SP 500 and NDX Futures Daily Charts

The markets were trying to shake off the weak bank earnings this morning and a post option expiration hangover, when shortly at 9 EDT the SP Ratings Agency changed its outlook on US sovereign debt to negative.

That sent the markets reeling, and the games played intraday were remarkable indeed.

There is intraday commentary on the downgrade and its market impact here

The timing of the downgrade seemed political to me, a note from the monied interests tagged to the Ryan plan which has passed in the Republican dominated House of Representatives.

What next? I expect the markets to try and shrug this off, and take a cue from the late day buying in the futures markets which removed much of today's losses. Like a hopeless drunk, these jokers will not stop until they get behind the wheel and hit the wall.

How Far Can the Fed Go in Manipulating Markets Before It Becomes a Private Banking Fraud?

When does public policy go too far and become an instrument primarily serving private fraud?

I have had this video on the manipulation of the debt markets by the Fed in the Matières à Réflexion links since last week, but moved it here on request because apparently many missed it, and did not understand its importance, the implications.

It is a fairly good example of the rationale for the Fed and its member banks dealing in paper derivatives to manage perception and attempt to 'manage' longer term interest rates. And by extention it also provides the reason and even some of the means in manipulating the price of gold and silver.

Papers such Gibson's Paradox by Larry Summers demonstrate a belief that the price of gold and silver have a definite correlation to long term interest rates, which the Fed is admittedly trying to 'shape.'

One may make the argument that this correlation between gold and the bond no longer exists since the US is no longer on a gold standard, and futher, just because the FED may use derivatives to distort long term rates, that does not mean the Fed and their multinational banking associates are doing the same thing in related markets such as gold, silver, stock prices, LIBOR, etc. It is circumstantial.

But in point of fact the evidence from the Fed's own transcripts, and quotes from various members and bankers, demonstrates that the perception of at least gold and silver in the market is still an active concern and of serious interest to the Fed. So now we have motive and means, and indications in half hidden documents that it is indeed occuring.

Why else would JPM short multiples of the entire supply of silver that probably exists in the world, while also holding massive positions in the derivatives markets, except for the purpose of manipulating the prices?

The recent stonewalling on the release of the relevant documents by the Fed is not frivolous, as well as the antics at the CFTC concerning position limits and investigation into the silver market. What starts out innocently enough obtains a life of its own, and the cover ups ensue, along with the abuses and private profiteering as we saw in the TALF disclosures, and the situation becomes much greater and more far-reaching than its original intent. A well intentioned program can indeed become a money machine for looting the public trust.

The problem of course is that while the Fed and its associated private banks can never run out of their own paper, or the ability to write derivatives on that paper, they can and may very well run out of physical gold and silver to support their financial engineering, if the demand is made to 'stand and deliver.' This has long been identified here as one of their weak spots which may be reached before the more extreme limit of the value at exchange of the bonds and the notes of zero duration, the dollar.

It is never so much the original scheme that brings them down, but it is almost always the ever-expanding cover up of personal larceny.

In other words, gold and silver bullion may expose the weakness of the Treasury, and the Fed and their member banks, and thereby restrict their ability to operate freely in managing perception by manipulating prices and rates. This is why they hold such an animosity to it, and attempt to conceal so many of their dealings in it, even promoting hysterical attacks from friendly sources in the establishment media.



Related: More on the Literal Bernanke Put- FT

SP Changes US Debt Rating Outlook to 'Negative' and SP Intraday, NAV Of Precious Metals

This is the same SP whose ratings were for sale to the banks throughout the build up to the financial crisis, and which has largely escaped investigation and indictment. So, even though their opinion here may be valid, how are we to know that it has not been bought again, with regard to timing and impact?

And of course the word of the downgrade was held completely confidential, even from insiders, right?

As I had cautioned last week, something wicked this way comes.  Its tracks were on the tape, most likely in word leaking out to insiders who succeed as they usually do, not in any personal merit, but by breaking the rules for their benefit.

That is the problem in dealing with an unreformed, unindicted, and corrupt financial sector. Who do you trust? And this has a decided drag on economic recovery.

The failure to reform when he held the mandate was Obama's greatest mistake. But others made the same mistake, from the Congress to the Fed. Their motivation for this policy error will be the subject of much future speculation.

This negative outlook is not a surprise. It is consistent with a growing crisis in the US.

Notice that gold and the Swiss franc, and to a lesser extent silver, were safe havens choice of the people. The bonds were hit especially on the long end, with a flight to the short end. Stocks were hammered in the flight from risk down to support in a fairly cynical manner it seemed to me.

Of course in the secondary action the wiseguys took the opportunity to stage a calculated bear raid on the metals. Kind of like machine gunning the refugees and burning the life boats. Their criminality knows no bounds, has little self restraint, and is lawless, respecting nothing but power.

"Give me control over a Nation's Currency and I care not who makes its Laws."

I am not certain of the attribution of this quote, but as my old school economics professor demonstrated to us again and again, it is certainly the case as we analyzed the development of the European Union and World Trade Organizations in a transnational fiat currency regime.

There is opportunity in these short term swings but only for those will a cool head tempered by experience. In the short term fraudulent pricing and manipulation is widespread, with deceit as their currency. For most it is better to hold to your long term trend investments and not be overextended.

I shifted the weighting in my trading portfolio out of the overweight to the short side taking profits, to overweight bullion on the dip, still hedged.

