Stocks and Precious Metals Charts - Naked Force and Fraud - Epic Wash and Rinse

 

"With a monetary expansion intended to help cure an credit bubble crisis that is not accompanied by significant financial market reform, systemic rebalancing, and government programs to cure and correct past abuses of the productive economy through financial engineering, the hot money given by the Fed and Treasury to the banking system will not flow into the real economy, but instead will seek high beta returns in financial assets.

The monetary stimulus of the Fed and the Treasury to help the economy is similar to relief aid sent to a suffering Third World country.  It is intercepted and seized by a despotic regime and allocated to its local warlords [the financial and their Banks], with very little going to help the people.

These injections of monetary stimulus to maintain a false equilibrium is in reality creating an increasingly unsustainable and unstable monetary disequilibrium within the productive economy.

Those who have taken a huge share of the last three bubbles would like to stop the bubble now, keep their gains, and return to a system of fiscal restraint with light taxation on their windfall of assets.

So why does this not just simply happen?  Because the political risks become enormous.  It is difficult to reduce a population of free men into debt slaves, without risking a significant reaction.  Therefore, it seems most likely that the government and the Fed will try to 'muddle through' for the time being, and look for an exogenous event to break the stalemate.

The traditional solution has been a military conflict, which stifles dissent against the government while generating artificial demand sufficient to energize the productive economy. It is a means of exporting your social misery, official corruption, and fiscal irresponsibility to another, weaker people. [war, what is it good for?  misdirection and distraction]

As a reminder, in a purely fiat currency regime with an absence of external standards, the question of inflation and deflation is a policy decision.  The limiting factor is the latitude with which that policy decision can be made. [a balance between force and fraud]

Jesse,  The Speculative Bubble in Equities,  10 October 2009

 

"Such unsustainable social arrangements are backed by force and fraud.  And as the fraud loses its power over time, force must increase, until there is an end in genuine reform, or eventual self-destruction."

Jesse, Credibility Trap, 24 August 2012

 

"A value-dictated, purely fiat, currency exists through force and fraud.  As the fraud grows thin and obvious, the greater and more pervasive the force must become.  If imports are needed, wars of aggression will follow to extend and maintain the 'sphere of influence', a euphemism for control.  When force finally falters, the currency collapses.  A value-dictated, purely fiat currency is not an innovation— it is among the oldest forms of tyranny."

Jesse, Slip Sliding Away,  5 March 2019

 

"It would be no sin if statesmen learned enough of history to realize that no system which implies control of society by privilege seekers has ever ended in any other way than collapse." 

William Dodd, US Ambassador to Germany, 1933

That was some serious wash and rinse dithering we have seen over the last couple of days.

The second lows have been set, with a vengeance.

The spokesmodels were reduced to yammering inanities.

It was pretty much a reversal of everything from yesterday.

Dollar up sharply with VIX, gold and silver lower, and stocks took the gas pipe.

Let's see what the Non-Farm Payrolls report brings.

Have a pleasant evening.

Stocks and Precious Metals Charts - From Fear to Greed - Powell Sparks 3% Relief Rally Off Second Low

 

"Greed is not good.  Greed is a disease, an aberration of simple honest ambition and necessary provision taken to excess.  This simple distinction may be lost on a people no longer able to distinguish between virtue and sin, honor and expediency, appetite and gluttony, the means and the ends.  

Every great religion, every school of philosophy has cautioned throughout history on the perils of unbridled and unregulated greed.   And yet this generation would make a god of it, although they may not understand, or care, what it is that they are doing, and whom it is they serve. 

Greed, often in company with hubris and fear, is a handmaiden of the corrupting influence of power and triumph of the will.  Greed is contagious, and attacks the very contentment of society at its heart, turning it towards oligarchy and oppression. 

"Greed is a bottomless pit which exhausts the person in an endless effort to satisfy the need without ever reaching satisfaction." 

Erich Fromm 

What the US has today is not market capitalism that predominantly rewards the merits and work of individuals, but rather is the product of dishonest and disordered minds, a system of fraud and plunder by privileged oligarchs masquerading as fair and honest markets of legitimate valuation and price discovery." 

Jesse, Greed Is Not Good, 19 December 2010

 

"A bounce in the major stock indices at this point is customary, perhaps after some more dithering around.  And let's hope it succeeds at making a higher high.  But if not, we'll always have Paris."

Jesse, Second Lows Are In, 29 April 2022

 

Fed Chairman Powell sparked a 3% rally in a relatively listless post-decision market by essentailly taking a 75 bps interest rate increase off the table, and suggesting that the bond market was already pricing in the extent of their 50 bps increases for this year.

Powell tossed the markets a bone, and they reversed in a big, big way.

VIX plummeted.

The Dollar dropped like a rock almost 100 bps.   

Gold and silver rallied.

China comes off a four day national holiday tonight.  This may liven up the precious metals trading there.

