SP 500 and NDX Futures Daily Charts - Want To Take you Higher

This will end badly.

Notice how equities hit the bottom of the trend channel, and then took off like a horse with a red hot poker applied to its posterior.

The real economy is not keeping pace with the financialisation of reality.  And that is a recipe for disaster, but in the future. 

In the meantime, try not to get in front of these drunk-with-power drivers.

Hong Kong Gold and Silver Exchange To Launch 1,500 Tonne Depository in China

Just a fad. Nothing to see here, move along.

Reuters
Hong Kong gold exchange eyes 1,500-tonne warehouse in mainland China
February 16, 2014

The Chinese Gold & Silver Exchange Society (CGSE), based in Hong Kong, aims to launch a physical bullion trading exchange and a 1,500-tonne depository in mainland China within the next year, its president said on Thursday. The century-old firm, which runs Hong Kong's only physical bullion trading exchange, is looking to tap the burgeoning demand for gold in China, which last year toppled India from its ranking as the world's top gold consumer.

Its 171 members include dealers, banks and jewellers, among them Chow Tai Fook Jewellery Group Ltd, the world's most valuable jewellery retailer. It has been in talks to open a warehouse in China's free trade zone in the Qianhai district of Shenzhen that has struggled to take off some three years after it was first touted as a new "mini-Hong Kong".

But talks are finally getting serious after last year's launch of the Shanghai free trade zone, CGSE President Haywood Cheung told Reuters. "Three years ago we started negotiating with them to build a vault for gold and silver. It is now finally down to an ad hoc committee," said Cheung, adding that Qianhai officials had asked for CGSE's plans and proposals...

Read the entire story here.

Margin Call: Ted Butler Wonders About the Real Cause of Bear Stearns' Collapse

Ted Butler has put one of his newsletters into the public domain.

It raises some interesting points.  As you may recall Bear was suffering losses in a number of financial instruments at the time.  But there has not been serious discussion about their precious metal positions.

At the time of the MF Global collapse it appeared that JPM had their fingerprints all over the squeeze and margin call that put them down.   JPM, In the City of London, With a Margin Call.

But I had never thought about it happening in the case of Bear Stearns.

Goldman may be the vampire squid, but JPM may be Mack the Knife.

And is MF Global Jenny Towler, and Bear Stearns Schmul Meier?   And if so, who then is Tiger Brown?

Mackie, what price did you pay?

Times may change, but the song remains the same.

What Really Happened To Bear Stearns?
By Theodore Butler
February 17, 2014

Six years ago the well-known investment bank Bear Stearns imploded. In February 2008, Bear Stearns stock traded as high as $93; by mid-March the insolvent company agreed to be taken over by JPMorgan for $2 a share (later raised to $10 after class-action lawsuits). In the annals of Wall Street, there was hardly a more sudden demise than the fall of Bear Stearns. The cause was said to be a run on the bank as nervous investors pulled assets from the firm. Bear Stearns was said to be levered by 35 times, meaning it had equity of $11 billion and total assets of $395 billion. This is a very small cushion if something negative suddenly appears.

Something negative did hit Bear Stearns in the first quarter of 2008; although there are remarkably few details of what went wrong. Since Bear had a significant presence in sub-prime mortgages and that market was in distress, it is assumed the fall of the firm was mortgage related. That may be true, but there was no general stress in the stock market through mid-March 2008 reflecting a credit crisis. Was there instead some specific trigger behind the company’s sudden collapse?

I believe that sudden and massive losses and margin calls of more than $2.5 billion on tens of thousands of short COMEX gold and silver contracts were the specific triggers that killed Bear Stearns. Let’s face it – Bear was so leveraged that a sudden demand of more than $2.5 billion in immediate payment for any reason could have put them under. Bear Stearns’ excessive gold and silver shorts on the COMEX are the most plausible reason for the sudden demise.

