SP 500 and NDX Futures Daily Charts - Argentine Stock Market Goes Boom

It took some doing, but over the weekend I was able to explain to an engineering friend why the US equity markets can continue to drift higher on light volumes. There is little real selling to exert downward pressure, and with liquidity in excess in all the 'right hands,' a bubble in certain classes of paper assets can easily develop, in what becomes a feedback loop.

I think the analytical mind blanches at the realities of modern finance.   And the realization that in many ways it is a con game.  How can such things take place in the holy of holies, Wall Street?

Speaking of the realities of modern finance, the FOMC will have another meeting this week. There is speculation that Old Yeller will pull back on the party, but I doubt this very much.

 

On the colonial front, the Argentine stock market (Merval) crashed over 12 percent today as the US Supreme Court refused to hear the case, thereby ruling in favor of its creditors.    The Argentine government has described these funds as 'vultures.'   That does not bode well for a quick resolution.

Have a pleasant evening.

 

 

 

Robert Johnson: How We Broke the Bank of England

This is a continuation of the Robert Johnson interview which had been posted here.

As you know, Robert Johnson is one of my favorite economic voices. He brings both theory and practical knowledge to bear on our current problems.

And he is a mature and intelligent trader who is able to speak with depth on broader social issues, which is far too often a rarity.

Great money does not ordinarily confer great wisdom and virtue on its possessors, alas, and far too often it does the contrary. This is a principle of human nature which has been recognized from at least the time that our Lord walked the earth, if not much further before that. 'It is easier for a camel to pass through the eye of a needle...'


The Real News Network

Gold Daily and Silver Weekly Charts - FOMC Next Week - Calling Dr. Strangelove

Gold and silver continued their rally off a deeply oversold condition, well within their intermediate downtrends.

There was little action in the Comex warehouses, and a few more contracts were stopped.

Next week is an FOMC meeting.

 

We may then see how the cards will fall in the short term.   For now it seems that that status quo may continue to prevail, given the nature of pricing discovery.

 

It appears the Defense Department is funding universities 'to model the dynamics, risks and tipping points for large-scale civil unrest across the world.' 

 

Sounds like it will be a busy time in the Pax Americana.

 

Have a pleasant weekend.

SP 500 and NDX Futures Daily Charts - The Death of Volatility

The US equity markets ended the week on a dull note, barely able to bounce after a lower open to end the week on a correcting note.

The question will be if this is just a consolidation after a widely noted great leap upwards, or will we see a bit more action to the downside before this is over.

The FOMC will be meeting next week, and as is their wont, they may be pouring more of their oily liquidity over the troubled waters of the mispricings of risk.

As the Financial Times most recently notes in this headline, the Central Banks have used their mighty power to eradicate risk.  All gain and no pain, a world without consequences (especially for the benevolent and enlightened rulers of finance).

 As if.

This is the pinnacle of moral hazards, the triumph of the will to print money, and an impermanent plateau of illusory prosperity.

Have a pleasant evening.

Anat Admati: Seeing Through the Bankers' New Clothes - The Bullet or the Bribe

"Looking at the world as a whole, the drift for many decades has been not towards anarchy but towards the reimposition of slavery. We may be heading not for general breakdown but for an epoch as horribly stable as the slave empires of antiquity...few people have yet considered the kind of world-view, the kind of beliefs, and the social structure that would probably prevail in a state which was at once unconquerable and in a permanent state of cold war with its neighbors."

George Orwell

The reign of the Banks was reintroduced on the back of, and is sustained by, a major campaign of corruption of the political processes and the public discourse. The decisive moment was the repeal of Glass-Steagall, and the further withdrawal of the watchers on the wall by both political parties who have gone along to get along.

The difference in the analogy offered in this talk is that the monied interests are not some semi-benign doddering old emperor who has fallen victim to the flattery of courtiers and the schemes of conmen.  They are a monstrous construction of reckless pride and greed who will work their schemes until the exhaustion and collapse of their prey.

One is foolish to expect them to be ruled by self-control and appeals to reason, given the nature of their pathology.  These are the very types that cause people to organize themselves for their protection.  This is the highest responsibility of government: the promotion of justice, and the defense of all people, including the foolish and the weak, for the common good against thieves, conmen, bandit, foreign armies, and domestic predators.