If you wonder why these bear raids happen, and why the paper bullion bankers defend certain price levels so viciously, often stepping in to hold gains to one or two percent in a day, this may help.

"Open interest in gold futures and options traded on the Comex typically exceeds supplies held in its warehouses. If the holders of just 5 percent of those contracts opted to take delivery of the metal, there wouldn’t be enough to cover the demand, Bass said."

University of Texas Takes Delivery of Bullion

The US markets cannot withstand a determined run on the assets which the banks, and funds, and probably even the Fed have already sold. The financial sector is a deepening cesspool of cover up and deception resembling a confidence scheme, an accident waiting to happen. If it did not involve so many of the well placed and powerful it would have already fallen of its own weight and arrogance.

What more can I do, what else is there to say? What wonders will persuade a people determined to be as gods? What, indeed, is truth, in times of general deception, when even the caretakers cannot be trusted to hold their sacred oaths and duties? And yet this is nothing, compared to what is to come. Walk carefully in the light of God's love, holding to His tender mercies, unless you be misled, gaining some objects and advantages, but losing yourself.

"Let him who walks in the dark, who has no light, trust in the name of the Lord, and rely on his God." Is. 50:10

AFP
S&P adopts 'negative' outlook for US debt

WASHINGTON — Ratings agency Standard & Poor's on Monday revised its outlook on US sovereign debt to "negative" from "stable", citing Washington's looming debt and fiscal deficits.

"Because the US has, relative to its 'AAA' peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable," S&P said in a statement.

A Review on Where We Stand with Regard to Deflation, Hyperinflation and Stagflation

Well, the good news for everyone is that nothing seems inevitable here, that there is almost always a choice, but it is often wrapped up in a nice looking rationale, with all the compulsion of a necessity, for the good of the people.  Us versus them in a battle for survival and all that.  And clever leaders on the extremes provide the 'them' to be dehumanized and objectified.  The leftist wishes to murder the bankers, and the fascist the lower classes and outsiders.  The extremes of both end up making life miserable for almost everybody except for a privileged few.

And so I reiterate that in a purely fiat currency, the money supply is indeed fiat, by command.

People like to make arguments about this or that, about how so and so has proved that the Fed does not or cannot do this or that, that banks really create money only by borrowing, that borrowing must precede this or that.

It's mostly based on a fundamental misunderstanding of what money is all about, with a laser beam focus on hair-splitting technical definitions and loquacious arguments more confusing than illuminating, lost in details.  In a simple word, rubbish.

Absent some external standard or compulsion, the only limiting factor on the creation of a fiat currency is the value at exchange of the issuers bonds and notes, and currency which is nothing more than a note of zero duration without coupon.

If I had control of the Fed, unless someone stopped me, I could deliver to you hyperinflation or deflation without all that much difficulty from a technical standpoint. The policy reaction of those who might be in a position to fire or lynch me is another matter.  The Fed not only has the power to influence money creation in the private banking system.  It has the ability to expand its balance sheet and take on existing debt of almost any type at will and at any price it chooses.

But that is the case as long as the Fed has at least one willing partner in the primary dealers, and the Treasury is in agreement. And even that requirement for a primary dealer is not all that much of an issue given the amounts of existing sovereign and private debts of which the Fed might avail itself for the forseeable future.

So at the end of the day, a thinking deflationist is almost reduced to the argument that 'the authorities will not allow it' or 'will choose deflation rather than inflation'  And this is technically correct. However, let us consider my earlier statement about those who might fire or lynch one for making a highly unpopular choice.

It is economic suicide for a net debtor to willingly engage in deflation when they have other options at their disposal, and especially when those decisions involve people outside the system.

That is not to say that the deciders could not opt for economic suicide, but the people designated to suffer and die for that choice and cause might not take kindly to it. Deflation favors the creditors significantly, and those creditors tend to be a minority of domestic elites and foreign entities.   Both the extremes, hyperinflation and deflation, are choices best implemented in autocratic governments.

There are those who observe that Franklin Roosevelt 'saved capitalism' by his actions in the 1930's and I believe they are correct. If one considers the various other outcomes in large developed nations to the Great Depression, whether it be Italy, Germany, Russia, or Spain, the US came out of it fairly intact politically. People conveniently overlook the undercurrent of insurrection and violence that was festering amongst the suffering multitudes, and the growth of domestic fascist and communist organizations.  There were several plots to overthrow the elected government by military means, although the history books tend to overlook them.

So it is really about making the best choice amongst bad choices. This is why governments choose to devalue their currency, either with quantitative easing, or explicitly against some external standard as the US did in 1933. Because when the debt is unpayable, it must be liquidated, and the pain will be distributed in a way that best preserves the status quo.

Hyperinflation and a protracted deflation are both very destructive choices. So therefore no rational government will choose either option.

They *could* have those choices imposed upon them, either by military force, political force, or by economic force. Economic force is almost always the cause of hyperinflation.

So you can see why a 'managed inflation' is the most likely outcome at least in the US. The mechanism has been in place and performing this function for the last 100 years.

The problem or twist this time around comes when the monetary stimulus does not increase jobs and the median wages, because of some inherent and unreformed tendency in the economy to focus money creation and its benefits to a narrow portion of the populace. The result of this is stagflation which although not indefinitely sustainable can be maintained for decades.  Most third world republics are like this.  A vibrant and resilient middle class is sine qua non for a successful democratic republic, and this has strong implications for the median wage.  The benefits and the risks of growth and productivity must be spread widely amongst the participants.  Oligarchies tend to spread only the risks, keeping most of the benefits to themselves.

