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“There is definitely going to be another financial crisis around the corner because we haven’t solved any of the things that caused the previous crisis. Are the derivatives regulated? No. Are you still getting growth in derivatives? Yes.”
Mark Mobius, Bloomberg
More bear raids today but they failed to detract from the flight to safety into gold as the precious metal significantly diverged from stocks, at least for today. Silver, being more correlated with industrial activity, felt the slump in stocks a bit harder.
Although the stock market decline is steep, and tied to bad economic results which were ignored during the month end paint job, it does have the smell of a wash and rinse within the trend channel, on manageably light volumes. This magic lantern show and churning is how the big trading desks make their money and their nearly perfect trading records. An intraday chart of the SP futures are below.
Let's see if the key support around 1300 holds if we get that far. For a trader this somewhat predictable volatility is like a steady paycheck, but for the average person it can be a source of understandable anxiety and confusion, which themselves are the currency of fraud.
I would like to make a brief comment to clarify my understanding of the premiums to NAV in closed end funds.
The premiums do not indicate that one trust or fund is better than another. I use them rather to select entry and exit points for that particular fund.
There are differences among the funds, and that is a data point of information about the market. PSLV has a reasonably good redemption policy on actual physical silver, and it therefore commands a higher premium to NAV than funds which do not have a reasonable redemption policy AND a high confidence level that the silver is actually there for the taking.
Based on all the data, there seems to be a strong indication that there is a widening gap between 'paper silver' derivatives and obligations and the physical bullion market. The wider that gap becomes, the greater the noise the market will make when the value at market and price discovery is free to operate.
In other words, the Comex looks as though it is heading towards a very severe market dislocation. When and if it does happen the pundits and players will feign surprise, and then some of the naysayers will become 'I told you so's.' But most of them will just climb under a rock somewhere and wait for another opportunity to emerge with the inevitable ups and downs of markets.
What we can expect now is even more volatility and increasingly blatant attempts to save the big players who are trapped, especially those too interconnected to fail. This failure of the markets is a result of the corrupting partnership between government and large corporations based on personal greed and amoral expediency.
I am now starting to wonder if this event will be associated with a failure in confidence in the dollar, and some sort of exchange or bank holiday. The timing of any event such as this is problematic for a variety of reasons having to do with lack of transparency and regulatory failure. A major break in the markets and a liquidation of assets could significantly set it back and delay it.
But the Comex deliverable inventory represents a sort of a visible indicator, if not a countdown, of how difficult the situation is becoming to manage.
If those in a position of authority wished to quietly debase the national currency without alarming creditors or the public, they could hardly do better than to surrepititiously promote theories that made people believe that bad times and money printing would make the currency stronger, despite all historical evidence, even to the point that they would disbelieve their own observations of higher prices and a dwindling savings, until it was too late, and the crony capitalists had secured most of the valuable and enduring assets favored by the independent judgement of people outside the system.
Even better if it prepares the many to welcome the strong hand of an autocrat government that is prepared to 'do something' to make their dream worlds come true, no matter the prices paid in freedom and fresh injustice and corruption.
This is the darker, the less probable side of what I am seeing and my interpretation of it, and so I would hope that it is wrong. More likely the jokers in charge will try and muddle through until external events force they hand, and then pain begins to be handle out in even larger portion according to some formula yet to be determined.
I do think that much of the current political discussion in Washington and New York (and probably London as well) revolves around the shaping of that formula for the distribution of pain. The monied interests wish to hand the public, and most likely the world at large, a shit sandwich, and compel them not only to eat it, but to pay dearly for the privilege as well. Whether or not they can accomplish this is another matter. But they are giving it a good try.
Let us therefore allow the market to reveal all its secrets to us in good time, and trade it according not to what we think could happen, but what is actually happening as we can best understand it. The key to success in this is knowledge, experience, and above all, humility.
You are a witness to history. Try to step out side of your emotions, the day to day blur of the ordinary, and look at the big picture, the slow but inevitable changes that have occurred over the last fifteen years.
For some background, here is an interview with James Grant that helps to set the stage.
When a monetary system grows faster than its own organic demand, that is a type of monetary inflation, whether it is immediately reflected in consumer prices or not.
The US money supply is still growing far in excess of the natural demand for currency, whether you consider consumption in GDP, or investment, or even per capita growth for that matter.
There is a HUGE overhang of dollars, known as eurodollars, being held 'out of the domestic pricing system' and significantly NOT reported in the money supply figures by the Fed.
If foreign selling of the dollar and US debt starts picking up momentum, the returning dollars will swamp the Fed's ability to sterilize the transactions like a tsunami.
Right now the financial engineers are once again trying to obtain a 'soft landing' for this problem, but vested interests are preventing a successful resolution. The monied interests prefer the status quo, and virtual looting of the public trust. Once they possess critical income producing assets, then the economic system will be restored to some equilibrium, and sound money.
This is roughly the setup that I see in the world economy, and is the cause of much of the instability and contention amongst nations, which I have called the 'currency war.'
There is a strong desire for a change in the reserve currency regime, particularly amongst the developing countries. The Anglo-American banking cartel is fighting that change every step of the way in order to maintain their privileges and positioning. The financial and political leaders from the nations appear to be often at odds, but in some ways they are allied in common interests, with managerial elites finding common cause in the service of their own power and enrichment.
When this natural progression of change can no longer be resisted, things might start moving more quickly, perhaps remarkably so.
But until then bear in mind that these big changes happen slowly and for the most part quietly with sudden bursts of change and release of energy, often over a period of years, until the pressure breaks into the public arena, and voila, a full blown crisis appears as if out of nowhere. And most swear that it could not have been foreseen or predicted.
I am telling you, again, that it is happening now, and with this continuing resistance to change and reform it may very well break upon the world financial system in the next few years with what could be a terrific, almost astonishing effect that will sweep away whole institutions and many long held beliefs and assumptions, old lessons that have been unlearned, and must be accounted for again.
The economic news in the US is becoming dreadful.
Never faint of heart, fund managers marked up stocks today, thereby improving the value of their portfolios for the important end of month report.
Let's see if mom and pop throw some 401k buying into the mix tomorrow with more employment numbers from ADP.