Bear Stearns did fail and due to a sudden cash crunch was acquired by JPMorgan for a fraction of what it was worth two months earlier. Bear Stearns was the largest short in COMEX gold and silver at the time. The day of Bear Stearns’ demise coincides precisely with the day of the historic high price points in gold and silver. That is also the same day the biggest COMEX gold and silver short would experience maximum loss and a cumulative demand for upwards of $2.5 billion in cash deposits for margin. It was no coincidence the music stopped for Bear Stearns that same day...

Read the entire article here.

Thomas Frank: Pity the Billionaires, Marxism for the Master Class

“Ayn Rand's 'philosophy' is nearly perfect in its immorality, which makes the size of her audience all the more ominous and symptomatic as we enter a curious new phase in our society....to justify and extol human greed and egotism.”

Gore Vidal


"It is not Man but nature that raises into one class those who are chiefly intellectual, in another those who are marked by muscular strength and temperament, and in a third those who are distinguished in neither one way or the other, but show only mediocrity -- the last-named represents the great majority, and the first two the select. The superior caste -- I call it the fewest -- has, as the most perfect, the privileges of the few...

The order of castes, the order of rank, simply formulates the supreme law of life itself; the separation of the three types is necessary to the maintenance of society, and to the evolution of higher types, and the highest types -- the inequality of rights is essential to the existence of any rights at all. A right is a privilege. Everyone enjoys the privileges that accord with his state of existence.

Wrong never lies in unequal rights; it lies in the assertion of equal rights."

Friedrich Wilhelm Nietzsche, Der AntiChrist

In light of the recent outcries by billionaire Tom Perkins for fair and loving treatment, I thought it might be interesting to explore the mindset that pictures the doyens of Wall Street, and those who have taken fortunes out of the dot.com and housing bubbles, as the real victims of the financial collapse and The Recovery™.

I think that part of this comes from the phenomenon that for some people, gratitude is their natural response to good fortune, even if it has come from hard work. Whereas others are possessed by a restlessness, an insatiable spirit, and their response to everything is 'I deserve more!.' 

Tom Perkins not only wishes his wealth, and his banal collection of toys, but he wishes to have public adulation as well, or at least the power to compel people to defer to him.

Mr. Frank thinks that this time around the cultural response to a Great Depression is 'backwards,' as compared to that of the 1930's, and one might tend to agree. There certainly has not been the rising of a national sympathy for victims, or a proper outrage at the arrogance and excesses of the financiers.

But this might overlook the fact that the US was a bit of an outlier back then, as only a few countries turned towards progressive reforms, while other developed nations embraced the hardness of totalitarianism, and even went so far as systematically murdering the weak.

But it is a mistake that the US is some sort of paragon, if one recalls John Steinbeck's The Grapes of Wrath. The allure of selfishness and evil is a natural tendency that we overlook in our economic models, among other things. And we certainly ought not overlook the consecration of the country to the principle that 'greed is good,' or more plainly to Mammon, in the latter part of the last century.

I agree with him that Obama has been a pivotal disappointment, and I was interested to hear the reasons why he thought this was so.  Overall I found his perspective to be interesting, as though he was not an American historian and journalist, but some foreign observer sharing an exterior perspective of wonderment.

I have started the tape beyond the introductory remarks and welcomes at this talk he gave in Seattle.

"Do you think he is so unskillful in his craft, as to ask you openly and plainly to join him in his warfare against the truth? No; he offers you baits to tempt you. He promises you civil liberty; he promises you equality; he promises you trade and wealth; he promises you a remission of taxes; he promises you reform.

This is the way in which he conceals from you the kind of work to which he is putting you; he tempts you to rail against your rulers and superiors; he does so himself, and induces you to imitate him; or he promises you illumination, he offers you knowledge, science, philosophy, enlargement of mind. He scoffs at times gone by; he scoffs at every institution which reveres them.

He prompts you what to say, and then listens to you, and praises you, and encourages you. He bids you mount aloft. He shows you how to become as gods. Then he laughs and jokes with you, and gets intimate with you; he takes your hand, and gets his fingers between yours, and grasps them, and then you are his."