This is essentially the reasoning that occurred to me when I looked at the US economy and monetary system in the year 2000.

The one point I remain a little unclear on is how 'hard' the law is regarding the direct monetization of debt issued by the Treasury. I am not an attorney, but I am informed by those familiary with federal statutes that this is a gray area in the existing law but currently prohibited.  But it is easily overcome as I said with the inclusion of one or two amiable primary dealers who will allow the debt issued by Treasury to 'pass through' their hands in the market, on its way to the Fed at a subsidized rate.  For this reason, and for purposes of policy matters, and occasional economic warfare, countries may tolerate TBTF financial institutions with whom they have 'an understanding.' 

I have also come to the conclusion that no one knows the future with any certainty, so we must rely probability and risk management to guide our actions.

So really absent new data the argument is pointless, a matter of uninformed opinions. The dollar will continue to depreciate, and gold and silver and harder currencies appreciate, until the fundamental situation changes and the US economic system is reformed.

I think there are other probable outcomes that involve world government and a currency war, and this also is playing out pretty much as I expected.  Fiat currency can take on the characteristics of a Ponzi scheme, whose survival is only possible by continuing growth until all resistance is overcome.

This is the conclusion I came to in 2000. I admit I was surprised by the Fed's willingness to create a massive housing bubble, and the willingness of the US government to whore out the middle class in their deals with mercantilist nations; their hypocrisy knows no bounds.

So that is the basis of much of my thinking and I wanted to take a moment to share it with you in a compact, highly condensed format.

I remain a little unsettled on the issue of hyperinflation, because there is the possibility that a large bloc of countries could join together to repudiate the dollar. Since so much dollar debt is held in these foreign hands, that is the kind of exogenous force that could trigger a bout of what might be termed hyperinflation. I don't see the dollar going to zero in this, but rather the dollar having a couple of zeros knocked off it, with a new dollar being issued. I have read John Williams case for hyperinflation several times now, and see nothing more compelling in it.

Indeed I think the reissue of the dollar with a few zeros gone is inevitable. It is the timing of that event that is problematic. It could be one year, or it could be fifty years. There is a big difference there for your investment strategy.

“One day you will go the ATM and the dollars will be Blue---not Green ---and you will get a few less than you expected.”

And yes, the government could just get medieval on your asses, and seize all the gold and silver, force you to take the value of the dollar at whatever they say it should be. They could also seize all the farm land, all the means of production, and tell certain groups of people to get on freight trains for resettlement in Nevada. I think we can stipulate that governments can do this, and the people can accept it to varying degrees. If you wish to make this the dominant assumption in your planning then by all means.

For those who simply say "I disagree" or "Go read so and so he has proved this or that" I say that people believe lots of things, and can find data selectively to support almost any outcome they prefer,  But the market is the arbiter here, and the verdict so far is beyond all question. The Fed is doing exactly what they said they would do, so there should be no surprises. And they have more in their bag of tricks.

If there is new data I would certainly adjust my thinking but absent that I now consider this settled to my satisfaction, and wish to turn instead to more thinking on what changes need to occur to prevent the system breaking down, and restoring it to some semblance of reasonable functionality.

Gold Daily and Silver Weekly Charts - Something Wicked This Way Comes

Today was a very early April options expiration for US equities, and we saw quite a few antics in the stocks. Of special interest to many were the games being played with the mining stocks.

There is intraday commentary on gold and silver and the closing of the retail gold window at the Belarus central bank here.

April is supposed to be one of the better months for stocks, but so far it has been correcting fairly steadily from the early April highs.

Gold and silver are starting to get a second wind in this breakout, and the increasing inflationary environment in the global fiat currencies, particularly the dollar, are driving them higher.

This is the latest on US inflation from John Williams at Shadowstats. John tracks the underlying inflationary trends better than anyone else that I know.

"The pace of consumer inflation is accelerating rapidly, with annual CPI-U at 2.7% and CPI-W at 3.0%, while the annualized quarterly, seasonally-adjusted inflation rates have hit 5.2% for the CPI-U and 6.0% for the CPI-W.

These higher inflation numbers are tied directly to the Federal Reserve's successful and ongoing efforts to debase the U.S. dollar, which in turn have boosted dollar-denominated commodity prices such as oil. The inflation pace here normally would be of concern to the Fed, except the U.S. central bank officially ignores inflation tied to food and energy prices, even though, again, those debilitating price increases for consumers are a direct result of Fed policy.

Of particular discomfort to consumers, this inflation has not resulted from booming economic activity and wages, but rather from Fed monetary policy in the context of stagnant/declining broad economic activity.

Inflation has gained the upper hand in retail sales, with sales gains now more than accounted for by rising prices. A pending benchmark revision (April 29th) should show a much weaker recent history for retail sales activity, as the just-published benchmark revision to industrial production did for that series...

Inflation Above 3% Tends to Rattle Consumers. Where consumers look at inflation in terms of out-of-pocket expenses, the threshold of pain has been crossed, with popularly used consumer price indices at or within one month of topping 3% annual inflation. Further, for those who do not get paid in seasonally-adjusted dollars, the 0.5% adjusted CPI-U monthly gain felt more like the 1.0% unadjusted gain."

