Gold Daily and Silver Weekly Charts

This was a relatively quiet day.

The silver shorts did not deliver a 'gut check' to the market as one might have expected.

The markets seem almost 'controlled.'

Have a pleasant weekend.

SP 500 and NDX Futures Daily Charts

It's little more than a liquidity puffball now. That applies to both the markets and the economy.

The Banks must be restrained, and the financial system reformed, with balance between individuals and the corporations restored to the economy, before there can be any sustained recovery.

MF Global Turns Into Battle For Scraps Between Hedge Funds and Customers

"Some of the likely litigation targets are MF Global's main trading partners, its primary banker JPMorganChase, and clearinghouses that processed last minute trades for MF Global as it spiraled towards bankruptcy. Another possibility is MF Global's own United Kingdom affiliate, where about $700 million in customer money is tied up.

But recovering any funds won't be easy.

'In terms of resources, the worst counterparty in the world to go up against in court is the government,' said one bankruptcy lawyer, who asked not to be named due to relationships with firms that have a stake in the outcome of potential litigation. 'The next is JP Morgan.'"

In a brokerage bankruptcy the customers have priority over other creditors including bondholders, who in this case include some hedge funds. The CFTC is on record for this in the case of MF Global. But the CFTC seems to be a relatively toothless regulator these days. They have been sitting on a silver market manipulation case for over three years for example, and cannot even begin to say 'peep' about it, except to occasionally make lame excuses for what everyone knows has been happening.

In an almost amazing bit of behind closed doors switcheroo, the regulators at the SEC and the court agreed to treat MF like a Chapter 11 bankruptcy rather than a Chapter 7. As the article points out, there are two trustees, Giddens, a career corporate lawyer who is nominally representing the customers, and Freeh, a former member of the Clinton Administration who is representing the interests of the creditors like JPM.

As an interesting sideshow, Louis Freeh had exclusive possession of the MF Global emails and other evidence, and refused to share it with government agencies until his attorneys had an opportunity to sift through them, and 'find no evidence of wrongdoing.'

Customers of the other big brokers that went bust, like Lehman for example, did not have this sort of problem. They were made whole on their accounts.

Mackie Messer, otherwise known as JP Morgan or simply 'The Morgue,' held an unsecured credit line with MF Global for $1.2 billion, but they managed to snatch the funds in the last week of their operations it appears, and lawyered up on various fronts to make sure they hang on to it.

As Chris Whalen said, we know who has the money, we've always known where it was. The question is how willing and able the system is to make them give it back.

Equal protection under the law is apparently just a theoretical objective these days. It seems to mean that everyone is free to hire as much legal power and political influence as they can afford and then let the stronger party win. And the poor and the rich are both permitted to sleep under bridges in cardboard boxes if they wish. That's only fair.

One can only imagine if anyone will be prosecuted, and at most, some lieutenants may settle up while admitting no guilt.

Battle lines forming between MF Global customers, hedge funds
By Nick Brown and Katya Wachtel
Fri Feb 24, 2012 2:36pm EST

(Reuters) - The MF Global saga could soon become a legal battle between hedge funds and the futures brokerage's shortchanged customers, with more than a billion dollars at stake.

As the investigation into the collapse of the Jon Corzine-led brokerage moves into more of a regulatory whodunnit than a criminal case, the guessing game centers on who the two court-appointed trustees overseeing MF Global's liquidation will sue to recoup money owed to customers of MF's broker-dealer unit and creditors of its parent.

Those decisions are not easy ones, legal experts say, and they could end up pitting hedge funds like David Tepper's Appaloosa Management and Paul Singer's Elliott Management - who own MF Global bonds - against brokerage customers trying to recover an estimated $1.6 billion shortfall in their accounts.

It's likely that James Giddens, the trustee in charge of recovering customer funds, and Louis Freeh, the trustee in charge of recovering money for parent creditors, will dispute the ownership of certain assets, said attorney Chris Ward, vice chair of Polsinelli Shughart's bankruptcy practice, who is not involved in the case.

A more complex battle could arise from the fact that both customers and bondholders claim priority for payouts from MF Global's general estate...

Read the rest here.

The fog of cover up has been wafting heavily over this entire scandal since the first week. I doubt very much that the real truth will ever be fully disclosed. I just hope that the customers, who are surely victims of a corrupt financial system, are able to recover their money.

“Thou shalt not be a victim, thou shalt not be a perpetrator, but, above all, thou shalt not be a bystander."

You may wish to keep this aphorism in mind with regard to your financial transactions going forward, whether you are in the US, Canada, Asia, or Europe.

An Attempt to Inflate Financial Asset Prices and Maintain Negative Real Interest Rates

As you may recall I said early this year that the stock market had the flavor of a 'market operation' on the tape, a conscious effort to inflate asset prices.

If you look at some of the key market charts below, the price action has pretty much been a thrown rope, almost never violating the 15 Day Moving Average.

It has been a while since I have seen a Williams%R pegged to the topside like this with barely a flutter, especially considering all the hijinks going on in Europe.

Let's see. Negative real interest rates, incessant stock market climb. Must be an 'inspiring confidence' sort of thing. Looks almost like the upside of a pyramid scheme. The most artful one I had ever seen started around early in 2004 and did not really end until the crash of 2008.

As the touts and cheerleaders were saying on bubblevision today, better buy them now while they're cheap. Yowza, yowzer, getcher hot stocks and nekkid ladies...

If you want to know why the Fed and Treasury keep the TBTF and their financial harpies at the ratings agencies around, this may be the reason: to implement their global financial policy decisions. How long they can keep it up is another matter. But they are not likely to run out of money, and much of the buying and selling in these equity markets is artificial, the quick action of computers shaving off nickels in a well-tempered instrument.

Maybe that's why they had to smack gold and silver so hard into the end of the year. Otherwise they might have taken off with the stock pumping exercise, broken through upside resistance at 2000 and 40, and threatened to get out of hand, shake up the confidence of the other players, and all that.

But if you look at the SP 500 deflated by oil, either WTI or Brent, its been in a serious nose dive.

No matter how good they want to make this look, its still a paint job, and a fairly thin one at that. But it will probably take some incident, or a key economic report gone bad, to break this nominal uptrend, so wait for it.