SP 500 and NDX Futures Daily Charts - The Magic Mountain

"There are so many different kinds of stupidity, and cleverness is one of the worst."

Thomas Mann, The Magic Mountain


"All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind."

Adam Smith

Stocks pulled back a little today, in the face of weak economic news. Import and export prices came in a little on the high side.

Corporate earnings in the virtual realms remain rather good. The real economy story, not so much.

Stocks have gone almost parabolic, and deserve some time to rest. If we see a trend break it may turn bearish, but for now equities are rising on the Fed's balance sheet, light volumes, and lack of an event that might trigger selling.

If some event does hit, stocks will have the resiliencies of meringue. But that is a big 'if.'

Gold Daily and Silver Weekly Charts - Pop Go the Weasels

The metals popped higher today as the Non-Farm Payrolls came in light, and visions of QE taper receded further into next year.

There was intraday commentary Tremors and Warnings in the Gold Market that is worth reading. While I was glad to see the wiseguys lighten up on the price capping in the metals, there appears to be a more dangerous set of market conditions that they might realize.    Some of the 'old hands' see it, but the fresh crop of the masters of the universe seem to be quite taken with their powers over paper. 

It is a quaint notion, but the cure for tightness in supply is higher price. But given enough bad behaviour, and the normal market clearing mechanisms can fail to respond in the expected time intervals.

Nature, ain't it a bitch.

Who can say what snowflake will provide the little push that starts the avalanche. Better to see the avalanche conditions developing and do something to relieve them.

Have a pleasant evening.

Fly the Skies of Air Morgan: Never fear, the London Whale is here...

SP 500 and NDX Futures Daily Charts - The Last Fandango

Stocks rallied higher as poor economic news in the US Non-Farm Payrolls caused traders to push the tapering of QE even further into the future.

The current forecast for stagflation is looking quite realistic. The 'deciders' are making the monetary and fiscal policy errors almost on cue.

At some point the stock market will suffer a break, and correct more than the usual 4 to 6 percent. But with the Fed 'put' firmly in place, I suspect that this will be event driven, and the Fed will try to step in quickly to dampen the effects.

We are seeing asset inflation without a doubt. But the assets tend to be those favored by the financial sector, so don't look for them in commodities and other real things for example.

Have a pleasant evening.

Tremors and Warnings in the Gold Market

"Here and there an individual or group dares to love, and rises to the majestic heights of moral maturity. So in a real sense this is a great time to be alive. Therefore, I am not yet discouraged about the future.

Granted that the easygoing optimism of yesterday is impossible.

Granted that those who pioneer in the struggle for peace and freedom will still face uncomfortable jail terms, painful threats of death; they will still be battered by the storms of persecution, leading them to the nagging feeling that they can no longer bear such a heavy burden, and the temptation of wanting to retreat to a more quiet and serene life.

Granted that we face a world crisis which leaves us standing so often amid the surging murmur of life's restless sea. But every crisis has both its dangers and its opportunities. It can spell either salvation or doom. In a dark confused world the kingdom of God may yet reign in the hearts of men."

Martin Luther King


"However, I have learned that in times of crisis, the dodos always charge in to make matters worse."

Andrew Greeley

Here are three charts that capture the somewhat uniquely dangerous situation in the gold futures market on the Comex.  It reminds me of watching a child playing with a chemistry set, or a drunk getting behind the wheel of a car.  Disaster is not assured, but the situation cries out for adult supervision and intervention.

The first chart shows all gold in storage at Comex certified private warehouses. The major bullion banks control the vast majority of this storage. Among these are JPM, HSBC, Scotia Mocatta. Storage and delivery services are also provided by Brinks and Manfra, Tordella, and Brookes, a large NYC coin and bar dealer.

The year long decline in open interest on the Comex is a phenomenon worth noting. It is marked on the third chart.   Even as gold bullion purchasing is soaring, gold futures interest in the US is in a secular decline.   But even with this decline, the 'claims' of ownership as represented by futures contracts over ALL gold in the warehouses is a bit high.

Not to say that futures contract owners can have any claim on gold merely held in storage.  But they can try.   I include this because some people consider it to be important.  If the price is allowed to rise high enough, that customer gold might be tempted into the deliverable category and offered for sale.  The key question is 'how high.'

The better metric to watch is the number of claims per registered, or deliverable ounces of bullion on the Comex.  This gives us a current 'temperature reading.'   And that measure remains near all time highs at 52.62 claims per ounce at these prices.   My friend Nick Laird at Sharelynx, who does a wonderful job of charting and data gathering, prefers to call it 'owners per ounce.'   But since a single ounce of gold cannot have 53 owners if the music stops, I prefer to call them 'claims' or virtual ownership.

Every prior deep decline in registered gold bullion during this bull market has marked an intermediate price trend change.   I do not think this time will be different, all other things being equal.