"There are no necessary evils in government. Its evils exist only in its abuses. If it would confine itself to equal protection, and, as Heaven does its rains, shower its favors alike on the high and the low, the rich and the poor, it would be an unqualified blessing."

Andrew Jackson, Veto of the Second Bank of the United States

The Banks and their associated Corporations continue to extract usurious fees, misprice risk, rig markets, and engage in a variety of soft bribery and extortion.  And it will not end well.  I would like to be more optimistic, but it is discouraging to see how easily the financially powerful have co-opted some sincere reform movements into their willing tools, spouting utopian nonsense.  The shepherds have been struck down, by the bullet and the bribe, and the sheep have been scattered.

The Anglo-American financial system is an accident waiting to happen.  And you can be sure that they are expecting, once again, to dip their beaks deeply into the public pockets when they do. 



h/t Bill Moyers



We are surely not the first generation to face this sort of trial, since it is in the very nature of this fallen world, and the burden of every generation to rise to their particular trials and temptations. If anything we may be notable for our weakness, our lack of faithfulness, our foolish pride, a perverted perspective unworthy of our many gifts, and the stubborn hardness of our hearts too often in the name of our just and loving Lord.

"...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

Gold Daily and Silver Weekly Charts - Feeling the Pressure

"Truth is truth, to the end of reckoning."

William Shakespeare, Measure for Measure

What goes down must generally go up, at least once in a while, especially when going down is fighting against the prevailing fundamental trend.

There was intraday commentary here about gold and silver that is worth reading if you have not done so already. 

The downtrend is not yet over, but I am providing some clues as to those things that are worth watching.  These include the gold/silver ratio, and the dow/gold ratio. 

The short interest and market structure in silver provide a backdrop for some explosive upside movement IF the price can break out of the steady selling pattern which may have already gone to an extreme.

If there is a break in the market, you will not see it coming from anything on the Comex, which has become an extended infomercial for quite a bit of what is wrong in the US markets and economy: lack of transparency, captured regulators, weak enforcement, unequal protections, insider trading, and institutionalized frauds and inefficiencies.

It is difficult to draw any conclusions from the historic defeat of a major House of Representatives player in a primary, because of the exceptionally low voter turnout of less than 14%.  And the overconfidence of the incumbent, Eric Cantor, going into the election certainly did not help to motivate his workers to get their base out to vote.

But having said that, it looks like this might be a reaction against an establishment politician who was widely perceived as a willing enabler of the financial corporations.  We would have to see more elections like this to draw any meaningful conclusions however.  As it is, people can use this one example to support just about any bias that they may wish to support.

It would be interesting to see a coalition of the dissatisfied start ousting incumbents, but there are many cultural divides to be breached for that to happen.  Both sides, at their extremes, really cannot 'see' the other without scorn, stereotype, and derision.   The center is a quiet place these days.  But that is where the healing will begin.

Let's see what happens.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - The Elephant In the Room

Stocks had a bit of a correction today from what were clearly overextended levels.

The economic news this morning was weak, but tends to reinforce the view that The Recovery™ is highly selective, based on a monetary and fiscal policy that favors a relatively powerful few and fortunate individuals with exceptional wealth and connections.

That is not to say that there are not ways to do better than average with hard work and smart thinking. Rather, it is that there are artificial headwinds, and both subsidies and impediments for some, that work against a more general prosperity that have not yet been reformed out of the system.

I really don't see this correction gaining much momentum to the downside yet, although one has to keep an eye out for those exogenous events such as we are seeing in Iraq, Syria, and the Ukraine.

Barring such an event, a correction of the SP futures to 1900 would still not break the uptrend channel.  It will let some of the air out of this market, which is plentiful, and provide the wash-rinse cycle that the pros use to extract their rents, in addition to HFT.

There is no sustainable recovery, just more talk about 'the new normal' and the need for patience to allow time and the market to work their cures, in an act of faith in those canards that brought us to where we are in the first place.

Have a pleasant evening.

NAV Premiums of Certain Precious Metal Trusts and Funds - Gold/Silver Ratio - Dow/Gold Ratio

I suspect we will know when this long decline in this precious metals market is over when the Gold/Silver ratio drops to something less lofty than 65.

Even with today's big move, the metals have not yet broken the downtrends, but are bouncing off the bottom of a declining channel, at least so far.