So the long and short of it is that the stock markets dithered their way to form and test a second low, and then rocketed off that bottom in a relief rally.

Wow, who could have seen that coming.

Let's see how the Non-Farm Payrolls comes in on Friday.  

A weak number may reinforce the dovish stance.  A strong number will not.

And a lukewarm number will just provide another backdrop for  more wiseguys gaming the system.

As the fellow from Goldman was urging people this afternoon, it's time to take those cash savings out of your bank accounts and pile them into the risk markets.

Yikes.

I have marked the place on the stock index charts where bully needs to be to take the CrashTrak model off the table. 

Have a pleasant evening.

 

 

Stocks and Precious Metals Charts - Dithering Ahead of the Fed - FOMC Tomorrow, NFP on Friday

 

"Some people come into your life as blessings.  Some come into your life as lessons."

Teresa of Calcutta


"Prayer is not calling God in to bless our activities. Rather, prayer takes us into God’s presence, shows us His will, and prepares us to obey Him.    God will use your prayer times to soften your heart and change your focus. As you pray for others, the Holy Spirit will work in your heart so that you have the same compassion for them that God does.  

If you do not love people as you should, pray for them.  If you are not as active in God’s service as you know He wants you to be, begin praying.  You cannot be intimately exposed to God’s heart and remain complacent.  The time spent with God will change you."

Henry Blackaby, Prayer Changes You


The markets are pacing in circles, waiting for the Fed announce their benchmark rate decision tomorrow afternoon.

The markets are pricing in a 50 bp rate increase with several more to follow in subsequent FOMC meetings.

The Dollar backed off a bit but remains firmly on the 103 handle.

The VIX continued to pull back.

The next three days will tell us quite a bit.

Have a pleasant evening.

Stocks and Precious Metals Charts - C'est la Guerre - Europe Roiled by 'Flash Crash'

 

"Citigroup Inc.’s London trading desk was behind a flash crash in Europe that sent shares across the continent tumbling after a sudden 8% decline in Swedish stocks.  The sell off was triggered by a large erroneous transaction made by the U.S. bank’s London trading desk, according to people with knowledge of the matter who asked not to be identified discussing private information.  A knee-jerk selloff in OMX Stockholm 30 Index in five minutes wreaked havoc in bourses stretching from Paris to Warsaw toppling the main European index by as much as 3% and wiping out 300 billion euros at one point." 

Bloomberg, Citi’s London Trading Desk Behind Rare European ‘Flash Crash’, 2 May 2022

 

"Plus ça change, plus c'est la même chose." 

Jean-Baptiste Alphonse Karr, Les Guêpes

 

"The market was thrown into confusion on 2 August 2004 when Citigroup pushed through EUR11 billion in paper sales in two minutes over the automated MTS platform.  As the value of futures contracts fell and traders moved to cover their positions, Citigroup re-entered the market and bought back about EUR4 billion of the paper at cheaper prices.  

The strategy was dubbed Dr Evil, after the Austin Powers character, in an internal e-mail circulated by the traders.  Immediately afterwards MTS moved to impose temporary limits on the value and volume any one dealer can push through the system at a time.  MTS also suspended Citigroup from trading on its bond network for one month after finding that the UK bank breached certain market regulations." 

Finextra, Citi bond traders indicted over 'Dr Evil' trade, 19 July 2007

 

"In a community where the primary concern is making money, one of the necessary rules is to live and let live.  To speak out against madness may be to ruin those who have succumbed to it.   So the wise in Wall Street are nearly always silent.  The foolish thus have the field to themselves.   None rebukes them." 

John Kenneth Galbraith, The Great Crash of 1929 

 

Seriously, how can one expect a multi-billion dollar trading platform or its regulators to bother with safeguards and protections against sociopathic rogue traders or systemically critical 'typos.'   LOL

The watchdogs of the fourth estate was too busy swooning over the international cast attending the Michael Milken conference at the Beverly Hilton to be concerned about any of these market-busting, existential questions.

Stocks were slumping hard today, confirming those lower lows.

And then we saw a miraculous bounce in the afternoon to take them back to the green. 

Sounds like a bit of bottom dithering and then a bounce.

Who could have seen that coming?

Gold and silver were slammed today, ahead of the FOMC on Wednesday and the Non-Farm payrolls on Friday.  

 What a surprise.

Although silver bounced back a bit in sympathy with equities.

The dollar bounced back up to the higher 103 handle.

What will they think of next?

Below is an update to the market dislocation 'CrashTrak' model.  

As a reminder, major market dislocations are low probability events, even at this stage.  

And we are not looking at the number of times that the markets have traced this pattern, and it has not worked out to a major further decline.

The next two steps in this model are by far the most important.  So far this is just flirting with disaster.

And as always, we may recall that we are in the modern era of major market intervention with easy money.

Have a pleasant evening.