Stocks and Precious Metals Charts - Madness and Moral Hazard

 

"Wall Street did not accidentally run a barge aground and leave a small oil slick on the Hudson River. Wall Street did not accidentally release tainted lettuce that sickened a few dozen people. What Wall Street did was intentional and criminal: it financially engineered a toxic subprime house of cards which it knew from its own internal reviews was going to collapse; it then molded the toxic product into inscrutable bundles; it sold the bundles to unsuspecting investors around the globe while making side bets that it would all come crashing down.

Then, after causing the greatest financial collapse in the United States since the Great Depression, Wall Street’s unrepentant scoundrels paid themselves billions of dollars in bonuses with taxpayer bailout funds. The 2007-2009 financial crash was more than the product of greed.  There was both knowing and criminal wrongdoing, but none of those responsible have gone to jail. None of the regulatory gaps that allowed this to happen have been rectified. The biggest Wall Street banks have grown even bigger and remain too-big-to-fail."

Wall Street On Parade, The Power Players Behind Silencing Wall Street Reform, October 18, 2017

"Each time banks fail, by bailing the system out again, we teach our finance sector a lesson: you can safely take too much risk because, when you lose, the taxpayer will pick up the bill. Such a system is destined to fail, but the party can run for a long time."

Simon Johnson and Peter Boone, Economic Donkeys, 19 September 2009

"Moral hazard is the probability that a party insulated from risk will behave differently from the way they would behave if fully exposed to the risk. Moral hazard arises because an individual or institution does not bear the full consequences of its actions, and therefore has a tendency to act with increasing recklessness, literally 'without reckoning." It also encourages the rise to power of the sociopath in the affected organizations. 

Unfortunately there is a small but powerful oligopoly of privilege that is trying to project themselves onto the global stage while believing that they are immune to ordinary consequence, and have become addicted to the notion that 'others must pay' for their failures. Moral hazard comes from rewarding bad behaviour in markets with wristslaps and bailouts. It is a danger to the economy and to the public."

Jesse, Moral Hazard, 22 March 2008


Today was a risk off day, with the commensurate flight to safety that occurs sometimes when the dawn of reason breaks through the fog of the mispricing of risk.

VIX surprisingly did very little.  This to me is a strong sign that this, at least for now, is a managed unwinding of bubble assets by a select group of relative insiders.

The Dollar rose.

Gold and silver soared.

Gold futures continuous contract tagged the 2999.7 level today before close a few dollars lower.

Silver took out the prior managed resistance and just thrashed it with some authority.

That Gibraltar of safe havens, Bitcoin, fell back down to the 80,000 level.

Like fools, a new meme coin seems to be born every minute, severely diluting the hot money crowd.

Stocks are hitting some 'must hold' levels.  The slow managed decline suggests that we may not be done with this unwinding, flash relief rallies notwithstanding.

To their credit the attempts to halt the Ukraine proxy war is well appreciated by anyone who is not a slavering neocon.  

Otherwise Trump and His Merry Grifters seem to be stressing the global monetary and political system, with what appears to be gratuitous showboating, and not of particular benefit to the broader American public.   

Moral hazard is not a purely economic function.  It applies to those who wield power more generally as well.

Have a pleasant evening.

Stocks and Precious Metals Charts - There's a Slow Train Coming Around the Bend

 

“Thus did a handful of rapacious citizens come to control all that was worth controlling in America.  Thus was the savage and stupid and entirely inappropriate and unnecessary and humorless American class system created.  Honest, industrious, peaceful citizens were classed as bloodsuckers, if they asked to be paid a living wage.  And they saw that praise was reserved henceforth for those who devised means of getting paid enormously for committing crimes against which no laws had been passed.  Thus the American dream turned belly up, turned green, bobbed to the scummy surface of cupidity unlimited, filled with gas, went bang in the noonday sun.”

Kurt Vonnegut, God Bless You, Mr. Rosewater, 1965

“In societies that worship money and success, the losers become objects of scorn. Those who work the hardest for the least are called lazy.  Those forced to live in substandard housing are thought to be the authors of substandard lives.  Those who do not finish high school or cannot afford to go to college are considered deficient or inept.  No system in history has been more relentless in battering down ancient and fragile cultures, devouring the resources of whole regions, pulverizing centuries-old practices in a matter of years, and standardizing the varieties of human experience.

