Gold Daily and Silver Weekly Charts - April Showers Bring May Flowers

There was intraday commentary about the 'market rigging' story that was on 60 Minutes this Sunday past.  You may find it to be interesting.   60 Minutes Sanitized Its Report on High Frequency Trading.

The argument that captured the interest of the floor traders on the NYSE and distracted them from what little trading that actually still takes place there is interesting to watch as well.  I have linked to it within that commentary.

There were the usual ins and outs in the Comex gold warehouse yesterday. The deliveries might well start showing up in the report on today's activity, which will come out tomorrow. I am still curious about Nova Scotia stopping out a big chunk of the gold being supplied out of JPM, both listed as house accounts. But since they are both custodians for this and that, we will have to wait and see where the hot potato actually stops.

Silver showed more resilience than gold today, which is sometimes quite a good sign.

As a reminder Friday is a Non-Farm Payrolls report.   The VIX is back down to its lower levels. Stock markets have hit a new record high, or at least the headline market has done so.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Reform? April Fools - Another New Stock Market Record

"The markets for equities of all kinds had evolved to a platform for hackers...[High-frequency traders] are the ultimate hackers. They’re running software programs that have one goal, and that’s to exploit the trading systems as early and often as possible...

When software programs are trying to outsmart other software programs and hack the world's trading platforms, that is a recipe for disaster."

Mark Cuban, June 27, 2012


"We would rather be ruined than changed;
We would rather die in our dread
Than climb the cross of the moment
And let our illusions die."

W. H. Auden, Age of Anxiety

Today was the first of the month, when the inflows from mom and pop's 401k and IRA savings are offered up on the altar of Wall Street. I think we are just about ready for the rinse. The VIX is back to near complacent levels, given our geopolitical context.

But there is a Non-Farm Payrolls report on Friday, so don't get too worked up about it just yet. The Fed likes to watch the stock market, and there is always talk of Robert Rubin's and the ESF's favorite confidence toy, the SP futures.

Have a pleasant evening.

HFT: 60 Minutes Sanitizes Its Report - What Banks, What Exchanges?

There were some gaping holes in the 60 Minutes expose about the stock market being rigged. The story was spun in such a way to make one think that uncontrolled innovation had created some unfortunate and inadvertent technical arbitrage opportunities in exchange centers outside of Manhattan, but a clever insider, funded in part by ultimate insider David Einhorn and backed by the big dogs of Wall Street, had come up with a clever technical fix in a new and better exchange called IEX.  Protected by a spool of fiber to induce network latency.  

 Free market triumphs, mission accomplished.   And wait breathlessly for the IPO.

Don't even think about a minimum transaction tax, a speed bump rule such as a minimum order duration, or anything more comprehensive than that. A spoolful of fiber makes the medicine go down.

I was so enchanted that they allowed someone to say 'the stock market is rigged' on national television that I thought that giving it a day or two to sink in might be appropriate.  And it is rigged.  It is just not fixed, in the manner of genuine reforms.  It is a laughingstock amongst insiders. Well not everyone is laughing.

What was this 60 minutes piece, a limited hangout expose that will still be boldly and hotly denied? 

The Fight Today That Stopped Floor Trading on the NYSE

"How frightened hypocrisy hastens to defend itself."

Victor Hugo

What is coming down the road, another flash crash or a major market failure?  Or are the natives just getting restless?  Look, reform!  And it was self-regulating!  The major owner and executive chairman of CBS, Sumner Redstone, of the aptly named holding company National Amusements, could not have asked for a better script.

If you did not notice, they parsed HFT into two types.  Conventional HFT that rides on the bid ask, normally in small incremental orders, aimed at skimming and carving up the smaller orders of the retail investors.  What INEX is addressing is 'front running' HFT that games lags between exchanges to jump in front of BIG orders from powerful insiders. 

Never mind the front running, which was taking a bite from the pros,  how about the steady nibble at the bid and ask on virtually every order that is being placed?   Doesn't anyone remember the computerized transactional skimming in the movie Office Space? 