J.H.Newman, The Times of Antichrist

David Simon: Our Rigged Political System

David Simon, journalist and creator of the TV series The Wire and Treme, returns to talk with Bill Moyers about the triumph of capital over democracy.

“If I could concentrate and focus on one thing … and start to walk the nightmare back, it would be campaign finance reform” Simon says.

Simon warns that if we don’t fix our broken election system — by getting big money out of elections and ending gerrymandering — we will have reached “the end game for democracy.”

Gold Daily and Silver Weekly Charts - Dead on Target

Gold ran right up to the chart's first 'red resistance' line today at 1320 and stuck to it, with the usual wobbling back and forth.

So needless to say it took out its 200 Daily Moving Average with some authority. 

Silver popped a buck and change, and settled for 21.50ish.

The Comex bullion warehouses took in 2,199 ounces of gold into the delivery bins at Brink's, but nothing seems to be going out, so far, even to those who have taken delivery.

As a reminder the US markets will all be closed on Monday for President's Day.  Please attempt to carry on without their guidance.

Have a pleasant weekend.  See you Monday evening.

SP 500 and NDX Futures Daily Charts - Neither Snow, Nor Rain, Nor Lousy Economics Reports

The US markets will be closed on Monday for a national holiday.

Please try to carry on without their imperial oversight.

Have a pleasant weekend.

Gold Daily and Silver Weekly Charts - Defeated When We See Them Running

There was intraday commentary on the precious metals here. You may wish to read it if you have not.

Gold is starting to threaten its 200 Day Moving Average.  A technical chart is included below. It is also starting to approach a short term overbought condition.  It is not clear yet how relevant that might be given some of the strong supply and demand issues at play at these price levels.

When will the manipulation of the precious metals end? The market manipulation will be defeated when we see the manipulators running for their lives, most likely ahead of a memorable break in the gold and silver markets. Try not to be caught within the blast radius of their downfall, which will be more contemptible than tragic.  The only tragedy is the damage done to the innocents by the needless greed of power and pride.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Carnival of Beasts With No Hope

"He who makes a beast of himself gets rid of the pain of being human."

Samuel Johnson


"Victory is a fleeting thing in the gambling business. Today's winners are tomorrow's blinking toads, dumb beasts with no hope."

Hunter S. Thompson

The economic news this morning was not good, with unemployment claims high and retail sales off.

But corporations are doing well, and the Time-Warner deal, which ought to face some serious anti-trust scrutiny, buoyed the bubble dreams of the one percent.

Snow day here. Have a pleasant evening.

NAV Premiums of Certain Precious Metal Trusts and Funds - What Are They Thinking?

"The only way to partially explain away why JPM has been allowed to hold such controlling market shares [in gold and silver] is to claim that JPM is either hedging for clients or making markets. But in flipping from a 20% short gold market corner in Dec 2012 to a 20% long market corner 8 months later, the hedging argument goes out the window as it is impossible to reconcile what clients would be shorting so much in December and being long so much 8 months later. Remember, JPMorgan tried the same hedging excuse when the London Whale debacle was first reported, but dropped it immediately when it became obvious that it was nonsense. That leaves market making...

Market making is permitted and encouraged to enhance liquidity and tamp down price volatility, but not to rig prices...If JPMorgan is practicing market making in silver they couldn’t be doing a poorer job..."

Ted Butler, Butler Research LLC, Feb 12, 2014

"If you shut up truth and bury it under the ground, it will but grow, and gather to itself such explosive power that the day it bursts through it will blow up everything in its way."

Emile Zola

I think the whole matter of silver manipulation could have been cleared up if the CFTC had actually released the finding of their five year investigation into manipulation of that market, and stated that they had looked at the hedging and market making closely, found it to be legitimate, and backed it up with some verifiable and conclusive facts.

 But they chose instead to say nothing.  The lack of transparency in the financial system overall is harming confidence, and is morally appalling.