What exacerbates this situation is the absolutely remarkable drawdown in gold bullion from the ETFs around the world, but most heavily in GLD and on the Comex.   We have not seen anything like this in silver, platinum, or palladium.  It is significant.  See The Amazing Disappearing Gold Bullion

As you know, I am persuaded that the request from the Bundesbank for the return of Germany's gold, and the deferral of this by the Fed for seven years, set off a chain of overreactions and market maneuvers that in retrospect will be viewed as foolhardy.

If the price of gold is allowed to rise closer to the $1650 to $1750 trading range by the end of January, preferably the end of December,  I think the Comex might avert what for them could become a potentially disastrous situation.   And they need to get started on this fairly quickly so that the rise is gradual and controllable. The higher it riser this year, the less pressure there will be on physical gold early next year.

If the bullion banks continue to game the system, and scalp profits with other peoples' money,  my forecast is for a market break and dislocation in the gold market that will imperil quite a few smaller trading houses, and greatly impact confidence and global trade.  I would not be surprised to see a halt called to the paper and physical gold trade, a forced cash settlement on futures and derivatives, and a price adjustment higher, perhaps in multiples of triple digits.   Such price jumps can be unsettling well beyond their immediate circles of interest.

And we could see a TBTF bullion bank or two shaken to their foundations.  If the governments overreact in trying to get them out of their own mess again without loss or reform, then I think it is time to keep your heads down and watch for big changes.  I doubt they could be that clumsy, but most politicians know less about money than most economists, and that is pretty bad.  And they are certainly as craven and pliable, so it is possible.

I have a couple of other forecasts about changing politics in the US, which involves major changes in the current two parties.  People forget that the lifeline of the Republicans and the Democrats as they are now is more current than old in terms of human history.  And a major party change with some splintering and interesting alliances is becoming more probable.

Although it is just a forecast, it looks like the die will be cast in December.  If they try the annual price hit in early December, they might set off a series of unfortunate events as the new year unfolds.

So you might consider this a sort of warning to be watchful, just based on the market mechanics.  It does not have to happen.  But it has been hard to overestimate the reckless stupidity of unbridled greed.

Again, the most likely outcome is the infamous muddle through and the kick of the can down the road, with a rising price in gold as part of an intermediate trend change.  But we are now in a period of high risk, and I don't yet see the right steps being taken to avert it.   Some of that rests on the shoulders of the CFTC, and quite a bit on the exchange, the politicians, and the regulators of the banks.  They need to take the keys away from the drunks and reckless children in their own organizations and in the ones that they oversee.

I do not want to join the doomsayers, those who troll for clicks with ever more dire headlines of impending doom.  It almost gets to be like watching the supermarket tabloids.

All of our problems are soluble, and things are no worse now than they have been many times in the past.  Our parents and grandparents faced much worse, and I personally have seen harder times by far.  But it is getting pretty bad on a secular level, mostly from self-inflicted wounds and corruption.

I wanted to state this unequivocally now because I can see another financial crisis brewing, and if it does come it undoubtedly will be followed by a bunch of hand-wavers running around saying that 'no one could have seen it coming.'  Just like the last two or three financial crises.  Maybe this time the powerful will act with caution and good sense.  I have the impulse to hedge that though, and certainly not to count on it. In their self-centered blindness they are becoming mere players and pawns in the great tide of history.

"The long memory is the most radical idea in America. That long memory has been taken away from us. You haven't gotten it in your schools. You're not getting it on your television. You're being leapfrogged from one crisis to the next. Mass media contributed to that by taking the great movements that we've been through and trivializing important events.

No, our people's history is like one long river. It flows down from way over there. And everything that those people did and everything they lived flows down to me, and I can reach down and take out what I need, if I have the courage to go out and ask questions."

Utah Phillips


"You will study the wisdom of the past, for in a wilderness of conflicting counsels, a trail has there been blazed. You will study the life of mankind, for this is the life you must order, and, to order with wisdom, must know. You will study the precepts of justice, for these are the truths that through you shall come to their hour of triumph. Here is the high emprise, the fine endeavor, the splendid possibility of achievement, to which I summon you and bid you welcome."

Benjamin N. Cardozo

Gold Daily and Silver Weekly Charts - Cap, Cap, Cap Ahead of Non-Farm Payrolls

“The term propaganda rings melodramatic and exaggerated, but a press that, whether from fear, careerism, or conviction, uncritically recites false government claims and reports them as fact, or treats elected officials with a reverence reserved for royalty, cannot be accurately described as engaged in any other function.”

Glenn Greenwald

Silver and gold chopped sideways today with silver a little higher and gold a little lower.

Action was light.

Tomorrow is the Non-Farm Payrolls report from September that was delayed because of the Beltway antics.

