Gold Daily and Silver Weekly Charts - The Hunger Games

Last night Nick Laird showed me some excellent original data analysis from his site, Sharelynx.com, that demonstrates that a decline in the price of gold during an FOMC week is no sure thing, but more normally distributed. And we have to balance that against a different, and much less statistically robust graph, that was on ZH, and which I also presented here, that clearly showed declines in FOMC weeks, and no similar declines in off weeks, but for a much shorter period of time.

Nick looked at full weeks, and even much tighter spreads of days, but only looked at FOMC events, and a lot of them going back to 2006, and then even to 1994. I plan on looking at some of his data much more closely, but it does drive home the conclusion that simply betting blindly on around certain events does not work. If it was that easy, everyone would do it. Rather, there are other variables at play, of that I am certain. And I will take a much closer analytical look at all the data, and not just cycles and dates, when I have a greater opportunity.

Next week is an option expiration for the precious metals futures on the Comex. A large tranche of gold was deposited into the JPM warehouse. Perhaps these are preparations for the next active month for physical bullion which is April. Otherwise things were quiet.

Another thing of which I am reasonably confident is that there is a 'currency war' in progress, and some great changes in the composure and complexion of international finance and trade. This 'war,' more like a new kind of cold war than a military war, ebbs and flows, manifesting itself first in one way and then in another. And sometimes it pokes its head out of the financial pages and onto the headlines, as it has recently done in the Ukraine and Crimea.

As you might always expect in times of change and contention, truth is in short supply. And I think some long standing trends are coming to a head. And so we should expect the unexpected, and look for things to happen, particularly from the top down, that we had not seen coming.

I will never forget how, shortly after the tragic events of 911, and the expected response against the Taliban in Afghanistan, that the word was given out from the top down, 'attack Iraq.' And people looked at each other and said with their eyes, what? And the media machine was put into gear, and the march to Iraq was begun.

I mean that sort of unexpected thing, that does not seem to make sense if you have been following some logical sequence of things, but that the media picks up from the top and repeats without fairly batting a jaundiced eye.

If you want a vision of the future, I would not look for a 1984 type boot stomping endlessly on a human face. Rather, I think we will see the kind of bifurcated society of a few effete haves in a few cities, and the great number of have nots, as is depicted to some effect in The Hunger Games. President Snow reminds me of the consummately ruthless CEO, moreso than a dictator. The various District have been reduced to their basic economic elements, and the people of the Capitol are living large on their efforts.

Like most works of fiction it is an oversimplification. But it has a resonance with the kids, wildly popular in the teens and younger set. The young have a tendency to pick up on trends based on behaviours that are not carried overtly perhaps in the official news and the spoken words of adults. When the books became popular I read them, just to keep in touch with my own children and what was attracting those of them who were thinking. And now the movies are coming out. The books are better, but you may find the movies to be diverting.

So it looks like interesting times ahead. And may the odds be ever in your favour.

Have a pleasant weekend.

SP 500 and NDX Futures Daily Charts - Quad Witch Boogie Woogie

Today was a quadruple witching expiration, with the futures rolling over to June, and the options expiration on US equities.

And naturally we saw the rest of the wash and rinse cycle, the up and down, that has characterized this week.

So what next. Ukraine is the visible manifestation of the currency war, and it seems to be getting warmer, not colder. With round two of the financial retaliation of the US going forward, with credit cards and accounts being frozen, and downgrades from the credit ratings agencies, a message is going out to the rest of the world, loudly and clearly.

I expect this will be a volatile year overall, with stocks tottering a bit on their lofty heights. I am not looking for a crash or anything such as that, although this is the kind of environment in which an exogenous event would cut to the bone.

The Fed has the market's back, and certainly the backs of their owners at the Banks. The pundits were touting the financial stocks today. Of course, these are the same types who would say things like, "The signs are that the end is near. Up next, a list of stocks that are expected to outperform in the apocalypse."

Have a pleasant weekend.

NAV Premiums of Certain Precious Metal Trusts and Funds

As you may recall today is the 'quadruple witch' for the equity markets.

The premiums are at their 'new normal' levels.

The cash level continues to be historically thin at Sprott Silver, although they seemingly face no short term needs from their cash burn rate.  But at some point they will have to do another offering. 