The precious metal cartel is giving up ground, but grudgingly.  We will know that they are defeated when we see them running for their lives, ahead of what is likely to be a memorable break in the paper gold and silver markets.

I do not expect the big insiders to get caught up in this debacle as I have said on numerous occasions. But they will be carrying some big specs and funds out on stretchers.  And perhaps a bureaucrat, politician, and banker or two.

In fact, it is likely that if the scheme is revealed and taken down before a crisis, it will happen because big players started complaining to the regulators.  The market overseers will listen to the financially powerful, if not the public, as had happened in the case of the London Whale.  This is the failure of equal justice, and it will bring down whole governments if it continues.

The gold/silver ratio remains unusually high. The discounts on some of the funds are narrowing and the PSLV premium is getting wider. Their cash level is a bit low, leading one to assume they will once again add to their units in an offering probably later this year, but not too long into it.

They are trying to get through this February delivery period. March may be a different story perhaps. But at the end of the day there will be a reckoning, and the longer this continues the worse it will be.

No scheme such as this can go on forever, no matter how confident they may seem. The cockier they become, the closer the resolution. That is all a part of the bluff, and too often, self-delusion.

Gold Daily and Silver Weekly Charts - Baby It's Cold Outside

“But today as then, the great propertied interests and their agents commit the most ferocious crimes in the name of the whole people, and bluff and brow-beat them by lying propaganda."

C.L.R. James, The Black Jacobins: Toussaint L'Ouverture and the San Domingo Revolution

Gold and silver tried to break higher today, with gold leading the way. After an early morning pop up to 1298, the Anglo-American gold cartel brought the water cannons to bear, and pushed it back down to 1292 in the after hours.

Tomorrow a major winter storm is going to have its way with the Northeastern US. The bailout boys will have to wear their mukluks to work, or hired some unemployed to carry them about. But never fear, they'll be there. Thank God for the financial system that they are not too lazy to steal.

Monday is a holiday in the States, so we'll be heading into a three day weekend.

The next option expiration for precious metals on the Comex is February 25th.

There was a little back and forth in storage, but nothing meaningful happened in the Comex warehouses yesterday.

Have a pleasant evening. Don't fall into any snowdrifts on the way to work tomorrow.

SP 500 and NDX Futures Daily Charts - Calm Before the Storm

Snowstorm that is, bringing nearly another foot of snow, with a possible mix of freezing rain and ice, to the NYC - Phila metroplex area tomorrow. We'll have to see if the dampens the enthusiasm of the masters of the universe.

Stocks paused today, digesting their recent gains, as they run to the top of the trend channels.

Tomorrow should bring a little more interesting menu of macroeconomic data for the US.

As a reminder, Monday is a holiday in the States and all the markets will be closed. So we are heading into a three day weekend.

Have a pleasant evening.

The Whining of the Bailout Boys: SEC Whistleblower Gary Aguirre and John Mack

"In an interview on Bloomberg TV, John J. Mack, the former chairman and chief executive of Morgan Stanley, called for an end to the harsh words that have been hurled at Mr. Dimon and Lloyd C. Blankfein, Goldman Sachs's chief executive, over their pay."

CNBC, 11 February 2014

The Bailout Boys

"In 2006, Gary Aguirre, a then-client of GAP [Government Accountability Project] attorneys, rocked the financial world by alleging wrongdoing by Securities and Exchange Commission officials for their failure to not allow a proper investigation to proceed, possibly due to political connections.

Aguirre is a former SEC lawyer who was dismissed by the agency following his attempt to subpoena John Mack – a prominent financial figure who later became the CEO of Morgan Stanley – in an insider trading investigation of Pequot Capital Management, one of the country’s leading hedge funds. Aguirre’s story sparked outrage, a Congressional investigation, and (eventual) vindication by the U.S. Senate.

Aguirre’s battle dates back to June 2005, when he suddenly encountered resistance at the S.E.C. during the course of his investigation of Pequot. A $7 billion hedge fund, Pequot’s CEO was Arthur J. Samberg, another prominent financial figure and longtime friend of John Mack, who preceded Samberg as Pequot CEO. Hedge funds are unregulated private investment funds that typically engage in unconventional investment strategies, such as short-selling.