SP 500 and NDX Futures Daily Charts

I forgot to remind you all that today was the April options expiration for US equities.

Given the thin trade, it was shenanigans abounding.

So far the April equity action is nothing but disappointing, and earnings reports seem lackluster.

Next week should help us to sort things out. Despite today's up day the short term downtrend remains intact.

A Run On the Central Bank of Belarus as Devaluation Fear Forces Halt to All Gold Sales

"Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it bounces, marked, ‘Account overdrawn.’

Ayn Rand

I was a little surprised the people fled to gold and tried to drain the central bank, desperately trying to get out of their fiat currency ahead of a suspected devaluation.

This is how it happens, on a smaller scale.

I was in Moscow in the 1990's when they were starting to flee the Russian rouble for gold, diamonds, US dollars, and vodka. It is hard to imagine what it feels like to watch your life savings simply and relentlessly evaporate away. It was a 'quiet panic' that left a very deep impression on me.

Apparently the US dollar is no longer so much a safe haven in that part of the world. At least that is what I hear.

Belarus is small. When a bigger ship starts to founder, the lifeboats may be very crowded.

It cannot happen.  The authorities will not allow it.  This is what they always say.

In some ways it is already happening.

The Feds are already rationing and throttling gold and silver sales by throwing paper and propaganda at the demand.

I wonder how much of it has been secretly siphoned away by insiders already. The time to buy income producing fixed assets is when there is 'blood flowing in the streets,' but the time to get safe and independently liquid is before that blood starts to flow.

Big things are happening, little brother.

Reuters
Belarus Central Bank Halts Sales of Gold for Roubles

MINSK, April 15 (Reuters) - Belarus' central bank has stopped selling gold to local retail customers for Belarussian roubles it said on Friday, after demand for precious metals soared due to expectations of a currency devaluation.

The bank did not explain its decision.

Belarus is in talks with Russia on a $3 billion bailout package that Minsk hopes will help it avoid a painful devaluation of the rouble and offset the large current account deficit.

Belarussians bought 470 kilograms of gold from the central bank last month, up from 209 kilograms in January and February together, as they sought to protect their savings.

Analysts say that Belarus will have to eventually devalue the rouble by about 20-30 percent even if it receives aid from Moscow. However, the central bank has said it would not make any such moves until late April.

Gold Daily and Silver Weekly Charts - Gold, Silver and Stocks in a Financial Panic

Gold is resilient, bouncing off its tentative right shoulder support. Silver is just awesome, taking no prisoners.

The commodity commentary on the Bloomberg network was particularly ridiculous today. They drew a parallel between the commodity rise into 2008 and the subsequent sharp decline with the rise into 2011, suggesting that there will be a similar decline, without ever mentioning the cause, using ominous sounding words and innuendo.

Uh, as I recall there was a stock market crash in 2008 that pulled down everything including commodities. Funny, they keep forgetting to mention that while predicting a waterfall decline in commodities, and endlessly touting equities.

I will repeat as I have done so over and over, that if there is a general liquidation of all financial assets, gold and silver will take a hit as well, along with most other commodities. Silver will decrease further because it has a high beta or variability.  Since the miners have a correlation to stocks they will take a hit depending on their beta.

This will most likely represent a buying opportunity if you have the right time horizon and capitalization, and of course depending on your economic outlook, because gold and silver tend to  recover more quickly than stocks if there is an economic recovery.

Why?  Because money supply and credit expansion lead productive GDP growth, and in some cases as we have now to a much greater degree than normal because the transmission mechanism between credit and the real economy is broken, with a heavy tax being placed on the inflow of new money by the outsized financial sector. 

This is how it also happened in the Crash of 1929 and the decline of US equities and valuations into the trough in 1933.  And it will most likely happen like this again even when there is an eventual recovery with legitimate and substantial reform.   I expect that reform to also include a significant restructuring of US debt, the international money reserves and arrangements, and of course the US dollar. 

*Could* something else happen?  Yes, and in that case I would do something else.  That is what is called decision making based on data, not speculating on nonsensical quackery and theories, ignoring the actual data provided by the markets and the economy until you run out of money to play the game.

If there is a waterfall decline in stocks, which is a possibility, I would expect to have my trading account weighted to the short side by the time it gets underway, and make a significant sum of money as I have done the last two times this happened in the past ten years.  I would expect not to touch any of my long term gold and silver holdings and take the charges of turning over long term assets such as bullion.  I will not touch them until something fundamentally changes in the makeup of the dollar based money system.

Trying to get positioned well ahead of improbable events is generally pretty dumb, the hallmark of an amateur, but especially if you are doing so using financial instruments like triple ETFs with lots of valuation slippage, and take them as long term positions, thereby almost guaranteeing a loss even if you are eventually right.

Yes anything can happen, but as Walter Bagehot so appropriately observed, 'Life is a school of probability.' 

SP 500 and NDX Futures Daily Charts - Another Day, Another Save, But Not Out of Trouble

Earnings came in somewhat mixed today, but there was some ominous trend news on PC sales this morning.

After the bell, Google missed its earnings per share number.

The bulls saved it for the day, again on lighter volumes, but stocks appear to be struggling, and may even be in a bit of trouble.

I turned more cautious into the close, adding to short positions to hedge bullion longs.

