copper options expiry
Dec. 27 Comex December gold futures last trading day
Dec. 27 Comex December silver futures last trading day
Dec. 27 Comex December copper futures last trading day
Dec. 27 Comex December E-micro gold futures last trading day
Dec. 27 Comex January 2013 E-mini copper futures last trading day
Dec. 28 Nymex December palladium futures last trading day
Dec. 30 Nymex January 2013 platinum futures first notice day
Dec. 31 Comex January 2013 silver futures first notice day
Dec. 31 Comex January 2013 copper futures first notice day

SP 500 Futures Daily Chart at Year End - Pigmen Rampant on a Field of Monetary Inflation

There is a an obvious ramping in the US equity markets into the year end that is running into fairly long term resistance.

I think 1455 is the highest this market will go without a deal on the fiscal cliff. Perhaps not even that high without an extraordinary effort.

If needed, Wall Street stands ready to pressure the Congress and the Administration in January by dumping the financial asset markets, hard, in the manner of the TARP negotiations.  We'll make them an offer they can't refuse.

Conversely, the SP 500 is in a fairly obvious inverse head and shoulders formation that has not yet activated by breaking out from its neckline, which is around 1455. If something does happen that permits such a breakout, it can run quite a bit.

There is a similar potential Inverse H&S on the NDX 100 big cap tech chart.

I suggest as always you ask the question cui bono, 'who benefits?'   Although they do happen, there are few accidents these days.

From a certain perspective the US and UK financial systems are being dominated by a set of loosely organized criminal enterprises that have captured, or at the least nullified, the regulatory functions of the markets.  This adds a significant element of uncertainty to what in theory is a discounting and price discovery mechanism.

There are rumours of a 'deal' on the fiscal cliff, in which the Republicans accept tax increases of a sort on those with incomes over $400,000 per year, and Democrats accept cuts on pensions of the elderly and veterans by using 'chained CPI' to calculate inflation rather than the current, significantly weakened, version of CPI-W.  The major feature of chained CPI is to make substitutions to cheaper products as prices increase.  As meat prices increase, for example, one can switch from beef to pork, pork to chicken, and chicken to dry cat food.

This change does so little to really 'fix' the budget problems of the next ten years, but visits such pain on the weak, that one has to wonder if there is a streak of sadism in the monied interests controlling the Beltway.   Although they will deny it, I think there is.

The plutocrats intend to resolve their debt problems generated by a corrupt financial system by inflating the currency. The benefit is that a switch to an even more distorting method of calculating price inflation will provide additional cover to their debasement of the currency.  I am not ruling out another asset bubble, this time probably in the financial asset markets.

The story for the year end seems to be inflating financial risk assets like stocks while capping precious metals and other key commodities.

As for the promised raising of taxes on the uber-wealthy, don't you believe it.  Their tax avoidance schemes are well-researched, well-funded, and intricate in ways that the average person can hardly understand.   And those educated enough to understand it won't say a word, through a mixed bag of careerism, self-interest, willful ideological blindness, and personal greed.   Its a feast of fools.

Why admit complicity in a fraud and accept the consequences when you  can double down and attempt to take it all, and write the history afterwards.

Its a win-win for the pigmen, shifting the pain to the elderly and veterans, and achieving even greater opacity to their wealth transfer schemes through monetary inflation.  If you know how to play it, asset inflation through official monetary magic, which is just another facet of that age old fraud of seigniorage,  is a wonderful way to steal from the hoi polloi without them feeling it until collapse comes, in the manner of a Ponzi scheme.

Let's see what happens.

Gold Daily and Silver Weekly Charts

The deal makers in Washington have until roughly the end of this week to tip their hands on the short term resolution of the 'fiscal cliff.'

These markets are a bit silly, matching some of the commentary I am seeing at various places around the web and in the media. 
Speaking of mysteries, the NY Times asks, Why Are Large Gold Shipments Leaving Afghanistan?

This is a good time of year to remind ourselves of our mutual dependencies, and our own weaknesses which are so easily overlooked, especially in a culture that favors swagger and arrogance.   Empires seem to thrive on the will to power.

"Christianity is called the religion of pity. Pity stands opposed to the powerful emotions which heighten our vitality; it has a depressing effect. We are deprived of strength when we feel pity...

What is good? All that heightens the feeling of power in a man, the will to power, power itself. What is bad? All that is born of weakness. What is happiness? The feeling that power is growing, that resistance is overcome."

Friedrich Nietzsche, The Antichrist

As you may recall, Nietzsche ended up in an insane asylum, and his philosophy of the blood, of the Übermenschen, and of the triumph of the will, turned Europe into an asylum of madness as well, for a time.

SP 500 and NDX Futures Daily Charts

Late day rally after week NY Fed Empire report this morning.

Trading is thin for the holiday season already. Shenanigans abound.

Net Asset Value Premiums of Certain Precious Metal Trusts and Funds

Premiums remain rather thin on the Sprott funds in particular.