Prior to that date, Aguirre had been investigating the case for months, issuing over 90 subpoenas without obstruction. When Aguirre recommended that Mack’s testimony be taken under oath, he was told by his supervisor that it would be difficult to obtain approval for the subpoena due to Mack’s powerful “political connections.” Over the course of the next two months, Aguirre’s supervisors refused to allow him to issue Mack a subpoena. Aguirre questioned this decision at every level up the chain of command (including SEC Chairman Christopher Cox), reporting his superior’s behavior and providing evidence supporting his subpoena request.

In September 2005, Aguirre was fired 11 days after being awarded a two-step pay increase....

Aguirre eventually testified again in front of the Senate Judiciary Committee, offering further analysis of the role of proper oversight in regards to hedge funds. More and more evidence emerged supporting Aguirre’s allegations. Finally, the Senate Finance and Judiciary committees released their full report, which completely validated all of Aguirre’s claims. This was a significant victory.

In May 2009, after numerous insider-trading investigations by the SEC, Pequot closed down. Many economists also feel that these large-scale hedge funds had a significant effect on the sub-prime mortgage market’s burst, which led to the current global recession. The S.E.C. continues to be criticized for a lack of internal oversight, as evidence by the Bernie Madoff scandal (which also involved a whistleblower)."

Government Accountability Project, The SEC and Gary Aguirre

Related:
Versailles Watch: John Mack Whines About How Badly Wall Street CEO's Are Treated - Yves
Report Says SEC Erred on Pequot - NY Times
Gary J. Aguire - Wikipedia

Why Isn't Wall Street In Jail: The Notorious Case of Gary Aguirre and John Mack - Taibbi
Mary Jo White's Involvement in the Gary Aguirre Case - Taibbi
Mobsters of Wall Street - Jim Hightower

"Call him a fat cat who mocks the public. Call him wicked. Call him what you will. He is, he says, just a banker 'doing God’s work'."

Times of London, Goldman Sachs and Lloyd Blankfein

Gold Daily and Silver Weekly Charts - Gold Runs Higher - Vichyssoise

Janet Yellen's testimony today was a bit painful at times, but perhaps it will improve as she becomes more familiar with dancing in the lions' den. Her answer about raising the minimum wage shows her to be a tried and true economic General Pétain, well versed in failure and capitulation to the forces of neo-liberalism.   At least le Maréchal de Vichy had a few moments of greatness, although much earlier in life.

Trickle down stimulus is going to most likely stretch the social fabric to the point of tearing. But its failure is going to have to be demonstrated quite forcefully it seems. Keep an eye on the UK and parts of Europe for early warning signs.

It was interesting to see gold move higher with stocks, with silver moving higher as well, but somewhat sluggishly.  I have a suspicion that this is about gold's February delivery issues and the general shortage of physical gold bullion which is developing.  But only time will tell.

About 26,858 ounces of gold bullion came out of Scotia yesterday, in both categories of storage.  We have yet to see the kinds of deliveries tacked up that the standing and stopped orders suggests, but it looks like there will be no close shaves this month. 

I have marked the key overhead resistance levels for gold in red lines on this chart.  And you will notice that gold is still 'channel bound.'  

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Calling Down the Thunder

Initial Claims and Retail Sales might provide some economic grist for the market's mills on Thursday, but for today it was all bullishness as the thin volumes and lack of organic selling let stocks take off on the news that there will be a clear debt ceiling bill up for a vote tonight, and Janet Yellen's pandering to the corporate classes in her testimony today.

Stocks are rising on a tide of misdirected and overly narrow liquidity, compliments of the Federal Reserve which is the tip of the banking cartel.

On a more practical note, another winter storm is expected to sweep through the NYC metro area on Thursday offering some potentially significant snowfall. Let's see if this has any affect on the bull's ardor for more. It may improve the occupancy of Manhattan hotels.