SP 500 Futures Intraday and NAVs of Certain Precious Metal Trusts and Funds - A Whiff of Fear

I would start shifting to a net short if the SP futures crack 1290 to the downside.

Until then I would rather be long gold and silver, including some miners, from the dip as mentioned yesterday, and use any stock index and other asset shorts to hedge positions in miners and perhaps silver.

The Net Asset Value Premium chart is included below.  There is hardly a bubble like activity in those premiums although the divergences are interesting.  They indicate a fear of a break in supply in the physical silver market in my opinion, and not just among retail investors. 

People in the trade know Sprott has the silver AND that they can take delivery of it if push comes to shove and they need actual possession of it for some reason.  There is no other way that I can explain this except as some arbitrage trade.  There must be a fairly sophisticated fear of a risk of a default in the silver bullion market and PSLV is being used to hedge that risk. At least that's my take on this, but I could be wrong.

The economic data continues to indicate a growing stagflation in the US.  Fresh information out of the European sector suggests that a 'retructuring' of sovereign debts may be coming.  The same could be said of the US, but its nice to own the ratings agencies and be providing liquidity lifelines to half the worlds multinational banks.  It adds a panache to one's financial profile,  and is certain to buy at least a few friends amongst TWCTF (those who control the flow).

There could be a cage match brewing between the Anglo-American controlled World Bank, and the European dominated IMF, especially if the BRIC's obtain some representation there.   In most cases of intense diplomatic discussion it is wise to follow the money, and war, including currency war, is continuation of diplomatic efforts by other means.

Carl Levin has referred Goldman Sachs to the SEC and the Justice Department for multiple counts of perjury and violations of various securities laws.   His YESness is trying to raise a billion dollars for his presidential re-election campaign, and those internet donations are not flowing freely from the masses.  So would you like to place any bets on a meaningful investigation and any forthcoming indictments?  Well apparently some are willing to make that bet.  Goldman CDS Jumps on Levin Claims

I'd rather bet that this is some variation of the Chicago-style extortion rackets, with a bait and switch kicker. Been there, seen that done last election. But make little mistake there is almost no one keeping almost anyone of size honest these days between the government and business. The Wall Street satanspawn have co-opted the process.

Without reform of the international trade regime and the imbalanced FIRE sector there will be no sustainable recovery.

Gold Daily and Silver Weekly Charts

A rebound today from the bear market raids of yesterday. The action in the miners intraday was a little obvious. When you can come in and move a market with 1000 share orders you know it is a thin trade. The premiums of CEF and PHYS went into the red intraday and provided a potential opportunity. Took it for a ride, but Your Mileage May Vary.

I had a thought today, that when they make the film about how silver caused the fall of the House of Morgan, that Tilda Swinton would be a good choice for the role of Blythe Masters. For ideas on how to depict the final default in silver, Tilda's last scene in the movie Constantine might offer some ideas.

It's too bad that Leslie Nielsen has passed away, because he would have been interesting as Jamie Dimon. Christian Bale or Dan Akroyd would probably be a good second choices. Hugh Laurie?

Gilbert Gottfried would probably be great as Lloyd Blankfein.  He could probably get it just about right.

The right hand side of the rounded inverse H&S curve in the gold chart was set today hopefully, showing support about where it would have been expected.

Silver remains resilient. QE is here to stay without regard to what antics the Fed may engage in, or what nice words the politicians may use to wrap that dead fish.

Without reform, particularly in the financial sector, there will be no sustainable recovery. The FIRE sector is a regressive tax on the real economy and offers a serious drag on the recovery.

SP 500 and NDX Futures Daily Charts

Nothing is quite broken yet.

JPM's numbers did not thrill the markets this morning.

Gold Daily and Silver Weekly Charts

Both gold and silver tested the expected support levels of 1450 and 40 today and held those levels successfully.

Let's see what new variations on a theme that the TBTF banks will have for us, even as they start trotting out their earnings tomorrow.

SP 500 and NDX Futures Daily Charts

The US equity market is working on a little downtrend here, with discouragement coming on the Alcoa earnings announcement, in which the top line of revenues was missed.

The banks start reporting tomorrow, and if even the financial sector disappoints we may see some additional action to the downside. We have not even yet hit the first big 38.2% retracement for this rally yet.

Benny won't be stopping at QE2, although he might throw a little interest rate razzle dazzle our way, raising while maintaining the flow of easy liquidity to the financial sector.

Gangsters of New York: The Real Housewives of Wall Street and Welfare for the Richest

This is tip of the iceberg stuff that might be defended by some as just the sort of thing that happens incidentally when one manages a large program under duress. So sorry. Nothing to see here, so move along.

That is like the defense being offered in the Raj Rajaratnam insider trading trial today that the defendant, Mr. Rajaratnam, is SO smart that he really didn't need all that insider information that people like Rajat Gupta had been giving him. I doubt they will get an acquittal giving all the tape recordings that they have, but they seem to be playing for a settlement, a wristslap and a fine and disgorgement of profits. That is the traditional outcome when some medium sized macher falls into the occasional government investigation of financial corruption.

The point of showing this here is to highlight the need for financial reform, transparency in government and especially at the Fed which handles huge sums of money and disburses them without effective oversight.

What is especially repugnant is not so much the epidemic of graft and corruption that has crippled the country and infested the regulators and the government. What is especially repugnant is the well financed campaign to go after the victims, the taxpayers and defrauded investors, and to force them to bear the brunt of the pain caused by that graft and corruption, by playing on the meanest and lowest impulses in the people.