NY AG Eric Schneiderman himself praised mom and pop affecting HFT as 'providing liquidity.' I think that canard has been capably debunked in many places and much better than I can do. It is like sex in college. The kind of liquidity you get you don't want, and when you desperately need even that liquidity, its not there. Why not just praise portfolio insurance to abolish risk, and party like its 1987?

And what about the bombing of quiet markets with an avalanche of orders to brazenly manipulate the price?  We have indictments of American companies doing that from Europe to Japan, with the sexy title 'Dr. Evil strategy.'   And it is happening like clockwork, almost every day.

And as the king of Samoan metals traders, Salelologa Dave said, 'I’ll know that real change is coming to our system when the Government allows Sixty Minutes to discuss the manipulation of the gold market."

And brother, that is the truth. We can't even get the CFTC to disclose its five year study of manipulation in the silver market that we paid for.

60 Minutes Sanitizes Its Report on High Frequency Trading
By Pam Martens
April 1, 2014

Two of the chief culprits of aiding and abetting high frequency traders, the New York Stock Exchange and the Nasdaq stock exchange, failed to come under scrutiny in the much heralded 60 Minutes broadcast on how the stock market is rigged.

This past Sunday night, 60 Minutes’ Steve Kroft sat down with noted author Michael Lewis to discuss his upcoming book, “Flash Boys,” and its titillating revelations about how high frequency traders are fleecing the little guy.

Kroft says to Lewis: “What’s the headline here?” Lewis responds: “Stock market’s rigged. The United States stock market, the most iconic market in global capitalism is rigged.”

Kroft then asks Lewis to state just who it is that’s rigging the market. (This is where you need to pay close attention.) Lewis responds that it’s a “combination of these stock exchanges, the big Wall Street banks and high-frequency traders.” We never hear a word more about “the big Wall Street banks” and no hint anywhere in the program that the New York Stock Exchange and Nasdaq are involved.

60 Minutes pulls a very subtle bait and switch that most likely went unnoticed by the majority of viewers. In something akin to its own “Flash Boys” maneuver, it flashes a photo of the floor of the New York Stock Exchange as Kroft says to the public that: “Michael Lewis is not talking about the stock market that you see on television every day. That ceased to be the center of U.S. financial activity years ago, and exists today mostly as a photo op.”

That statement stands in stark contrast to the harsh reality that the New York Stock Exchange is one of the key facilitators of high frequency trading and making big bucks at it....

Read the entire piece with the details here.

After Many a Summer Dies the Swan

"Vanity and narcissism — the compulsive need to be admired and praised — undermine one's courage, for one then fights on someone else's conviction rather than one's own."

Rollo May


"Narcissus so himself, himself forsook,
And died to kiss his shadow in the brook."

William Shakespeare


"Alas! for this gray shadow, once a man —
So glorious in his beauty and thy choice,
Who madest him thy chosen, that he seemed
To his great heart none other than a God!"

Alfred Lord Tennyson, Tithonus

I had intended to write about the winds of change beginning to rise in Europe, but it is hard to find a proper beginning for such a vast and historic subject. But luckily a reader sent me Grant Williams latest newsletter, which you can read in its entirety here. So I may defer on my own effort, and provide a taste of things to come with this.

As you may recall I have said on any number of occasions that when change comes, it will probably come first at the periphery, as in all great changes in empire. In the east it is generally brutish, sturm und drang.   But watch when it comes to the UK, most likely first amongst the English speaking nations.  The backlash and repression there on the whole will be— polite but comprehensive.

The credibility trap takes its toll over time, and people lose interest in the status quo.   The ruling elite never see it coming, because they are so self-absorbed, enamored of themselves.  Their first reaction is disbelief, and then rage, because how can they be unappreciated, so betrayed, such beneficient gods?

I am not saying that the change will necessarily be for the good, but it will come, just as it did in the 1930's, with very mixed results.