There is a definite divergence between paper and physical gold, but the two are still related and influence one another. The notion that they are completely unrelated now is incorrect based on the data which I see. Even with premiums, the spot price of gold and the price you will pay or sell for plain bullion is definitely related.  

I am sure some traders believe that the two are completely unrelated and shorting gold against the dollar is a nice paper trade.  In some ways it is compared to the other vehicles one might trade.  But given the carry trade like returns,  I think that they are chasing nickels on the freeway.

When and if the two do diverge significantly, we will definitely know it.  They will be carrying traders out on stretchers.  When the gold price turns the short squeeze might become epic.  And the privileged will be able to grab the available supply first.

It was JPM to the rescue again with another big chunk of 96,450 ounces of gold bullion for the COMEX warehouse in storage.  I wonder where they are obtaining such large tranches of gold.  Perhaps it has something to do with the price beating and disgorgement of metal by GLD last week.

A transfer of  24,218 gold bullion ounces out of deliverable into storage occurred in the Scotia Mocatta warehouse.

As you may recall Scotiabank cause a bit of a fuss when Harvey Organ and son went there with an auditor to verify the existence of some of their personal holdings for whatever reason.  I believe that this was at the end of 2010 or very early 2011.    The scandal was that when they went to the vault, there was very little actual bullion there, compared to what the total holdings there were reported to be.

And Scotiabank has had one of the better reputations in the industry. 

Well, they repaired that.  But the point that Harvey often makes is that just because you hold a title or a piece of paper for something, does not mean you can obtain it readily when you need it.

Just ask the people of Germany.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Jobs, Jobs, Jobs

Stocks shook off some early morning economic news on housing that was weak and managed to close unchanged to slightly higher ahead of tomorrow's big Non-Farm Payrolls Report for September that was delayed by the government shutdown.

After the bell Netflix turned in higher than expected earnings, which gave a little extra lift to the tech futures.

Have a pleasant evening.

An American Injustice

Although one might just attribute this to the peculiarities of small town life, for it was a microcosm of how ordinarily decent people can be prompted to do indecent things to outsiders and the other, and then turn and demonize them to justify their unjust persecution.

These sort of injustices were routinely displayed during my childhood, when local fiefdoms pled 'States Rights' and 'local rule' in order to continue to carry out the persecution of outsiders. And the perennial outsiders in America had been African-Americans, Catholics, and Jews, oftentimes as proxies for immigrants. If you read the link to the history of the Ku Klux Klan in the 1920's you know this.

People forget what it was like. Times change, and so do the targets, but the hatred and abusiveness remain the same. This is not to say that this is a uniquely American problem, not at all.

In the US there was greater popular support for this sort of hateful behaviour towards minorities than one might imagine.  In 1968 George C. Wallace ran on a platform of States Rights and the status quo in segregation and the routine oppression of minorities and 'outsiders' and was able to garner 13.5% of the vote.

This type of 'might makes right' attitude never really goes away. It comes back under various names and with different rationalizations, too often falsely cloaked in familiar symbols like the flag and cross, or in some hypocritical theme of the individual freedom to act, horrendously. But we also see this on the far left where ideological rigidity makes inhumanity just as defensible, merely with different targets. It is a weakness of human nature and a common characteristic of fanaticism.

People may be decent overall, but there are a small minority of people who are to easily given over to anti-social actions, for whatever reason. Ordinarily decent people can be led to do and say remarkably indecent things, especially if they enjoy the approval of the powerful and some measure of anonymity, as afforded by the crowd.

The Kansas City Star
Nightmare in Maryville: Teens’ sexual encounter ignites a firestorm against family
October 12
By DUGAN ARNETT

MARYVILLE, Mo. — There wasn’t much left by the time she arrived, just a burnt-out structure and the haze of smoke that lingered around it.

The siding and gutters had melted. The roof was gone. Inside, piles of ash filled the rooms that had once bustled with the pleasant sounds of a family.

That morning last April when Melinda Coleman received word that emergency vehicles were gathering around her Maryville house, she had hoped for the best.

But if the events of the past year and a half had taught her anything, it was that when the town of Maryville was involved, that seemed unlikely.

Since the morning her daughter had been left nearly unconscious in the frost of the home’s front lawn, this northwest Missouri community had come to mean little besides heartache.

Few dispute the basic facts of what happened in the early morning hours of Jan. 8, 2012: A high school senior had sex with Coleman’s 14-year-old daughter, another boy did the same with her daughter’s 13-year-old friend, and a third student video-recorded one of the bedding scenes. Interviews and evidence initially supported the felony and misdemeanor charges that followed.

Yet, two months later, the Nodaway County prosecutor dropped the felony cases against the youths, one the grandson of a longtime area political figure.

The incident sparked outrage in the community, though the worst of it was directed not at the accused perpetrators but at a victim and her family. In the months that followed, Coleman lost her job, and her children were routinely harassed. When it became too much, they left, retreating east to Albany...