And this after providing even more tax cuts and subsidies so these looters and white collar criminals could keep even more of their ill gotten gains. Now that takes some arrogant nerve, and some certainty in the service of your bought and paid for servants in the government, and the stupidity of the average person.

Iceland's voters have had the courage to say 'no.' It remains to be be seen what Ireland will do.

But one has to wonder how far this all goes, and why there was such a knee jerk impulse in so many places to bail out the banks and the insiders, and take the broader public to its knees through a calculated campaign of 'austerity' that plays on the impulse to make someone pay, preferably someone who is weak, and unable to effectively fight back, some outsider or scapegoat, some other.

And why do these disclosures keep showing up on the blogosphere and in relatively marginal publications while the mainstream media maintains its silence? I have been waiting for this story to surface, but I did not expect it to come from the sportswriter at Rolling Stone.

There will be some solemn mumblings on the network news, and then some Wall Street nightcrawler will be brought on the Sunday morning discussion programs to explain why these things are an anomaly, an unfortunate isolated incident, and how we have to stay on the bigger picture, handing out pain for everyone but those who caused the problem, and continue to cripple the real economy by distorting it through graft and corruption and the subornation of perjury and abuses of power.

And Dodd-Frank made the Fed the major regulatory body for the financial sector, and the bought and paid servants of big business continue to try and strangle all other competing regulators like Elizabeth Warren and the Consumer Protection Agency in the cradle.

Perhaps reform is too difficult, and the issues too complex, for anything to be done but surrender the Constitution to the monied interests and the oligarchs. They seem so powerful, and so clever, and after all, they hold your credit cards, and iPods, and favorite television shows hostage.

I would like to believe, even now, that all the people throughout history, ordinary men and women, who have stood for liberty, sometimes against fearsome odds, and given their pain and even their lives, the last full measure of their devotion, for the idea of a free America, shall not have done so in vain, with their memory shamefully dishonored by their children.  That at some point the people will rouse themselves from their slumber, slow to act, but deliberate and unstoppable once they are stirred.  And then the real work of reform and rebuilding can begin.

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustained recovery.

Rolling Stone
The Real Housewives of Wall Street
By Matt Taibbi
April 12, 2011 9:55 AM ET

America has two national budgets, one official, one unofficial. The official budget is public record and hotly debated: Money comes in as taxes and goes out as jet fighters, DEA agents, wheat subsidies and Medicare, plus pensions and bennies for that great untamed socialist menace called a unionized public-sector workforce that Republicans are always complaining about. According to popular legend, we're broke and in so much debt that 40 years from now our granddaughters will still be hooking on weekends to pay the medical bills of this year's retirees from the IRS, the SEC and the Department of Energy.

Why Isn't Wall Street in Jail?

Most Americans know about that budget. What they don't know is that there is another budget of roughly equal heft, traditionally maintained in complete secrecy. After the financial crash of 2008, it grew to monstrous dimensions, as the government attempted to unfreeze the credit markets by handing out trillions to banks and hedge funds. And thanks to a whole galaxy of obscure, acronym-laden bailout programs, it eventually rivaled the "official" budget in size — a huge roaring river of cash flowing out of the Federal Reserve to destinations neither chosen by the president nor reviewed by Congress, but instead handed out by fiat by unelected Fed officials using a seemingly nonsensical and apparently unknowable methodology...

Read the rest of this story here.

Related story Paul Ryan Has Balls by Matt Taibbi

Recently related blog Of the 1% By the 1% and For the 1%

Gold Daily and Silver Weekly Charts - Correction Underway, How Low Will They Go?

Today we had an expected pullback after an amazing advance last week. A correction and consolidation is a necessary and natural element in any bull market.

As you may recall I mentioned last week that I had expected at least one retest of the neckline after the breakout. That expectation remains valid. This sets a near term target for gold in the 1450-55 range. I could even imagine a deeper dip intraday to shake out the weak hands.

If today caused you some anxiety you are probably either holding too much leverage or an overly large position. You may wish to scale back to something you can hold more comfortably.

Silver dropped on a big bearish bet according to some reports.

If you want to see an analog of what this pullback in the 4-5 area *might* look like, please review the correction that silver had in the 2-3 leg of its rally. I am thinking 37ish as a worst case downside estimate unless the equity market liquidates, but given the volatile nature of the squeeze silver may not provide such an obvious buying opportunity.

So a more modest target of 40 may be more consistent with the expected pullback in gold, but I try not underestimate the power of paper in the short term. I am sitting largely in cash for the trading account and would not mind a chance to take on positions at the right support prices.

I added these details on targets by popular request (nagging) from 'The Coupon Guy.'

SP 500 and NDX Futures Daily Charts - Bully Is Wobbly, But Still Standing

A bit of a tough day for the bulls because they expected a rally given the budget agreement from Friday late.

This was not to be as the IMF came out early with discouraging words about the US GDP forecast.

After the bell Alcoa disappointed a bit by 'beating earnings by a penny' but missing sales revenue.

I came into the day net short and went out flattishly neutral. I was expected a further pullback for a number of reasons, but I have shifted to neutral and taken those gains off because I had expected the rally to fail at a little higher point, so I'm not quite ready to pull the trigger on a more determined short position and decline.

