Gold Daily and Silver Weekly Charts - Begin the Beguine

It is all about the Fed tomorrow and what level of market intervention they will maintain in buying public and private (Treasury and mortgage) debt.

I think a mix of both with a total below $10 billion may be a likely expectation. I think the taper will be slow, and the unwind of the balance sheet even much slower. I think we are looking at quite a few years, and not months. We will know once the economy has actually improved and we are certainly not there yet. Not with a stagnant median wage which dampens consumer demand.

There is a serious risk of a market dislocation, either in the dollar or stocks or both. I have not quite gotten a better feel for which way it will roll as it depends on some exogenous variables that I am insufficiently connected to foresee.

Either way, we can keep reading the short term signs. Gold and silver are coiled and look explosive, but given time. Timing is everything which is why cautious diversity is not a bad idea.

I was rereading some of Roger Babson's writings today, and came across the Babson Boulders of Dogtown which I had not known about that I can remember.

It is seems odd that I had never even heard of them because I had taken frequent car rides past that area while at school along the coast from Boston to Ipswich to visit friends who lived near Crane's Beach.  I remember Rockport and Gloucester quite well, and the obligatory stop at Woodman's Tavern in Essex.

It wasn't like I did not get out on the weekends. I once made the trek to Thoreau's location on Walden Pond and left my own stone on the pile that commemorates it.  I even took the trip to the House of the Seven Gables at Halloween for the witches convention.  That was interesting. 

I am a big enough fan of Babson to have walked his trail if I had known of it when it was handy.  But I did not have an interest in financial things and Roger Babson until after an MBA sparked a keen interest in economics at 40.  Until then it was all gizmos, gadgets and coding.  And the classics, history and literature of course.  But that was due to youthful whimsy, which is why it is the best time for exploring your options, and walking a trail lined by scattered old boulders with carved sayings from a man who had also seen the consequence of human folly approaching.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Tech Charges Higher

Stocks caught a bounce today as the markets wait for news from the FOMC tomorrow on the much awaited taper.

Money is flowing out of bonds into equities as fears cool and the market realizes that it is inevitable that bonds have topped, no matter how slowly the great trend change may come given the Fed's policy of subsidizing rates.   This once again will cause risks to be mispriced alas, and may put forward a rocky path to the unwary investor.

Have a pleasant evening.

Gold Daily and Silver Weekly Charts - JPM To Pay About $800 Million Fine for London Whale

"On Sunday afternoon, facing a revolt by his own party’s senators, Obama dumped Larry as likely replacement for Ben Bernanke as Chairman of the Federal Reserve Board...

But the fact that Obama even tried to shove Summers down the planet’s throat tells us more about Obama than Summers—and whom Obama works for. Hint: You aren’t one of them."

Greg Palast, Larry Summers: Goldman Sacked

JPM has agreed to admit wrongdoing and will pay about $800 Million in fines for concealing the huge trading losses in the case of the London Whale.

The precious metals rallied with stocks overnight as Larry Summers released Obama from having to cut him loose as a candidate for Fed Chairman.

The reason that Larry and Obama did this is quite simple.  There was broad bipartisan opposition to Summers in the Senate which precluded a confirmation. Sometimes it really is that simple.  Obama's own Senators refused to go along with it on principle and practicality.  That is how bad it was.  And that is pretty bad.

There was little other support to be gained as footing, except from Wall St insiders, with over 400 economists signing a petition that said Summers was a poor choice, giving their endorsement to Yellen. It was a policy battle that could not be won, and for which no strong allies were to be found.  One has to wonder what motivated Obama into such an awkward display in pursuit of a hopeless and apparently cynical policy decision.

Just like Syria. 

So what next. The metals were capped all day in a concerted manner. I suspect that this will continue until the FOMC announcement on Wednesday.

Let's see if any additional physical offtake is prompted by this, or if just a steady flow in background will still continues. Keep in the mind that COMEX is not a primary delivery exchange of any real importance. But the low inventories of gold bullion are more of a indicator of trends than a hard stop on anything. The COMEX will probably not be the locus of a failure to deliver. That honor is more likely to be held by the LBMA, perhaps even in response to some market dislocation in Shanghai or Hong Kong.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Summers' Over

Stock futures popped quite a bit higher overnight as the announcement that Larry Summers was no longer in play gave heart to the monetary doves, and hopes of QE for the foreseeable future.

Stocks gave much of that overnight hype back during the day as AAPL continued to lead tech lower, and the SP sagged.