First Majestic paid a 69% premium over the 30 day average price in a friendly acquisition of Orko Silver it was announced this morning.

Gold Daily and Silver Weekly Charts - Going Home

SP 500 and NDX Futures Daily Charts

"And can the liberties of a nation be thought secure when we have removed their only firm basis, a conviction in the minds of the people that these liberties are of the gift of God? That they are not to be violated but with his wrath?

Indeed I tremble for my country when I reflect that God is just: that his justice cannot sleep for ever.

Thomas Jefferson, Notes on the State of Virginia, Chap. XVIII

HSBC Management's Criminal Activity Above the Law: Justice for Some

"Now at this time of peril to your class and to your tribunal, when men are ready to attempt by speeches, and by the proposal of new laws, to increase the existing unpopularity of the senate, Caius Verres has been brought to trial as a criminal, a man condemned in the opinion of every one by his life and actions, but acquitted because of the enormousness of his wealth.

I have undertaken this cause as prosecutor with the greatest good wishes and hope on the part of the Roman people, not in order to increase the unpopularity of the senate, but to relieve it from the discredit which I share with it as a member of that class.

For I have brought before you a man, in whose case you have an opportunity by acting justly of retrieving the lost reputation of your judicial proceedings, of regaining your standing with the Roman people, and of giving satisfaction to foreign nations; a man, the embezzler of the public funds, the petty tyrant of Asia and Pamphylia, the thief who deprived the city of its rights, the disgrace and ruin of the province of Sicily.

And if you come to a decision about this man with severity and a proper respect for your oaths, that authority which ought to remain in you will cling to you still; but if that man’s vast riches shall break down the sanctity and honesty of the courts of justice, at least I shall achieve this, that it shall be plain that it was honest judgment that was lacking to the republic...

But now men are on the watch-towers; they see how every one of you behaves himself in respecting justice and observing of the laws. They see that, ever since the passing of the law for restoring the power of the tribunes, only one member of your class, and he, too, a very insignificant one, has been condemned."

Cicero, First Oration Against Verres, 70 B.C.

There is a disturbing trend in the US where corporate executives are able to commit serious crimes such as money laundering and outright theft (does MF Global ring a bell) and escape criminal prosecution and even personal fines by hiding behind the personhood of the corporation and a wall of implausible deniability.

You can fine a corporation, even by levying a very large penalty when judged by individual terms. But that is just a cost of doing business for the company that is absorbed by the system and the shareholders that sustain it.  And in the case of the TBTF banks, they are being supported by an ongoing government subsidy of cheap money from the public.  And the management that actually committed the crimes is allowed to continue on without serious personal penalty.

This is a 'live and let live' attitude amongst the privileged class, a type of professional courtesy. This is the 'CEO Defense' in which managers are paid enormous, outrageous compensation for their skills, but when criminal activity is exposed, they claim to know and do very little for that pay, and in fact claim to be barely involved with the business that they manage. This is not capitalism, this is corporatism, a form of organized crime.

This is the moral hazard of the credibility trap. Because there is little doubt that HSBC management has done things for and with other very important people that makes them truly above the law.

This is the menace of entitlement and privilege. And what is most discouraging is how easily they can turn the righteous anger of the people at this injustice into an attack on the weak, the elderly, the children, the 'other.' And this is our shame, and our own complicity.

As a reminder from history, the privileged Senatorial class did not engage in serious and meaningful reform. And within ten years they saw the rise of powerful men like Julius Caesar and Pompey, who sought in every way to subvert the laws of the Republic and the good of the people in their favor. And in 49 BC Caesar crossed the Rubicon. And most will remember what followed after.

Is the American republic to be nova Roma, the new Rome?

"At that time many will falter, and betray and despise each other. And false prophets will appear and deceive many people. Because of the increase of wickedness, the love of many will grow cold, but those who stand firm to the end will be saved. And the gospel of the kingdom will be preached in the whole world as a testimony to all nations, and then the end will come." Matt 24:10-14

Rolling Stone
Outrageous HSBC Settlement Proves the Drug War is a Joke
By Matt Taibbi
December 13, 3:25 PM ET

...Breuer this week signed off on a settlement deal with the British banking giant HSBC that is the ultimate insult to every ordinary person who's ever had his life altered by a narcotics charge. Despite the fact that HSBC admitted to laundering billions of dollars for Colombian and Mexican drug cartels (among others) and violating a host of important banking laws (from the Bank Secrecy Act to the Trading With the Enemy Act), Breuer and his Justice Department elected not to pursue criminal prosecutions of the bank, opting instead for a "record" financial settlement of $1.9 billion, which as one analyst noted is about five weeks of income for the bank.

Though this was not stated explicitly, the government's rationale in not pursuing criminal prosecutions against the bank was apparently rooted in concerns that putting executives from a "systemically important institution" in jail for drug laundering would threaten the stability of the financial system. The New York Times put it this way:

Federal and state authorities have chosen not to indict HSBC, the London-based bank, on charges of vast and prolonged money laundering, for fear that criminal prosecution would topple the bank and, in the process, endanger the financial system.