Read the entire story here.

Gold Daily and Silver Weekly Charts - Big Moves In and Out of Comex Bullion Warehouses

Yesterday saw two big withdrawals of gold bullion from the Comex warehouses.

62,050 ounces came out of HSBC and 16,556 ounces left Scotia Mocatta, both out of eligible storage.

But never fear, JPM came to the rescue with a whopping deposit of 192,900 ounce of gold bullion into eligible storage.  I wonder where that came from.  Wink wink, nod nod.

I just want to be able to watch the next leg up in the gold market, if and when it comes.  It could be impressive, and put some serious pressure on bullion supply.

Michael Kosares has a new piece out titled China’s London-Zurich-Hong Kong gold conduit — a major financial coup d'état.

Gold and silver were both capped today,  chopping sideways after the big pop from yesterday.

As a reminder the government will be releasing the September Non-Farm Payrolls Report on Tuesday.  Antics are customary.

Try to keep a clear head as others tend to lose theirs, overwhelmed by the phantoms of their imagination.  I get tired of reading about the imminent collapse of nearly everything as we know it.  I cannot help but note how many 'legends' are seeing imminent dangers growing more terrifying nearly every day.

I suspect that this excess of nervous energy is the result of not having enough to do.  Spending too much time listening to financial opinions and to the uber-wealthy whining about nothing in particular can be nerve wracking.  But that is financial television.

Having a sick dog helps one to maintain a well-grounded perspective.  Young children are an effective sink for excess energy as well.   Grandchildren work, but it is a bit of a cheat because at the end of the day you get to send them home, at least most of the time.

It appears our shitzu has contracted Lyme disease, which is quite common in this area amongst the canine class.  She is so naturally lazy that it was hard to tell at first.  I have been serving as her caregiver, as well as for she-who-must-be-obeyed, and loved beyond all others.  Tomorrow she gets her comeuppance in a trip to the vet, which will confirm her illness and a shot of antibiotics in the rump.  The shitzu that is, not my dearly beloved.  She is in for her own set of treatments again on Monday.

Have a pleasant weekend.

SP 500 and NDX Futures Daily Charts - New All Time High On the SP 500

The SP 500 ran to a new all time high today as the bulls were stampeding on the delay of the budget/debt crisis, and broad expectations of no taper until March of next year.

They were hot and bothered by the results from Google, GE, Morgan Stanly, among a few of the usual suspects.

Notice that VIX has fallen back down into the complacent zone.

Next Tuesday we will be getting the delayed September Non-Farm Payrolls Report. The consensus of economists is for a net add of about 183,000 jobs. I think we will fall short, and that the Street will slough that news off if it does not miss too badly. If it comes in fat, then look for renewed talks of 'taper.'

Have a pleasant evening.

Matières à Réflexion For Friday 18 Octobre

Fed Policy Errors Are Mounting

Andrew Maguire on the Gold Surge and Paper/Physical Markets (Florid headline there and some sweeping hyperbole in the piece, but otherwise a nice description of the market action this week)

Hedge Fund Assets Top $2.5 Trillion

Hedge Funds Seek to Trade as Protected Bankruptcy Insiders

China and Gold - Alasdair MacLeod

New York State Is Facing a Contagion of Corruption - Martens

RI Public Pension Reform: Wall Street’s License to Steal

Lurching Gold Prices Mystify Traders

Saudi Arabia Rejects Seat on UN Security Council

The Insufficiently Crazy Theory (All aboard!)

The Generational Warfare of Stanley Druckenmiller - Yves

NAV Premiums of Certain Precious Metal Trusts and Funds

Despite the recent rally the premiums remain thin to dour.

Historical Perspective: The Crisis Last Time

Each crisis has familiar facets, but also has its unique characteristics that do make things somewhat different with their own particular outcomes.

One of the great differences in this current financial crisis in the Western world, and I do mean to say 'current' since it has hardly been resolved, has been the policy actions of the governments of the world.

By forestalling a collapse of the banking system, the emerging markets have been somewhat insulated, at least for now, from the economic carnage that has occurred in the more developed nations. China, Brazil, India, and Russia are doing better than one might expect if there were a worldwide Depression. However I do think that those countries that rely on exports are clutching a viper to their breast. For the global trade regime is much more fragile than you might think, although few have yet seen it.

For the moment at least the G7, the U.S., U.K., France, Germany, Italy, Canada and Japan, have also been spared most of the pain that characterized The Great Depression. Quite a bit of this has to do with their central banks, and the eschewing of liquidationism, which these days might be compared to austerity, although it was not quite the same thing.

Where austerity has been applied, selectively forced from the outside in most cases, it has wreaked havoc with the people and the economies of those countries.    And it is giving rise to the extremism in political reactions that was quite common in the 1930's, in Italy, Germany and Japan most notably, although it was much more pervasive than other nations would care to admit.