But as those who study the longer term charts know, the June-July timeframe often sees an end to a secular downtrend in this long bull market in precious metals.

I suspect today's rally in the metals is due to weakness in stocks, and a changed perception in risk given the deteriorating situation in the Mideast, as well as the very weak economic results this morning.

But I do not want to lose sight of the theme that gold is priced in the West, but it is largely bought and sold in the East. And I suspect much the same can be said about silver.

When silver takes off, and the gold / silver ratio drops back into the 50's at least, we will know that the bull is more likely back.

We may also wish to keep an eye on the Dow/Gold ratio as well.

Gold Daily and Silver Weekly Charts - Consumed In the East, But Priced In the West

"Foreign investors can use offshore yuan to trade gold directly on the SGE international board, which is promoting the internationalization of the renminbi. The international board will form a yuan-denominated gold price index system named 'Shanghai Gold.'

Shanghai Gold will change the current gold market with its 'consumed in the East but priced in the West' arrangement. When China has the right to speak in the international gold market, the true price of gold will be revealed."

Xu Luode, Chairman, Shanghai Gold Exchange, 15 May 2014

And so the price capping continues, in the ritual of confidence, and nothing really happens at the Comex warehouses.   Contracts are stopped, and the bullion gets pushed around the showroom window.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Waiting for Godot

A lot of words, noise, and feverish activity on the surface, but nothing really happened.  The government seems to be permeating even the equity markets and gambling halls of the well-to-do with its self-inflating ennui.

Hell is watching Trish and Matt of Bloomberg TV discussing the real US economy with chief market strategists like David Kelly of JP Morgan on a dull market afternoon.

There was some relief provided by Jonathan Golub of UBS, who shows a deference to reality now and then in his messaging, carried by an engaging charm and a seemingly indefatigable good humour.  Jonah Hill, just glad to be here, to start a progress, swell a scene or two.

Today was definitely a good day to work outside around the yard, so as not to watch the character of the Empire continue to depreciate, if not for the rain. 

Have a pleasant evening.

 

Robert Johnson with Paul Jay: The Convergence of Finance and Politics

As you may know, Robert Johnson is one of my favorite speakers on economic matters. He does not get sufficient exposure, and certainly not on the mainstream media.

Here is an interesting perspective on recent financial history of the US, leading up to the development of our current system of finance and governance. It is an interview on The Real News with Paul Jay. You may find the interviews there with transcripts.

Reality will indeed assert itself at some point. The longer the wait, the great the force required to delay it, and the more dramatic the eventual reversion to the mean, whatever that might ultimately prove to be. It does vary, depending on the selected dataset and how one chooses to measure it.

Some would contend that the natural state of mankind is the dominance of the few and the enslavement of the many. Others would see it as an ever rising and falling impulse to freedom and virtue. Perhaps as Heraclitus contended, the only constant is change.

I will present the next segment on 'breaking the Bank of England' in the next segment as it becomes available.




Here are parts I and II of the same interview which consist largely of Johnson's personal background and development.

Currency War: 140 Years of Monetary History in Ten Minutes

Like most complex subjects reduced to a ten minute summation, there are plenty of nuances lost here, and one might certainly take issue with some of the conclusions. And the perspective of the discussion is largely centered on the US and Europe.

Nevertheless, I like the succinct overview of certain key events in recent world monetary history that lead up to the situation in which we find ourselves today.

Since most people are abysmally ignorant of where we have been, perhaps that is a good place to start once again, for those of you who have not heard this previously.

I would have liked them to have dealt with the gold confiscation and revaluation of 1933, in which FDR used the nation's gold to recapitalize the banking system, and changing the nature of the US currency while devaluing it, but that might have become over complicated. Most do not understand it for what it was, a currency transformation.

People tend to discuss money from an emotional basis, and that is understandable. I don't consider myself a 'hard money' person per se. At this point I would merely wish governments to leave gold and silver alone, and allow them to function as a private market force, co-existing with whatever currency schemes they choose to set up. The monetary authorities struggle with this concept, because they inevitably seem to abuse the currency system and resort to increasing amounts of fraud and force. This is not a facet of government, but of bad government.