Ted Butler: J. P. Morgan And Precious Metal Price Manipulation On the Comex

I am no legal expert, and therefore have no idea of the merits of this as a prospective case.  The law involves things like intent, opportunity, evidentiary proof, and so forth. Apparently one can sue another entity for just about anything, but that does not mean that the case has any merit.   And I certainly could not advance such a case based on even industry knowledge. That strikes to the heart of my own issue.

My primary concern is a lack of transparency. And that lack of transparency in these markets is not conducive to market efficiency.  It allows for gaming the system, either occasionally or, as we have seen, systematically.

I cannot tell if these markets are manipulated because so much of what is being done is hidden.  And it does not help that the CFTC conducted a five year long study into the subject, and then quietly killed it without ever having issued any information about their findings.

Some have shown evidence they say that proves that it is the tech funds that set price, and that JPM is just 'making a market.' If this is true, then additional transparency on the part of JPM and the other market makers would be perfectly reasonable to allay any doubts about the honesty and fairness of the markets for precious metals.  This is why the people have established, and paid for, regulators.  So they do not have to resort to lawsuits in order to achieve justice and equity in their transactions.

Considering the widespread rigging of key benchmarks and prices, I think to just dismiss these concerns with a sneer and a snigger is unreasonable, requiring people to maintain an almost slavish belief in the integrity of the Banks, trading desks, and the system.  Given the amount of abuse that has been exposed already along these same lines, that does not seem to be a thing that a thinking person would ask.

The major objection to transparency, by the way, is that it would diminish the profits of those in the position of market makers.  Well, market making is intended to be a utility function, with a small but regular return.  It is not appropriate for market making to be in the hands of those who are also major market players.  It is a certain invitation to corruption.

One of the more general things that struck home in this commentary by Ted is the concern that the Comex is becoming like a bucket shop, a betting parlor that is at arms length from the markets for which they are presumably setting prices.   The lack of delivery and the ability to create large amounts of contracts to receive or deliver on the fly, and then to transact them at whatever price you wish without seeming constraint if you are big enough, with deep enough pockets and enough advantageous information, is tantamount to setting up a con game, and then trusting in men to be angels.

Relying on self-regulation, under the discipline of private lawsuits, merely reinforces our increasingly bifurcated society, in which a small minority have ease and rights and freedom and even justice, because they can afford it.  And those many who rely on the justice provided by government will be faced with an upward facing and unresponsive bureaucracy, and with that, hard times.  Like quality Healthcare, there will be Justice, for some.

As you know I am no longer hopeful of change in the short term, given the nature of the credibility trap that has encompassed the political party process and the mainstream media. To paraphrase the discouragement pessimism of Czech author and political figure Václav Havel:

“No attempt at reform could ever hope to set up even a minimum of resonance in the rest of society, because that society is ‘soporific,’ submerged in a consumer rat race... Even if reform were possible, however, it would remain the solitary gesture of a few isolated individuals, and they would be opposed not only by a gigantic apparatus of national (and supranational) power, but also by the very society in whose name they were mounting their reform in the first place.”

It is no accident that the nascent movements for financial reform were either ruthlessly crushed, as in the case of the almost rudderless Occupy Wall Street, or co-opted by money and politics, as unfortunately happened with the Tea Party. Co-opt if you can, crush if you must.

Ted presents some of the facts in the contrary case, and I found them to be interesting.  It is hard to believe that the London Fix is so corrupt, but the Comex, which is the major pricing platform, is pristine, since the players are playing across all global markets.

Suing JPMorgan and the COMEX
Theodore Butler|
March 21, 2014

I’ve had some recent conversations with attorneys who were considering class-action lawsuits regarding a gold price manipulation stemming from reports about the London Gold Fix. I told them that while there is no doubt that gold and, particularly, silver are manipulated in price, I didn’t see how the manipulation stemmed from the London Fix. I wished them well and hoped that they may prevail (the enemy of my enemy is my friend), because you never know – if the lawyers dig deep enough they might find the real source of the gold and silver manipulation, namely, the COMEX (owned by the CME Group) and JPMorgan.

So I thought it might be constructive to lay out what I thought a successful lawsuit might look like, although I’m speaking as a precious metals analyst and not as a lawyer. I’ll try to put the whole thing into proper perspective, including the premise and scope of the manipulation as well as the parties involved...

Read the entire article for free here.