Like so many things that approach the universal nature of art, our reaction to it probably says more about us than it does about it. And perhaps for this effort as well.

And the times, they are a-changin'.

THINGS THAT MAKE YOU GO Hmmm...
Fight Club
By Grant Williams
01 April 2014

...Elsewhere this past week in Europe, there was another sign of things to come — and this time it played out in the UK as Deputy Prime Minister Nick Clegg of the pro-European Liberal Democrats threw down the gauntlet to the staunchly anti-European Nigel Farage of UKIP to join him in the first of two live televised debates — ostensibly on whether the UK should remain part of Europe, but in reality a desperate attempt to both blunt the challenge presented by Farage’s surging popularity and at the same time restore some credibility to Clegg’s ailing junior coalition partners.

As regular readers will know, Farage is the very embodiment of the anti-establishment movement. A pint-drinking, chain-smoking everyman who looks like he’d be more at home debating the issues of the day in a London pub than in the European parliament, Farage spent 20 years as a commodity trader and is one of the few politicians amongst the current crop to have a background in the private sector.

Clegg, on the other hand, is the archetypal politician: public school and Oxbridge-educated, related to aristocracy (albeit of the Russian variety), and a man who has been involved in politics for his entire adult life. The debate was fascinating to watch.

Farage’s bluster and soapbox oratory versus the polished politics of Clegg. Farage’s passion and intensity versus Clegg’s measured tone.

In the aftermath, the political pundits had their say on who emerged victorious, and they were unanimous:

Mary Riddell:
No minds will have been changed. The Faragistes who see their champion as the battler against faceless, bloodless, heartless power-brokers will be happy. But Nick won. As he should have. Easily.

Dan Hodges:
Nick Clegg kept calm and stuck to the facts. And it became clear facts are Nigel Farage’s enemy. He became increasingly angry and bombastic. By the end Clegg was engaging easily and effectively with his audience. Nigel Farage appeared to be cracking jokes to amuse only himself. His explanation of his reason for employing his wife was especially embarrassing. Fortunately, by that point, few people in the audience appeared to be listening to him.”

Toby Young:
“Overall, Clegg came across as more in command of the detail (possibly because he’d been briefed by the civil service beforehand) and for that reason I think he edged it.... Farage will certainly have pleased his supporters, but not much more than that.”

So... a humiliating public mauling of poor Nigel. But here’s where it gets interesting. In the Telegraph’s poll more than 81 per cent of readers said they thought Nigel Farage had won the debate.

A YouGov poll found that 57 per cent of people thought Mr Farage won the debate. This is perhaps the most important point.

Regardless of what those who spend their lives around politics believe, the public is ready for change, and they will be very hard to sway unless somehow they feel that quality of their lives can improve drastically — and that is not about to happen.

Measuring political performance by traditional metrics is a waste of time in a world where the people will simply vote for change. We saw it in Greece, we saw it in Spain, and now we’ve seen it in France. Next up, European elections in six weeks’ time.

Public disaffection with the world’s leaders is growing by the day — you can feel it — and nowhere was that made more apparent recently than in Holland last week when Barack Obama, halfway through his tour of Europe, took to the stage alongside Dutch PM Mark Rutte.

Obama, so used to adoring hordes — not only at home, but wherever in the world he is reading a teleprompter giving a soaring lesson in oratory — was presented with the answer to the age-old question about the sound of one hand clapping after he concluded, at a press conference, remarks espousing the USA’s “core values” of privacy, the rule of law, and individual rights. ([See the video below] to watch the most awkward end to a speech since Sally Field accepted the Oscar for Best Actress in 1985.)

People can’t even bring themselves to be polite to the incumbent political class anymore — not even to a rock star like Obama. Make no mistake, from Ukraine to Holland, from the United Kingdom and France to Greece, Italy, and beyond, politicians are under immense pressure to “do something” in order not to lose their grasp on power.

From Nobel to Ignoble