So let's see what happens.

Stiglitz: Of the 1%, By the 1%, and for the 1% and the Downward Spiral Into the Abyss

As we can see, the 'crisis' of the US budget impasse was averted, and the theater came to an end. Now the real work of creating a sustainable budget can begin.

The bankers are going to be unrelenting in their attacks on the middle class and the poor. The attacks will be threefold:

1. resisting financial and political reform which caused the crisis in the first place.  Three years after the crisis and no major player has even been indicted, the bonus system is flourishing again, and politicians are taking many millions in funds from the bankers and wealthy elite to promote their agendas.

2. blaming the victims, and compelling them to take the greatest pain of the bailouts, and continuing bailouts and subsidies to the financial class through spending reallocations. The bailouts and spending on the military industrial complex are crowding out the fundamental public functions of government.

3. shifting the impulse to reform from financial reform to 'tax reform' that further supports the monied interests. Cut taxes for the wealthiest as your primary agenda using a variety of deceptive means like promoting a consumption tax, or a flat income tax but with offshore havens and loopholes, so the burden falls most heavily on those who spend the greatest percentage of their labor on subsistence, their basic needs.

Listen to what Stiglitz has to say, and think about it. He is not perfect, the documentary Inside Job was not perfect, but start thinking for yourselves, and stop taking the easy route of allowing others to think for you, and mouth their slogans. They are only too willing to tell you what to think, what is real even if your eyes say no, if you let them.

Get back to the basic idea of reform, of at least bringing the banks back under control, of restoring them to some useful function that does not involve easy money and wealth without risk or production.

Try not to allow the pigmen and their piglets, who are being paid by the system in one way or the other, either directly or indirectly, and start thinking hard about what went wrong, what changed in the 1980's that took the country into such a state that it is in today, and then go from there.

Start thinking for yourself, and stop allowing crafty wordsmiths to play on your emotions, persuading you to drink their poisons with a happy smile. What they say sounds good, but their cup is full of misery for you and your children.

They are using the money system to control you. The stronger and more pervasive it gets, the more it dominates all human transactions, the more they can charge fees and rents on everything you do, in addition to the more esoteric methods of simply creating money and giving it to their friends using accounting rules and credit.

These fellows like to fool you, to say you can't do this or this will not work.  You can't reform Wall Street because they will just find ways around it, so you may as well give up and let them rob you blind. In what other area of human endeavor do people fall for such nonsense? If there was some bully who made you pay them ten dollars every time you left the store would you just accept that?

If you pass a law he would just move down the block? No, you would find those among you with the means and the will to stop them no matter where they went, and to give them the kind of thrashing that might discourage them or anyone else from even thinking about doing it again. That is what has gone wrong.

When a system richly rewards bad behaviour and does not punish it, even when the perpetrators finally make a mistake and lose billions, what do you think will happen the next time?

Time for a change, time for a real reform. Time for people to stop this 'every man for himself' mentality and start thinking about the country again. But therein lies a trap, so devious it makes me shudder, because when people start talking about the national good to you, they often are a wolf in sheep's clothing.

Despair is a trap. Things are broken, and beyond repair, so we must tear down the law and be hard on the people, these sheep, so they will learn by fear and hardship. Leiden macht frei.

What they will learn is lawlessness, to lose their humanity, and to kill you. And then in your fear you will reach for the big man with the iron rod and the will to use it, and there are many distorted, willful creatures who are eager to be that forceful ruler for you, to take up that rod in their pride and lust for power, and use it to knock everything down so that it is just as broken and desolate as they are.

And whoever he may be, he will put 'them' down forcefully, in a widening circle of 'them,' and lead you and yours on a downward spiral into the abyss. This is the lesson of the last century in Russia, China, Germany and Italy.

"What is good? All that increases the feeling of power, the will to power, power itself. What is bad? All that is weakness. What is happiness? The feeling that power is growing, that resistance is overcome. Not contentment, but more power; not peace at all, but war; not virtue, but efficiency. 'The weak and the flawed shall perish' is the first principle of our charity. And one should help them to perish. What is more harmful than any vice? Christian love." Nietzsche, The Antichrist

One way or the other this situation will be resolved. I am very concerned about the outcome and the way in which the US will get there, and the collateral damage that may be inflicted on the rest of the world.

Gold Daily and Silver Weekly Charts - Gold Breakout Targets 1510, Silver 45

Intraday comments on the markets can be seen here.

Gold and silver both broke out cleanly today and nailed the bullion bears' hides to the shed.

I have an open mind about a retest of the breakout for gold, but the short term target has been set at 1500-1510 with the inverse head and shoulder pattern that forms the right shoulder of the big inverse bull pattern that set up this breakout.

Big things are happening behind the scenes if you have eyes to see and ears to hear, and most of all a willingness to consider that all may not be as it appears on the surface. People are making decisions now, by doing nothing and going with the flow, that will effect them for the rest of their lives.

The discussion and threats of a US government shutdown are primarily political theater which does not mean all that much, but it does demonstrate foreign creditors that the politicians are not men and women of serious business, but merely bought things, purchased souls, playing to their various constituencies, fiddling around while the empire burns.

SP 500 and NDX Futures Daily Charts

US equities are a bit on edge ahead of earnings season which starts next week with Alcoa after the close on Monday.

