Gold Daily And Silver Weekly Charts - Shenanigans, Confidence Games, and Bailouts

"If you dont own gold...there is no sensible reason other than you don't know history or you don't know the economics of it."

Ray Dalio

Gold was under early pressure this morning and was pushed lower to the 1176 level for no particular reason. It is in a trading range after all.

What was notable is that silver barely budged, holding stubbornly on to the 16 handle. Sometimes they do hang a lantern on their antics, and silver has an astonishingly large open interest already at The Bucket Shop.

And so as expected, the Fed really did nothing except to update their verbage and gold shot back up again into the capping range they have been maintaining this week.

I provide some thoughts on the Fed's motivations and probable actions here in today's stock market comments.

You may be surprised to hear that Wall Street is whining through their enablers and cronies about more subsidies and handouts. You can read about that here.

Gold is being capped by a Western gold pool that is seeking to prop up their awful policy errors and vainglorious ambitions in managing the world's reserve currency.   Like all pools that run contrary to the primary trend of the markets it will most likely fail.  Forecasting exactly when and how it will fail is a problem, as long as the cheat is profitable, and any consequences are distant and therefore easily ignored.  The forces of paper money are powerful.  That is why it is attractive to those who seek power.

I was saddened to hear that Jimmy Lee, Vice Chairman at JP Morgan, died unexpectedly today at age 62.   My most sincere condolences to his family in their sadness.   I am sure he was a loving father and husband, and he seems like he was a genial colleague.  I have heard him talk, and he was strong on the notion of working hard but 'putting family first.'

One can only wonder what Jimmy might tell us, if he were able to speak to us now.  But then it probably would not matter, because people full of the world 'will not listen even to Moses and the prophets.' Lk 16:31

Eternal rest grant unto him O Lord, and let perpetual light shine upon him.

Have a pleasant evening.

 

 

 

SP 500 and NDX Futures Daily Charts - Much Ado about The Credibility Trap

The Fed and the equity markets are largely self-referential at this point.

That means that rather than effectively reflecting and addressing the broader reality of the economy, they are focused on themselves.

For the Fed, their strong desire is to raise rates two times fairly soon to get off the Zero bound before we draw closer to the Presidential elections. The Fed is very sensitive to this.

Only the terrible economic results in the first quarter held them off from raising 25 basis points at this meeting. They need to raise within the context of some semblance of economic stability to maintain the illusion of confidence.

As for the US equity market, it is running on hot money, stock buybacks, and 'the Game.' The Game is the Ponzi-like self-referential speculation, with a charade of economic numbers coming out of a spin machine that keeps pushing prices higher into asset bubble territory.

The Fed would like to cover their ass before the market crashes, and before moneyed interests trot out their latest assortment of political candidates.

Like the IMF, their policies have been serial failures, going back to the 1990's at least. They do not wish to be held accountable for this, as noted in the intraday commentary from the other day.

When privileged people repeatedly fail at a task, they quite often turn to harshness and even cruelty towards those whom they were purported to be helping, in a revulsion against their failed obligations.

Since they are incapable of faults, while maintaining their credibility which is founded upon their reputations and personal prestige, the people enduring their many plans themselves must have failed.  And so the people, not the planners, must be made to change, to improve, and often to be chastised for their shortcomings.

And the financial masters will do this, almost piously, in the name of saving a system which in fact has become an extension of themselves, and which finally serves no one well but them.

So no real reform can come, and little progress can be made, because the 'managers' are incapable of even admitting to their repeated failures out of self-preservation. And they will excuse this in the name of preserving 'confidence.'

This is the credibility trap.

That is the long and short of it.

Have a pleasant evening.

 

 

 

FOMC June 2015 Statement

Net-net, the Fed today said that while the first quarter was lousy, the second quarter was less lousy, and showed some sparks of growth if you looked hard enough.

The Fed is just itching to raise rates this year, by at least .25%.  

It has little to do with the economy per se, unless the wheels more obviously start falling off The Recovery™.

Let us not forget that, in the time honoured tradition of all pampered bureaucrats, the Fed would like to engage in some serious CYA (cover your ass) activity now before the next crisis unfolds due to their policy errors, which are continuing and many, and will not be resolved by higher interest rates.

It is a policy thing.  The Fed would like to get off the zero bound, both to end the speculation about when they will do it, and further, to give themselves some cushion to cut rates in case the current asset bubble pops.

I will stick with my long standing forecast that the Fed will raise by 25 basis points at least once this year, and maybe twice, unless the world economy really hits the skids so that even mom and pop at home notice it.  

They will not wish to be raising in a Presidential election year, but need to get off ZIRP for their own policy purposes by pulling the trigger on that at least once.

The strong dollar is stifling The Recovery™ so the raising of rates has to be done carefully.

Then there is the turmoil in Europe and the other asset bubble in Asia.

Release Date: June 17, 2015
For immediate release

Information received since the Federal Open Market Committee met in April suggests that economic activity has been expanding moderately after having changed little during the first quarter. The pace of job gains picked up while the unemployment rate remained steady. On balance, a range of labor market indicators suggests that underutilization of labor resources diminished somewhat. Growth in household spending has been moderate and the housing sector has shown some improvement; however, business fixed investment and net exports stayed soft. Inflation continued to run below the Committee's longer-run objective, partly reflecting earlier declines in energy prices and decreasing prices of non-energy imports; energy prices appear to have stabilized. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced. Inflation is anticipated to remain near its recent low level in the near term, but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of earlier declines in energy and import prices dissipate. The Committee continues to monitor inflation developments closely.

To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Jeffrey M. Lacker; Dennis P. Lockhart; Jerome H. Powell; Daniel K. Tarullo; and John C. Williams.