That is not to say that things cannot go from bad but tolerable, to much worse.  We are not yet out of this financial crisis, because the reforms have not yet been made.  We are in a crisis in slow motion, if you will, and it can still go either way. 

The actions that have been taken to prop up the banking system have only delayed the reckoning that will occur when the economic fallacies and policy errors of the last thirty years that overturned many of the safeguards that fellows like Berle had helped to create, are exposed for what they are.  Then a progressive spirit of government might begin to replace the tired propaganda of deregulation and the natural goodness of the oligarchs and their phony free markets.

I do expect things to remain unsettled, and for hysteria to remain high, especially at the edges of the political spectrum.  I do not expect to see a rise of fascism in the US or Germany per se, but remain more concerned about Spain, Greece, and Portugal. 

It is fortunate perhaps that communism does not represent such a spectre for the oligarchs to incite the people against.  Although it is painfully clear that many groups are searching for a workable 'other,' even one that is largely imaginary,  that helps the unscrupulous demagogues to tap into the darkest impulses of a troubled people.

The Crisis Last Time
By Richard Parker
November 7, 2008

For writers who seek to influence public affairs, timing plays a paramount role. And few writers have had better timing than Adolf Augustus Berle.

In the summer of 1932, with America trapped in the greatest financial crisis in its history, Berle published “The Modern Corporation and Private Property,” a scholarly yet readable analysis of America’s largest companies and their managers. Berle is largely forgotten today, yet with that book he succeeded in persuading Americans to see their economic system in a new way — and helped set the stage for the most fundamental realignment of power since abolition.

The stock market had plunged vertiginously three years earlier, and by 1932 Americans were desperate to reverse the much wider collapse that had ensued — and to make sure it wouldn’t happen again. The New Republic was soon hailing “The Modern Corporation” as the book of the year, while The New York Herald Tribune pronounced it “the most important work bearing on American statecraft” since the Federalist Papers. Louis Brandeis would cite its arguments in a major Supreme Court ruling on corporate power. Running for president, Franklin Delano Roosevelt recruited Berle — a Republican Wall Street lawyer who had supported Hoover — to join his “brain trust,” and that fall entrusted him with drafting what became the most important speech of the campaign. After the election, Berle remained in New York, yet his connection to the president he audaciously addressed as “Dear Caesar” was such that Time would characterize “The Modern Corporation” as “the economic bible of the Roosevelt administration.”

At first glance, the book would hardly seem to merit such broad acclaim. But if the topic was limited, Berle’s analysis was not. He used the data compiled by his co-author, the economist Gardiner Means, to examine how markets had become concentrated in just a few hundred firms and how senior managers had wrested power from the companies’ legal owners, the shareholders. No radical, Berle was eager to preserve the corporate system, which he called “the flower of our industrial organization.” But he now believed that new controls would have to balance “a variety of claims by various groups in the community” — not just its managers or shareholders — and assign “to each a portion of the income stream on the basis of public policy rather than private cupidity.”

In 1932, as in our own moment of financial crisis, most Americans could see that something needed to be done because these new behemoths — which had turned America from a nation of farmers into the world’s largest industrial power — were on the verge of collapse, poised like Samson to pull the entire economy down with them. Berle’s genius in “The Modern Corporation” was to align his professional insights with the public’s fears, and its anger. As he starkly put it in his preface, “Between a political organization of society and an economic organization of society, which will be the dominant form?”

In Theodore Roosevelt’s and Woodrow Wilson’s era, reformers like Brandeis had argued that strict anti­monopoly and anti-collusion laws could return America to a place of small firms and farms, the beau ideal of Adam Smith’s market model. But Americans continued rushing to the cities, spurring an explosion in mass consumption, financed by a boom in cheap consumer credit and easy home loans. Then, in 1929, the markets crashed.

The crash for a time reinvigorated not only the anti-monopolists, but also union organizers, socialists, agrarian populists and crackpot utopians. It also brought forth “forward looking” chief executives like Gerald Swope of General Electric, who supported progressive corporatism — a world of government-mandated business cartels in exchange for higher wages, improved working conditions, and corporate-based workers’ compensation, pension and unemployment plans. Berle, however, was keen on none of these solutions. In his book, he explained that giant corporations were not “natural” economic institutions but recent inventions of the law, cobbled together on the remains of the medieval corporation, a quite different institution. What the Depression showed, he argued, was that modern corporations had failed not only stockholders, but the public — and would do so again, if left unregulated.

But what sort of regulation was required? On details, Berle was maddeningly but deliberately vague. What he did say clearly was that government needed to bear final responsibility for the economy by using its powers to balance supply and demand. It would also need to require corporate directors to manage the managers, not just for shareholders’ benefit but in accordance with new rules codifying the collective rights of stakeholders and the broader social responsibilities of corporations.