Have a pleasant evening.

NAV Premiums of Certain Precious Metal Trusts and Funds

“I believe in aristocracy, if that is the right word, and if a democrat may use it. Not an aristocracy of power, based upon rank and influence, but an aristocracy of the sensitive, the considerate and the plucky.

Its members are to be found in all nations and classes, and all through the ages, and there is a secret understanding between them when they meet. They represent the true human tradition, the one permanent victory of our queer race over cruelty and chaos.

Thousands of them perish in obscurity, a few are great names. They are sensitive for others as well as themselves, they are considerate without being fussy, their pluck is not swankiness but the power to endure, and they can take a joke.”

E.M. Forster

The word 'pluck' means spirited and determined courage. These days I think it might be best expressed as 'character,' or 'to be a mensch.

And it isn't often found amongst the financiers, or the one percent, or our pampered political overlords, with a few notable exceptions.  There is something about power and money that softens a person's mind and moral sensibility. 

They tend to become obsessed with themselves, and their special needs.  They all too often are told what they want to hear, like the admirers do for beautiful women who lose all sense of their real worth.  And so they lose the character that comes from remembering our common humanity, memento mori, and our own fallibility, weakness, and quite frankly, unworthiness.  No wonder the parable about the camel and the eye of a needle.

Therein lies the root of tragedy.  The best lack all conviction, while the worst are filled with passionate intensity, as Yeats observed in 1919.

Gold Daily and Silver Weekly Charts - Morgan Gold Warns of Possible Physical Gold Shortage

All right I will confess up front, that during the day I have been watching recordings of the Winter Olympics curling matches which were held at Sochi earlier today. The women's match between the US and the Swiss was of particular interest, especially the strategy of the two teams led by their captains, Erika Brown and the legendary Mirjam Ott.

 I will not give anything away if you have not yet seen it. I will be watching the curling matches all week.  It is one of my few idiosyncrasies.  Most Americans have never heard of it.

The bit of controversy today is how much gold exactly is flowing from West to East, most specifically to China?

Bloomberg had a piece in print today about the record amount of gold that was imported by China last year through Hong Kong, exceeding 1,000 tonnes for the first time.  You may read it here.

What was even more interesting were the gold bullish comments that were made by two guests, one from Pimco and the other by Ed Moy, the chief strategist at Morgan Gold.  I include the interview below. He notes that there is concern about a physical gold bullion shortage.

"Quantitative easing has had a distorting effect on the price of gold...Overall when you look at gold, there are two separate pieces here. One is how the West looks at gold, and they have been investing in a lot of electronic derivatives and proxies for gold. Whereas the East has been buying a lot of physical gold. That demand has actually gone up. China looks like it bought 1,000 tonnes in 2013 making them the number one buyer in the world

Do you have a concern about a possible gold shortage?

Absolutely!

How ironic, now that JPM has hammered the paper price of gold down and covered their shorts, and are said by some informed analysts to be sitting net long gold.  Classic.

By the way, Morgan Gold is NOT associated with JP Morgan.  I want to make that clear.

Koos Jansen has an even better, more comprehensive article discussing the China gold action through Shanghai. The Shanghai Gold Exchange delivered 2,181 last year.   And this may not include official gold purchases by the People's Bank of China.  You can read that piece here.

I still think that most of the mainstream media and analysts are still missing the big macro trend change in gold buying by the central banks, and the reasons for it.  And you know that I think that many of them do not get it, because they do not wish to get it.  It is dangerous to imagine that the status quo may change.

Gold is moving from West to East.  And the time is coming when all will be revealed, when the paper gold market freezes up in shock, and the call from the world is made, stand and deliver.

SP 500 and NDX Futures Daily Charts - All God's Children

Stocks had a little upward bias today, but are now more firmly up against resistance.

VIX has fallen back down to calmer levels as you can see.

There are enough economic statistics this week to make things interesting.

Have a pleasant evening.