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Next week is March options expiration for gold and silver on the Comex.
US equities are looking fully valued and entering bubble territory fueled by Benny's handouts to the banks. Thin volumes and short holding times in markets where price is set at the margin by the last transaction is a setup for a flash crash.
Watch VIX and try not to get out in front, but perhaps its time to take out some insurance and bring in some profits.
On the global front, the Arab unrest is spreading amongst the oil dictators and western client state regimes.
Remarkable that, outside of Iceland and Greece, the put upon people of the West seem to be very quiet. In particular the people of Ireland are surprising in their acceptance of a new form of tyranny, not by the gun and the jackboot, but by the pen and the ledger book, and of course the cooperation of local political corruption.
Tomorrow is equity option expiration on the US stock exchanges, and also the last trading day before a three day holiday (President's Day) weekend.
Stocks are quite overvalued, and probably ready for a correction, or at least a consolidation. Any macro exogenous event could trigger a five percent correction.
I hate to keep saying that this is a momentum fueled melt up on light volumes, with Benny's banks leading the charge, but that is exactly what is happening. And they seem to be getting increasingly edgy about handing this off to mom and pop and the institutions.
However until VIX turns, which could be happening soon, I would not step out in front of this. But as of the last hour of trading I started getting defensive and battening down the hatches.
As for the real economy, nothing will improve until 'the truth is found to be lies,' as the song says.
In 1991, Blythe Masters read in economics (presumably with a heavy influence from H.P. Lovecraft and Stephen King) at Trintity College, Cambridge. In 1997, Blythe headed a small team of economists at J.P. Morgan bank in New York which developed the concept of the Credit Default Swaps as a means of insuring loans. This has led to Masters being described by The Guardian newspaper as "the woman who invented financial weapons of mass destruction." Regrettably, the quote from the Bhagavad-Gita about Shiva, destroyer of worlds, had already been taken by J. Robert Oppenheimer.
In April 2010 Masters told the Economic and Monetary Affairs Committee of the European Parliament that "there are definitely lessons that have to be learnt. I for one feel that I have learnt from that experience and there are things I may like to have seen done differently." There is nothing better than on-the-job training when manipulating the world's economy, as Ben Bernanke can attest. Theory is all well and good, but there is something to be said for the good old trial and error method.
Blythe has been the head of Morgan's commodity trading since 2006, and was reponsible for notably heavy losses in the firm's portfolio last year. JPM does not specifically disclose its own market positions, but is rumoured to be short a multiple of the solar system's estimated reserves in the silver market. The positions are said to be 'almost as volatile as Lindsay Lohan's personal life' and 'about as far underwater as the Titanic.'