The impact of Berle’s ideas was no doubt enhanced by his decidedly nonradical biography. The son of a reform-minded Congregational minister and his wealthy wife, he had entered Harvard at 14 and finished Harvard Law School at 21 — at the time its youngest graduate ever. (Arrogant as well as gifted, he once showed up in Felix Frankfurter’s class the semester after completing it. Puzzled, Frankfurter asked him why he was back. “Oh,” Berle replied, “I wanted to see if you’d learned anything since last year.”) After a year at Louis Brandeis’s firm, he briefly did public-­interest legal work before marrying well and settling down to a prosperous career in Wall Street corporate law.

As clients flocked to him, however, he began questioning the very system that was making them (and him) rich. In 1923, alarmed by the venality, the chicanery and frequently the stupidity of Wall Street, he started writing articles that over the next several years would virtually invent the modern field of corporate finance law, emphasizing moderate solutions. After Columbia Law School offered him a job in 1927, he began cycling between his lucrative practice downtown and his teaching uptown.

But the Great Crash — and the subsequent revelations of market manipulation, fraud and reckless risk-taking — forced Berle to change sides. He was a Mugwump Republican, but the economic chaos of the Depression, and the threat it posed to American democracy, convinced him a new sort of regulation was now unavoidable.

In late 1931, Franklin Roosevelt, then governor of New York, called on the Columbia political scientist Raymond Moley. Roosevelt was weighing a run for president and was looking for fresh ideas. Moley quickly approached Berle and connected the two ambitious Harvard men.

A month after “The Modern Corporation” appeared, Berle drafted Roosevelt’s famous Commonwealth Club address, delivered in September 1932. Proclaiming that “the day of enlightened administration has come,” Roosevelt articulated the rationale for much of the New Deal’s financial and corporate reforms, including deposit insurance and securities regulation. He defended the coming government interventions as protecting individualism and private property against concentrated economic power. Calling for a new “economic constitutional order,” he declared it our common duty to “build toward the time when a major depression cannot occur again.”

“None of Roosevelt’s speeches,” Arthur Schlesinger Jr. later wrote, “caught up more poignantly the intellectual moods of the early Depression than this one.” It helped assure his landslide victory — and earned Berle a series of ever more important posts in the administration. America began an unprecedented 40-year expansion.

By the Reagan era, however, a new philosophy would take hold, and the public oversight of markets that Berle helped pioneer would over time be swept aside, in confident belief that markets could self-regulate and that government was the problem, not the solution.

Today, that era itself seems to be coming to end, and the question Berle posed — will democracy rule the corporations, or will the corporations rule democracy? — seems a profoundly important one worth asking again.

Moyers: Citizens United the Sequel

I found Heather Gerken to be remarkably articulate, well-informed, and intelligent in this interview.

Enjoy.



Recommended Reading: McCutcheon vs. Federal Election Commission

Gold Daily and Silver Weekly Charts - Blow the Man Down

After the bell, the newly restored US government announced that we would have the delayed Non-Farm Payrolls report next Tuesday.

And Forbes says No, JPM Is Not Instituting Capital Controls.

Ted Butler has a very insightful piece on how he thinks JPM is managing the silver market.  I suggest that you read it when you can.  I read it on his subscription site the other day, and I am glad he has made this one public.

Gold and silver had a nice rally higher today. It would have been much more enjoyable if it was not in the wake of a heavy handed and totally obvious price takedown.

But it appears that the takedown did its work for the wiseguys. GLD has disgorged over four tonnes of gold bullion this week, and voila, HSBC, the GLD custodian, was able to post 83,000 ounces of gold bullion to storage yesterday. 

There was also an adjustment of 12,000 ounces of gold from the eligible to the deliverable category.  So, crisis averted with the total gold in the Comex warehouses back within spitting distance of 7 million again. 

Or is it. 

I think we are seeing a very obvious endgame strategy here.  The drawdowns in GLD stick out like a sore thumb, with no other ETF bullion category matching it. 

When the time comes, you may have some trouble if you want to get your bullion out of those warehouses, as they start putting up the yellow police tape around them. 

Until then its smooth sailing for the Bankster, right?

But give us some time and we'll blow the man down.

Have a pleasant evening.

SP 500 and NDX Daily Charts - Around Kap Hoorn, and Into Uncharted Seas

Huzzah!

The SP 500 hit a new all time high today, driven by exuberance over the pushing of the debt ceiling and budget debate into the future.

The Dow did not fare as well, being weighed down by IBM that showed rather poor earnings results. It is a 'real economy thing.'

We don't have much in the way of dependable economic data yet, since the government has just come back to work, and the ranks of the unemployed might be swelled by those impacted by the shutdown, so we will have to watch this carefully.

I am not so rosy in my outlook for the economy, and think that the SP 500 is rather richly priced at a trailing PE of over 16, but it really is a QE thing.

