Gold Daily and Silver Weekly Charts - Swan Dive on a Statement of the Obvious

The market was running the usual daily routine, with stocks grinding higher and gold under pressure, but in the last hour Fitch came out and warned of US bank exposure to Eurozone debt, and stocks folded quickly, and took gold and silver down with them.

The US dollar was remarkably lacksadaisical. Option expiration in the metals is next week. And it is a holiday shortened week in the States for the Thanksgiving holiday. Trading should be a real treat. I am probably going to take Friday off and catch up on my reading and some work in preparation for the winter.

I believe THIS week is a stock option expiration, so we might see more gimmicks like this as the market coils within a very obvious symmetrical triangle which we have previously noted.

I had a heavy stock short by the last hour as I sold the SP index to cover a bullion position even more fully, and took some of the short off in the after hours session.

Short stocks and long bullion is still making sense if you can get a sense on how to play it. But for 99 percent of investors, staying in the fundamental trends with a time appropriate portfolio allocation is by far the most effective course of action based on my experience.

SP 500 and NDX Futures Daily Charts - Headline Risk

It had appeared that we would see the usual routine, a low opening and a steady grind higher all day as the wiseguys bought the dip, and 'tried to take it up' as they like to see.

However, headline risk reared its ugly head to hammer stocks to their lows in the final hour of trading as Fitch Ratings warned of Eurozone exposure in US banks.

This market is thin. That means that there are few committed buyers and the action is frothy, subject to a sudden collapse.

Be careful. Better to stay out if you are not an experienced trader and know how to hedge risk. Most do not even know what the risks are.

I believe that this week is a stock option expiration so the shenanigans may have started early.

The symmetrical triangle on the SP 500 chart is rather troubling. Let's see how that breaks.

US Federal Prosecutions For Financial Fraud In the Obama Administration Fall to 20 Year Lows

The declines in US Federal prosecutions for financial fraud  that began under G.W. Bush have followed that down trend that in the first three years of the Obama Administration. That might make more sense if Obama had not been elected as a reform president in response to one of the greatest financial frauds in American history. 

In the first three years of the Obama Administration, federal prosecutions have been running at new highs. Over half of the prosecutions involve illegal immigration. Another 17% are drug related.

Illegal immigrants and drug dealers have the reputation for being notoriously cheap in providing campaign contributions.

Prosecutions for financial fraud however have dropped to the lowest levels in over 20 years.

According to the original study, the primary charges for Federal crimes in the latest figures are as follows.

"The single largest number of prosecutions of these matters through August 2011 was for Immigration, accounting for 50.7 percent of prosecutions.  The second largest number of matters were Prosecutions filed under the program area of Narcotics/Drugs  (17.3%)."

In defense of Obama, GW Bush had the unearned benefit of Eliot Spitzer leading the charge for the Feds on financial fraud from his office as the Democratic NY Attorney General. Of course Eliot got taken out by the Feds himself in 2008 as the result of an intensive ad hoc investigation into $5,000-a-night hookers from New Jersey named Ashley. I wonder what category that falls under.  She should have waited for the reality show - it has better residuals.

Don't get me wrong.  I am not trying to pick on BHO.  I am disappointed with his performance to say the least, and that set in around day 50 when he unrolled his appointments, so you can't blame it all on the obviously obstructionist opposition.  The people voted for Franklin Roosevelt and they got a Herbert Hoover.

Whenever you might say, "I don't really like Obama's ineffectiveness as a reformer" or "Although he seems decent and has many effective postions, I am uncomfortable with Ron Paul because of his ideological opposition to civil rights legislation and equal protection laws" at some point you usually hear: "Well who do YOU like?" Life imitates high school.

I don' t like any of them, or should I say like like? And a few are borderline frightening. And most people seem to feel the same way. I cannot believe that in the world's superpower, with about 300 million residents, this motley collection has risen as the cream of the crop.

NY Times
Prosecutions for Bank Fraud Fall Sharply
By CATHERINE RAMPELL

Federal prosecutions for financial institution fraud have tumbled over the last decade, despite the recent troubles in the banking sector, according to a new analysis of Justice Department data by the Transactional Records Access Clearinghouse (TRAC) at Syracuse University.

This category can refer to crimes committed both within and against banks. Defendants include bank executives who mislead regulators, mortgage brokers who falsify loan documents, and consumers who write bad checks.

During the first 11 months of the 2011 fiscal year, the federal government filed 1,251 new prosecutions for financial institution fraud. If that pace continues, TRAC projects a total of 1,365 prosecutions for the fiscal year. That’s less than half the total a decade ago.

