Gold Daily and Silver Weekly Charts - Capped - The Iron Heel

"We discover that the fortunes realized by our manufacturers are no longer solely the reward of sturdy industry and enlightened foresight, but that they result from the discriminating favor of the Government and are largely built upon undue exactions from the masses of our people.

The gulf between employers and the employed is constantly widening, and classes are rapidly forming, one comprising the very rich and powerful, while in another are found the toiling poor.

As we view the achievements of aggregated capital, we discover the existence of trusts, combinations, and monopolies, while the citizen is struggling far in the rear or is trampled to death beneath an iron heel.

Corporations, which should be the carefully restrained creatures of the law and the servants of the people, are fast becoming the people's masters."

President Grover Cleveland, State of the Union, December 3, 1888

Gold and silver popped this morning in New York, and then gave a bit of it back in the afternoon.

 

Silver is still hanging on to the 16 handle, and gold is hovering near the bottom end of a trading range between 1170 and 1230 US dollars.

 

There was intraday commentary on the CME futures exchange in Hong Kong here.  

 

I have not yet made up my mind on how real this market is. 

More specifically, even though it seems to require 'physical delivery' it is a thin market, and it is not completely clear to me how much of the gold might be round-tripping, how easy it might be for that to happen.   Koos Jansen in particular has done extraordinary good work sorting that out on the Shanghai Gold Exchange.   I do not wish to make any assumptions about the CME in Hong Kong and what the mechanics of things might be there.    I don't suppose any reader are trading on the CME gold exchange in Hong Kong and can let us know.

However I wanted to pass along a very interesting comment from my friend Nick:

For Tuesday the NY Gold Futures Contract had Volumes of 96,032 and Open Interest of 407,893 contracts.

For Tuesday the HK Gold Futures Contracts had Volumes of 168 & Open Interest of 45 contracts. (this is normal - very thinly traded).

Yet for the last two months the NY Contract delivered 16.2 tonnes of gold whilst the HK Contract delivered 257 tonnes of gold.

Yes that is something to think about, BucketShop-wise.

 

There was also some interesting commentary on the surprising fragility in the US debt markets here.

 

They'll never learn.

 

Have a pleasant evening.

 

 

 

 

 

SP 500 and NDX Futures Daily Charts - This is the Way We Wash and Rinse

Wax on, wax off.

Easy to do when the markets have become a casino.

Have a pleasant evening.

 

 

 

CME Is Delivering Hundreds of Tonnes of Gold Into the Markets, Almost Unnoticed

What, The Bucket Shop?  

Are they truly delivering 'tonnes' of gold into markets where people actually take delivery of the bullion and withdraw it from the warehouse?

Stop the presses.  Man bites dog.

 

Yes they seem to be.   Just not in the United States.

The CME has opened a futures market in Hong Kong and from reading the documents and looking at the warehouse reports it appears to be a market of 'physical delivery.'

And are they ever delivering as you can see below.  Since March they seem to have delivered 257 tonnes of gold bullion into Hong Kong.

 

I went over this a bit last night with Nick Laird, the Aussie data wrangler from near the Great Barrier Reef, who tends to ride herd on all things precious metals at Sharelynx.com.

 

Now there may be a hook in this somewhere.  We would have to determine how easy it is to roundtrip the metal in and out, even if that does not seem to be the way they do their gold business in Asia.  We do not know who is really playing on that exchange.  It could be the usual suspects.  Or it might be a new source of additional demand we must track into China.

 

But it certainly bears watching.

 

Fragility: What Has the Watchers Worried In the US Debt Markets

As you know I am on the lookout for a 'trigger event' that might spark another financial crisis, given the composition of the economy and the financial markets. 

In the last financial crisis 2008, it was the failure of the two Bear Stearns hedge funds that exposed the grossly mispriced risks in mortgage backed financial assets, and the generally flawed nature of the market's collateralized debt obligations.  This led to a cascade of failures in fraudulently priced assets, and resulted in increasingly large institutional failures, including the collapse of Lehman Brothers.

One can draw some parallels with the financial crisis before that, which was the gross mispricing of risk and inflated values of internet-related tech companies that had grown to obviously epic proportions by 2000. A failure of several key tech bellwethers to make their numbers, and some negative results in the economy, showed the flaws in the underlying assumptions in what was clearly an asset bubble. And once the selling started, it was Katy-bar-the-door.

 

The failure of two relatively minor hedge funds was not a great event. The failure of a tech bellwether to make its quarterly numbers is not either. But their interconnectedness to the other portions of the world markets through the financial institutions on Wall Street, and more importantly, the fragile nature of the entire pyramid scheme of fraudulently constructed and mispriced risk of financial assets, caused an inherently shaky system to fall apart.  What was most shocking was how quickly it happened once the dominos started falling.

The debt market in the US, with its deep ties to private equities, is probably not a trigger event, the fuse itself.  But it well might serve as the powder keg that will transmit the effects of some more individual event throughout the world's markets and economies.

The gross mispricing of risks in financial paper, again, and the lack of reform in the financial system along with excessive leverage and mispricing of risk, the fragility of long distorted markets if you will, has certainly risen to impressive levels again.

 

It is a familiar template of recklessness, fraud, and  then reckoning.  Afterward there is the usual attempt to blame the government officials which have been corrupted, and the people who have been duped and swindled.  Quite often some scapegoat will be found to be demonized.

 

I am thinking that this time the problem will arise overseas, with the failure of some major financial institutions there.  Perhaps Greece will provide the spark.  Or the Ukraine, or Mideast, or something yet unforeseen.  The failure of some major European bank certainly has historical precedent.

 

And if we do experience another crisis, do not be surprised if the moguls of finance come to the Congress through their proxies again, with a sheet of paper in hand demanding hundreds of billions of dollars, or else.

Last time it was a bail-out, which was the printing of money by the Fed to monetize the banking losses and shift them to the public.  This time they are thinking of something more direct, talking about a bail-in.   What if they eliminated cash, and started utilizing and redploying financial assets like savings and pensions.   The uber-wealthy already have their wealth parked in hard income-producing assets and offshore tax havens.  Who would stop them?

Like war, there will be an end to this kleptocratic economy of bubble economics and financial crises when the costs are borne by those responsible for it, and who so far are benefitting from it, enormously.

 

Tell us why you think it might be different this time.   What has really changed?  From what I can tell, it has not only stayed the same for the most part under the cosmetics of change, and significant portions of the financial landscape have gotten decidedly more dangerous, larger, and more leveraged.

 

Wall Street On Parade

Here Is What’s Fraying Nerves Among the Financial Stability Folks at Treasury

By Pam Martens and Russ Martens

June 10, 2015

On Monday, Richard Berner worried aloud at the Brookings Institution about what’s troubling the smartest guys in the room about today’s markets.

Berner is the Director of the Office of Financial Research (OFR) at the Treasury Department. That’s the agency created under the Dodd-Frank financial reform legislation to, according to their web site, “shine a light in the dark corners of the financial system to see where risks are going, assess how much of a threat they might pose,” and, ideally, provide the analysis to the folks sitting on the Financial Stability Oversight Council in time to prevent another 2008-style financial collapse on Wall Street.

Two notable concerns stood out in Berner’s talk. First was a concern about liquidity in bond markets evaporating rapidly for reasons they don’t yet “sufficiently understand.”

...Another major concern are the bond mutual funds and ETFs that have mushroomed since the 2008 crisis and are stuffed full of illiquid assets or assets which might become illiquid in a financial panic.

Read the entire article here.