The Fed is pumping money for all it is worth, expanding its purchased assets at a steady $80+ billion per month. The economic data will most likely be rather poor for 4Q, but that will be dismissed because of the shutdown.

So it looks like it is onwards and upwards. Let's sail round the Horn and into the blue Pacific.  But be forewarned, I see some rough seas across the next horizon.

I have not been short stocks for quite some time, occupying my leisure time playing the wiggles in gold and silver. But I am now getting an itch to start looking for a short entry point, but slowly. There is a notorious tendency for suckers to short new highs, and especially new all-time highs. And that does not often prove advantageous.

So let's make haste slowly, as the old Romans used to say, and enjoy this brief respite in our sea of troubles.

Have a pleasant evening.

Matières à Réflexion for Thursday, 17 October - Larry Summers Flinches At Gold Question

Alas, Google has repeated its error of the other week. It must be tinkering with a library of code, fixing some things and breaking others. The lowly system test process is always underrated and under-appreciated, but crucial to large scale software development.

I have notified them and expect they will correct this, but for now, here is the news. I will update during the day.

The Extraordinary Promise of the Greenwald-Omidyar Venture - CJR

Fed Could Begin to Taper From December - FT (Yes and the Banks could begin to act with moral goodness and honor.)

What To Expect During the Budget/Debt Cease Fire - Reich

China Ratings Agency Downgrades US Debt

GEAB N°78 The de-Americanisation of the World Has Begun

Thirty Million People Are Slaves - Half In India

Dollar Status In Doubt After Washington Antics

Why Regulators and Clients Can't Break Audit Oligopoly

Nobel Foundation Seeks Donations As Hedge Funds Are Not Sufficient

Mario Draghi Comments On Central Banks and Gold To Le Café friend Tekoa Da Silva

Or perhaps more apropos, Mario Draghi on why you should own gold.

Tekoa Da Silva: “Dr. Draghi, what are your thoughts on gold as a reserve asset? You have central banks like China, Russia, increasing their reserves, especially over the last ten years. Germany for example asking for some of their holdings back from New York. It [gold] doesn’t produce any income unless it’s leased. So why do you think they would want that, and what value does it offer in your opinion?”

Dr. Mario Draghi: “Well you’re also asking this to the former Governor of the Bank of Italy, and the Bank of Italy is the fourth largest owner of gold reserves in the world, which is out of all proportion to the size of the country.

But I never thought it wise to sell it, because for central banks this is a reserve of safety, it’s viewed by the country as such. In the case of non-dollar countries it gives you a value-protection against fluctuations against the dollar, so there are several reasons, risk diversification and so on.

So that’s why central banks which have started a program for selling gold a few years ago, substantially I think stopped…most of the experiences of central banks that have leased or sold the stock of gold about ten years ago, were not considered to be terribly successful from a purely money viewpoint.”

NAV Premiums of Certain Precious Metal Trusts and Funds - Oh, Snap!

The ratio of gold/silver remains rather high at 60.

Gold and silver are up today pretty much in lockstep. Silver may make up some ground if the afterburners kick in.

The premiums are holding well, but hardly exuberant to say the least.

COMEX Gold Warehouses Continue to Bleed Out As 'Owners Per Ounce' Climbs Back Over 53

"We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake.   Therefore at any price, at any cost, the central banks had to quell the gold price, manage it."

Sir Eddie George, Bank of England, reported in private conversation, September 1999

We saw more significant action in the Comex warehouse complex yesterday. 

A total of almost 4,000 ounces left the greatly diminished deliverable category, bringing it down to 717,666 ounces.    The ownership per ounce for each of those deliverable ounces is back up to 53.

Over 50,000 ounces left the Comex complex overall, taking the total amount of gold bullion there to 6,859,476 ounces.

As you know the gold bullion has been coming out of the ETFs in particular, and it is not showing up in the Comex warehouses.  There is widespread speculation and anecdotal evidence that this gold is being used to fulfill deliveries in Asia, after being refined into 400 ounce bars.  I do not think that it is likely to come back anytime soon.

There was a great deal made today of a letter that was sent out by JPM, limiting cash withdrawals by customers significantly and eliminating overseas wire transfers completely.  I have heard from some well-heeled individuals who are pulling their cash out in response to this.

I do not think this is a sign of government capital controls.  It is more likely involved with the trouble that JPM had gotten into with the OCC over their lack of compliance with regard to anti-money laundering measures.  As you may recall they received a 'cease and desist' order in January over this and have been under stricter surveillance since then.

Sometimes Banks engage in campaigns to migrate customers out of old platforms and less desirable accounts into more profitable account programs.  I did not see a message in their indicating that, but it is a possibility.  