The decline in these new cases stands in contrast to the government’s broader approach to federal criminal prosecutions. Federal prosecutions for other crimes have grown tremendously, with the number of total new prosecutions filed for all federal crimes nearly doubling over the last decade.

Read the rest of the NY Times article here.

All Federal Prosecutions



Federal Prosecutions for Financial Fraud

CFTC Commissioner O'Malia Warns of 'Rash Reforms' - "Isolated Incident" - Opposes Position Limits

The CFTC must make haste to prove to the public that MF Global was an isolated incident. It should not become involved in the issues of returning customer funds.

Oh, such wiles are hidden in the voice of reason and 'free market' ideology. Let's not be hasty. After all, it is only customer money, and we are just the regulators responsible for making sure it didn't happen in the first place.

Commissioner O'Malia has also actively opposed 'position limits' on silver and other reforms in commodity trading designed to curtail manipulation.

"O'Malia said the agency had overreached its mandate and echoed the industry's argument that there was no "empirical evidence" to substantiate the rule."

In his opening statement on position limits he said:

"...in addition to failing to detail costs, the two final rulemakings fail to articulate a convincing rationale for eliminating our current regime of principles-based regulation and substituting in its stead a prescriptive “government-knows-best” regime."

Principles based regulation. Unfortunately the principles are being written and administered by the brokerage firm of Dewey, Cheatum and Howe & Assoc.

Let's make haste to show this is an 'isolated incident.' How about making some haste to get the customers' money back, and telling us who took the money and what they are charged with?

How can this possibly be an 'isolated incident?' There's a fine line between an isolated incident and just another episode in a multi-year financial gang bang of the American public by Wall Street's monied interests.

Commissioner O'Malia was appointed by Barack Obama in 2009 according to Huffington Post: Scott O'Malia: Obama Appoints Ex-Lobbyist For Enron-Like Company To Top Regulator Position

Obama's failure to fulfill his electoral mandate, for whatever reasons, is one of the greatest flops since Plan 9 From Outer Space.

Credibility trap. Regulatory capture. Corporate "News." Judas goat reformers.

I fear the truth, and financial reform, will be led down a blind alley, and strangled. The best I can hope for is that the customers' money will be returned out of shame and fear, if not justice and wisdom.

CFTC Chairman Gensler is apparently asking for a December 5 vote to restrict the manner in which brokerages can use customer funds. Hence Commissioner O'Malia's warning on making changes to the status quo, and the new threat from the Congress to pass deep cuts in CFTC funding.

And next year the American public will be given Morton's fork opportunity to choose between two flavors of corporate extrusion, Tweedleflip and Tweedleflop. And so they will hold their noses, and most likely cast their joyless votes.

CFTC official warns about rash reforms post-MF Global
By Christopher Doering
Wed Nov 16, 2011 10:46am EST

WASHINGTON, Nov 16 (Reuters) - A U.S. futures regulator on Wednesday pushed for immediate action in the wake of collapsed brokerage MF Global, including a requirement that all intermediaries should hire an independent party to make sure customers funds are kept separate from the firm's own money.

Scott O'Malia, a Republican commissioner at the U.S. Commodity Futures Trading Commission, said in order to show the public that segregation works and that MF Global was an isolated incident, it must act quickly.

However, he warned about going too far with reforms without full knowledge of what happened at the failed brokerage.

"Many have said that the failure of MF Global was not systemic and that we are lucky. I don't view it in the same light," O' Malia said in a statement laying out the "next
steps" in dealing with the mess MF Global left behind.

MF Global filed for bankruptcy on Oct. 31 after investors and counterparties balked at revelations about the firm's bets on risky European sovereign debt.

Roughly $600 million is missing in customer accounts of the company's brokerage, and the CFTC is among the authorities investigating whether MF Global may have improperly mixed that money with its own funds.

O'Malia said the CFTC must ensure that all intermediaries are in compliance with segregation requirements. The agency also must reconsider rules it is crafting to implement the Dodd-Frank financial reform law.

In the three-page statement, O'Malia said it's too early to hail a proposal that would limit investments of segregated customer funds "as the solution to the MF Global problem."

He also warned against a plan that would have the CFTC intervene in insolvency proceedings to facilitate transfer of customer positions and collateral in the face of a shortfall.  "The Commission has not actively intervened in such a manner in MF Global, and so it is questionable whether the Commission would so intervene in the future," O'Malia said.

In light of MF Global's demise, O'Malia said the CFTC should ensure that clearing organizations are able to diversify their membership without introducing risk.