I am not in favor of a 'gold standard' for that reason now, because that would merely allow governments to once again monopolize the metals and set the prices artificially in order to control them. Gold cannot cure the corruption in the current political system, and could quickly be turned into a force for more repression. Better that the metals exist as free market alternatives for those who may choose them.

After listening to this presentation, one can surely understand why the central banks both fear and covet gold. It resists their wills, but has a natural tendency to be seen as money.

I do think that the nature of gold, and how it has been used as money over thousands of years, illustrates several important qualities that any sustainable monetary system must emulate and approximate. Those who dabble in monetary theory would do well to understand them.

De Gaulle's words are quite important, and I am glad they include that piece in which Charles de Gaulle speaks to the 'exorbitant privilege' of the US Dollar. The principled objection he is raising is the same question being raised by the BRICs today, and the resolutions being discussed behind the scenes are quite contentious over some of these very issues.

As you know, I suggested one solution would be an SDR, but reconstituted with a more contemporary and inclusive weighting system, together with a mechanism that does not permit the IMF to issue amounts of SDRs at will. The problem is that the IMF is dominated by the status quo and the Banks, and really no single class of people is capable of wielding that sort of discretionary power well for any period of time. So I don't see that happening yet, because an acceptable version of it is being fiercely resisted by the Anglo-American banking cartel. They are content to continue with their looting of the system for the foreseeable future.

Money is power, after all, and greed will too often refuse to relinquish any power or claim willingly, even to its own destruction. The American abuse of financial power for political purposes is causing a bifurcation in global finance, along the expected fault lines, and it will be interesting to see how that develops. 

Gold Daily and Silver Weekly Charts

Derivative: A security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties. Its value is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes. Most derivatives are characterized by high leverage.

If collateral collected to protect against the risk of counterparty default has been rehypothecated, then it may not be readily available in the event of a default. This, in turn, may increase system interconnectedness and procyclicality, and could amplify market stresses. Therefore, when collateral is rehypothecated, it is important to understand under what circumstances and the extent to which the rehypothecation has occurred; or in other words, how long the collateral chain is.

The gold that left HSBC yesterday turned up in the storage vaults of Scotia Mocatta today.

There were no reports of deliveries or other movement in the warehouses.

The US markets, including the Comex, are almost like a showcase now I think, a kind of Potemkin village of value, a child of the corporate financial state.

Look at all the pretty bullion, see it trade. Look at the prices. But if you wish to buy some, go to Asia and be sure to take delivery.

Even with stocks, it seems to be a web of paper bets, of interconnecting obligations to deliver.  It is an exchange traded, derivative world.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Wanna Take You Higher

With low volatility and not much in the way of volume or selling pressure it is a relatively trivial exercise for the big trading desks to keep floating prices higher on the technicals.

Not much is expected in the way of economic news until the end of the week.

Have a pleasant evening.

 

NAV Premiums of Certain Precious Metal Trusts and Funds

Very modest premiums to say the least.

I have taken a modest position in Silver Wheaton last week which is not normally commented upon here.

I am still anticipating another shelf offering in PSLV at some point to raise their cash levels back to more comfortable levels. But they are under no duress to do the deal given their existing levels which are adequate for their cash requirements, but are still a bit historically low.

Gold Daily and Silver Weeky Charts - Better Call Saul

It is hard to miss the price capping and manipulation on the metals market at the Comex, unless one does willfully so. And there are certainly those who do, and I suspect you know who they are.

There was little action on the metals front last Friday as the clearing and warehouse reports below demonstrate. The action has shifted to the East.

I expect the markets to unravel their story about the future somewhat slowly over the summer. This goes for stocks, bonds and commodities. We are seeing a great reckoning between reality and the will to power.

If anyone is near to a fiduciary responsibility for the obligations for gold and silver bullion delivery, or even large positions of naked shorts in stocks, and they do not personally have title and possession of the metal or the equities, I would probably suggest that they get out or start lawyering up now, with a well thought out Plan B involving offshore accounts and domiciles.  You can always try for a Presidential pardon later on.   I suspect it will become the fashionable thing to do.

If this convoluted system of asset rehypothecation starts breaking bad it is going to make MF Global look like a church picnic.  'Everyone was doing it' is not an unassailable defense, and 'I had no idea what was going on'' only works for those with very lofty connections and office.

Have a pleasant evening.