It could also be a short term cash problem at the bank.   Perhaps there is some perceived risk there that the general public is not yet aware.  I find that a little hard to believe, but it seems more likely than a move to more general capital controls by the government.  If another big bank or two institute similar rules then maybe there is a little heat there worth our notice.

When it comes to metals, this market is just a mess.  I am appalled at the manner in which the CFTC and the CME have been conducting their roles as overseers.  These big market sells in quiet periods are almost unbelievable in their frequency and brazen effect on price.  

Are some bullion banks in trouble with their positions again?   It seems like something very odd is going on, and we know that when the banks get too badly offsides the market, the central banks are often willing to extend themselves to help them 'for the sake of the system.'

Gold forwards have gone negative again.  This represents tightness in the short term supply of physical bullion.   There have been massive drawdowns in Comex deliverable gold and the ETFs this year, without anything at all like it in silver, platinum, or palladium which have held steady or gained over the same time period. And no one seems to notice.  Le monde autour est sourd, bien entendu!

I suspect that those who see nothing unusual at all in this, and are seasoned watchers and traders in precious metals, are probably whistling past the graveyard.  It will take higher prices to free up more gold to be available for delivery, and that will make it harder to keep tapping the ETFs to obtain physical supply with which to satisfy Asia.  It is quite the predicament.

And there remains the fact that the Fed told the Bundesbank that they may have the return of the German people's gold, but not for seven years.  This obviously suggests that the gold might otherwise be occupied, spoken for, and encumbered.

There may be a reckoning when the smoke clears, and the quantities actually available to buyers readily on the shelves are revealed at last.

Weighed, and found wanting.

Stand and deliver.

Gold Daily and Silver Weekly Charts - Bart Takes a Bow - Capital Controls

Cap, cap, cap again today as the antics in Washington had the metals left with a subdued trade while stocks jumped in response to ... a delay in financial Armageddon to the beginning of next year, or not. We'll have to wait for the firm details.

It does not do much for the floundering real economy, but the Street won't think about that until après ski.

We finally saw some meaningful activity in the Comex warehouses. I will write about that later this evening.

Several people have asked me about a letter from JP Morgan Chase about international wire transfers and dollar limitations and if it is related to capital controls.  Capital controls are actions by government to limit the movement of capital across its borders.

Since we do not yet know what prompted this move by JPM, a number of things are *possible.*  However it would be odd to embark on a policy of capital controls by starting at just one bank.

More likely this is related to the 'cease and desist' order presented by the OCC on JPM from earlier this year with regard to holes in their money laundering detection system. 

There could also be some particular problem at JPM that might provoke a number of withdrawals from overseas, a sort of 'run on the bank because of something that happens there.  But that is not likely, but it certainly would not be considered that a more general policy of 'capital controls.' 

But hey, speculation is more fun. Wow, capital controls are here. At only one bank. I wonder how you would get around that? 

Getting back to the metals, I don't know how long they can keep this up, but today I got the sense again that the tape is winding under this very heavy-handed price suppression. When it moves, it could be eventful. But until then we sit patiently, counting blessing and reminding ourselves of what is really important. It is certain that we will not be taking any physical gold and silver into the next world, but perhaps the unpaid debts of fraud may adhere to those who have accumulated them.

Bart Chilton made a surprise visit to Bloomberg television today, taking a bow for obtaining JPM's acceptance of their $100 million fine for the London Whale. It appears that Bart and a skeleton crew are still on active during the shutdown. One might wonder, if they are not watching the markets during this difficult period, what exactly are they doing? Besides the occasional television appearance, because the one riot one Ranger rule applies to that.

Here's a modest suggestion. Pick up the phone and ask the Comex to identify the party who dumped umpty ump tons of paper gold in a quiet market and triggered the stop logic last Friday. That's a start.

The action in the metals markets is almost eerie. The big sells in quiet periods, the growing open interest in the face of paper selling and decline of deliverable inventories seems blatant, brazen, and strange.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Fabulous Fab and the Mavens of Despair

This is funny on so many levels, and so rich a field for pithy remarks, that I don't quite have the energy left today to fully do it justice.

"Mr. Tourre no longer works at Goldman, and is enrolled in the economics doctoral program at the University of Chicago."

Dealbook, Fabrice Tourre Seeks a New Trial

It does offer some prospective ad slogans for University of Chicago's Economics program.

'When your white collar criminality lacks that competitive edge.'

If he was a politician he would just wait a few months and join a Beltway lobbying firm where results are all that matter.  As a financier you have to go upscale when things don't go your way. Why trade when you can make public policy statements and economic forecasts?

Mark Cuban was found not guilty by a jury this afternoon, and can skip grad school and go back to Shark Tank.

Stocks had the expected rally ahead of expectations of a last minute deal ahead of the debt ceiling. We will have to wait for the final details which *should* be released tonight or early tomorrow, but from what has been said so far it looks like a can kick down the road, but mostly past the holidays.

Have a pleasant evening.