Official Washington cannot tell the American people that the real purpose of its gargantuan military expenditures and belligerent interventions is to make the world safe for General Motors, General Electric, General Dynamics, and all the other generals.  The worst forms of tyranny, or certainly the most successful ones, are not those we rail against but those that so insinuate themselves into the imagery of our consciousness, and the fabric of our lives, as not to be perceived as tyranny.

The guiding principle of ruling elites was— and still is: when change threatens to rule, then the rules are changed.”

Michael Parenti, Democracy For the Few, 1974

"Liberty lies in the hearts of men and women; when it dies there, no constitution, no law, no court can even do much to help it.  And what is this liberty which must lie in the hearts of men and women?   It is not the ruthless, the unbridled will; it is not freedom to do as one likes.  That is the denial of liberty, and leads straight to its overthrow.  A society in which men recognize no check upon their freedom soon becomes a society where freedom is the possession of only a savage few, as we have learned to our sorrow."

Judge Learned Hand, The Spirit of Liberty, 21 May 1944

“It's impossible that there could be a plague, because everyone knows that they have vanished from the West.  We should not act as though half the town were threatened with death, because then it would be.   Yes, everyone knew that, except for the dead."

Albert Camus, The Plague, June 10, 1947


Stocks managed to hold a little bounce.

They were cheered by this morning's CPI numbers.

Gold and silver enjoyed a small rally.

The Dollar was choppy.

VIX fell.

The physical gold inventory in Hong Kong has hit a new low.

"Big-time negotiators, false healers and woman haters
Masters of the bluff and masters of the proposition
But the enemy I see wears a cloak of decency
All non-believers and men-stealers talkin' in the name of religion
And there's a slow, slow train comin' up around the bend."

Bob Dylan, Slow Train Coming album,  1979

Have a pleasant evening.

Stocks and Precious Metals Charts - History Is a Step-Child

 

"As nightfall does not come at once, neither does oppression.  In both instances, there is a twilight when everything remains seemingly unchanged.  And it is in such twilight that we all must be most aware of change in the air - however slight - lest we become unwitting victims of the darkness."

William O. Douglas, Supreme Court Justice, The Douglas Letters, 1987

"So, no, I don’t see this happening tomorrow, but I have said for many years that if we don’t get a handle on this then one of these days our descendants are going to sit down in high-school history class and open a textbook that begins with the words: 'The United States of America was … and then it will dissect how our experiment in self-governance came apart.'"

David Cay Johnston, Inequality's Looming Disaster, Salon May 22, 2014

"The financial asset bubbles since the turn of the 21st century have been enabled by four basic instruments of monetary policy error: Greenspan, Bernanke, Yellen, and Powell.  Whether we will have a third major collapse and crash to follow this latest asset bubble, as a consequence of misguided monetary policy, economic priorities, and bank regulation is not the issue.   The question is, shall we have a system that holds together long enough to have a fourth?"

Jesse, Malice Domestic and Endless Foreign Wars, 31 July 2018

"People of privilege will always risk their complete destruction rather than surrender any material part of their advantage. Intellectual myopia, often called stupidity, is no doubt a reason.  But the privileged also feel that their privileges, however egregious they may seem to others, are a solemn, basic, God-given right.  The sensitivity of the poor to injustice is a trivial thing compared with that of the rich."

John Kenneth Galbraith, The Age of Uncertainty, 1977

"This is a very crucial point: there is a lack of critical assessment of the past. But you have to understand that the current ruling elite is actually the old ruling elite. So they are incapable of a self-critical approach to the past."

Ryszard Kapuscinski, Interview: Writing about Suffering, Journal of the International Institute Vol 6 No 1, Fall 1998

"The essential characteristic of a good and healthy ruling elite, however, is that it views itself not as a function of the monarchy or the commonwealth, but as its very meaning and highest justification, and that it therefore accepts with a good conscience the sacrifice of untold human beings who, for its sake, must be reduced and lowered to incomplete human beings, to slaves, to instruments."

Friedrich Nietzsche, Beyond Good and Evil, 1886


Stocks were a bit choppy today, with a decline, a recovery, and then a failure to hold any gains.  

Gold and silver managed to bounce.

The physical gold inventory in Hong Kong is back to the bottom of the bowl again.

And Bitcoin did as well.   It's no fun riding a roller coaster that does not climb back up the next hill.

VIX fell. 

The Dollar fell.

A bit of the old back and forth, wash and rinse today I suspect. 

Consumer inflation information out tomorrow morning.

That may move things around a bit.

Have a pleasant evening.