It doesn't take a genius to see that the reasoning here is beyond flawed. When you decide not to prosecute bankers for billion-dollar crimes connected to drug-dealing and terrorism (some of HSBC's Saudi and Bangladeshi clients had terrorist ties, according to a Senate investigation), it doesn't protect the banking system, it does exactly the opposite. It terrifies investors and depositors everywhere, leaving them with the clear impression that even the most "reputable" banks may in fact be captured institutions whose senior executives are in the employ of (this can't be repeated often enough) murderers and terrorists...

And not only did they sell out to drug dealers, they sold out cheap. You'll hear bragging this week by the Obama administration that they wrested a record penalty from HSBC, but it's a joke. Some of the penalties involved will literally make you laugh out loud. This is from Breuer's announcement:

As a result of the government's investigation, HSBC has . . . "clawed back" deferred compensation bonuses given to some of its most senior U.S. anti-money laundering and compliance officers, and agreed to partially defer bonus compensation for its most senior officials during the five-year period of the deferred prosecution agreement.

Wow. So the executives who spent a decade laundering billions of dollars will have to partially defer their bonuses during the five-year deferred prosecution agreement? Are you fucking kidding me? That's the punishment? The government's negotiators couldn't hold firm on forcing HSBC officials to completely wait to receive their ill-gotten bonuses? They had to settle on making them "partially" wait? Every honest prosecutor in America has to be puking his guts out at such bargaining tactics...

Read the entire article here.

Sweet and Sour Meatball Soup

I had to look up the recipe, which was in a box written in
my godfather's hand, God rest his soul.

I have modified the recipe a bit over the years, but here is the basic idea.
Once you get the hang of it feel free to experiment with things that suit
your taste. I also make a version of this with codfish and oysters
instead of meatballs. I vary the sour-sweetness a bit for that, skip
the pork neckbones, and add some butter.


Süße und Saure Suppe

Into a large pot add four quarts of light chicken stock.
Add four stalks of celery. If it is green clean the outside
to remove any bitterness.

Add one pound of cleaned pork neckbones. This will add 'richness.'
One or two cloves of garlic.
Bring to a boil and simmer for 45 minutes.

Remove the bones and celery. I usually take any meat off the bones
and use it in something else, not in the soup. Sometimes the dog gets lucky.

Take 1 pound of ground beef and 1 pound ground pork and 8 to 16 oz.
of plain bread crumbs in a large bowl.  Add one tablespoon celery salt and pepper to taste.
One well diced onion.

Mix in two eggs. If the mixture seems heavy add up to 1/2 cup milk to soften the bread crumbs.
Salt and pepper to taste. A sprinkle of garlic powder if you are of that persuasion.

Bring the stock back up to a boil. Make the meatballs and add them to
the stock. Cook them until they float to the top on a slow boil.
Remove them and put them on the side in a bowl.

Add one cup of diced celery, one diced leek, one large potato,
and five or six sliced carrots.
Slice and add one lemon, removing the seeds.
Add one package of cleaned and separated chicken wings or wingettes.
Bring to a slow boil and simmer for about 45 minutes.

Turn the heat down very low.
Add 2 pints of sour cream. Add one cup of sugar. Mix lightly
without breaking up the carrots and other things in the soup.
Add some stock to the sour cream container and let it cool off.
Add 1/4 cup flour to the stock in the container and mix it well.
Add this back to the soup to thicken it. A rue can also be used. Or cornstarch.

Now taste the soup broth and add sugar to suit your taste. Do not overdo
but it should taste slightly sweet. Now if it is not sour enough add
some cider vinegar to bring the sourness into balance with the sweetness.

Add back the meatballs and let it simmer for about fifteen minutes. Don't burn.

Add some chopped scallions for color, and ground pepper. Add salt if needed.

Serve in a bowl with a crusty bread.

The meatballs tend to absorb the liquid overnight. Add some chicken stock if needed.

Gold Daily and Silver Weekly Charts

A second day of capping efforts started overnight in the lean hours with notable selling by someone who was either stupidly liquidating a position in a dull market, or more likely a joker playing at Dr. Evil with a 10,000 contract sale.

Be that as it may, the children have come home from school, including the young University man, and are decorating the Christmas tree. The cooking for the holiday began in earnest today as the smells of anise pizzelle cookies and a large pot of sweet and sour meatball soup doubly blessed the house with delectable smells, mingling with freshly cut pine wreaths.

The sour cream based soup is a family recipe that came from the heartland of Europe, but no one seems to remember exactly where. But it marks the start of the holiday in our home. Even the dog sensed something special, marking out a rug in the kitchen as her domain, with a sharp eye for anything that fell to the floor. This is my idea of heaven.

Joy to the world.

Have a pleasant evening.