Net Asset Values of Certain Precious Metal Trusts and Funds

This version includes the recent expansion of Sprott Gold and the latest update on the Central Trust.

The premiums to net asset value are interesting.

Notice that the Canadian dollar continues to strengthen against the US dollar, and the gold/silver ratio has dropped to the 36 range.

If the premium on PSLV is rational, then one has to wonder about the premium being applied to CEF. Does the auditing and redemption policy on PSLV make that much of a difference? Something for those who manage these funds to think about as they seek to differentiate themselves from the lesser regarded gold and silver ETFs, SLV and GLD, at least from the perspective of confidence in insurance as well as in gain.

I watched Inside Job last night and I strongly recommend that you see it, and show it to others. It is a very well done, concise, and understandable depiction of the US financial crisis, and how the failure to reform continues to cripple the real economy and the currency, to the detriment of the great majority of the people for the benefit of a relative few who have bent the government, the financial sector, and even the universities to their will.

As an aside, I finally watched No End In Sight, which is another documentary by Charles Ferguson and his team on the Iraq War, concentrating on the blundered occupation and the roots of the insurgency. It is also well worth watching.  

These documentaries are a little painful, because they strip away the illusion that these fellows who run things know what they are doing and are competent. This is why I have been saving them up for the right moment where I thought I could bear it. The recent rise in silver and gold gave me the heart to finally watch them, comforted by a feeling that I was not without alternatives.

I have seen whole companies lose the sense of meritocracy, and become like an oligarchy run by a few strong personalities, and their inner clique, stooges and girlfriends, and effectively destroy themselves while those running it line their pockets.  There is an elite that is wreaking havoc on the US national level, and it is affecting the global economy.

And to cap the evening, I finally watched Bush Family Fortunes by Greg Palast, which was not nearly so well done as Ferguson's two documentaries, but certainly capped off a discouraging evening's viewing.

What struck me the most is the sheer banality and lack of honorable character, much less virtue, in these financial men and politicians. The financial sorts such as Blankfein and Fuld are like caricatures of human beings. And the politicians are obviously phony and beneath contempt, without honor, lacking even the common virtues underneath a cultivated facade, 'whited sepulchres, which appear beautiful outward, but are within full of dead men's bones and all uncleanness.'

“False greatness is unsociable and remote: conscious of its own frailty, it hides, or at least averts its face, and reveals itself only enough to create an illusion and not be recognized as the meanness that it really is. True greatness is free, kind, familiar and popular; it lets itself be touched and handled, it loses nothing by being seen at close quarters; the better one knows it, the more one admires it.”

Jean de la Bruyere

When justice finally comes, hell is coming with it.

SP 500 and NDX Futures Daily Charts

Looked a little wobbly in a relatively wide ranging, low volume day.

The wiseguys are the primarily the ones trading in this market, selling shares back and forth to one another in a Ponzi like manner, and using positioning advantage to skin any specs brave enough to venture in for a trade.

That is why it has a bias to drift higher when nothing happens, but is still a tough market for a non-professional without insider knowledge and tools.

At the first serious whiff of smoke, they will hit the exits and these markets will break hard and fast to the downside. But that's just my opinion and I could be wrong.

There is no sustainable economic recovery. This is opera buffa, a stage managed farce run by the one percent, and for the one percent.

Gold Daily and Silver Weekly Charts

Looked like consolidation today.

Equities appeared to be a little wobbly overall, but they did shake off another large earthquake in Japan and an ECB rate hike.

Let's see how we go into the weekend.

SP 500 Intraday: New 7.4 Earthquake and Tsunami Alert In Japan

7.4 Earthquake 60 miles east of Sendai.  One to two meter tsunami alert.  Fukushima workers evacuated.

US equity futures took a plunge on the news, breaking the morning ramp, but have since regained some of today's gains as the market consider the implications.

I would expect the market to try and shrug this off at least until after the European close, and probably until about 11 PM Central Europe Time.

My heartfelt sympathy to all my friends in Japan. Tokyo was shaken but not damaged as Sendai is quite some distance to the northeast.

The full impact of these natural (and manmade) disasters is not fully factored in to the markets in this interconnected global economy, being smothered at least for now by monetary expansion and excess liquidity, the almost euphoric complacency of the Bernanke put.

At some point reality and the markets will converge.

90 minutes later: Bloomberg reports the tsunami warning has been called off.

SP 500 and NDX Futures Daily Charts - Suicide of the Middle Class

Late breaking news that Portugal will be seeking economic aid.

The volumes remain light, and the market vulnerable to a correction if something should happen which will cause a pickup in selling that overwhelms the Fed's monetary lift.

Marc Faber had an interesting interview with KWN: Bernanke Is Killing the Middle Class.

I am not sure it is Bernanke that is killing the middle class, as much as they are committing suicide to please the top one percent, and differentiate themselves from the poor, who they see as hopeless victims. Nothing else explains why ordinarily intelligent people spout slogans and support ridiculous notions and theories that are designed to reduce themselves and their own children to perpetual servitude.  The politicians and pundits are obviously paid to say and act as they do.  But why do the many willingly march to their own doom?

It tends to support the theory of Bernays, that the great bulk of people do not act on reason, but on emotions which are easily controlled and influenced, and therefore subject to manipulation. I can think of no better example of this than the manner in which the Tea Party was turned away from its initial cause of financial reform and put to the task of plundering the weak, the victims of the Wall Street and governing class frauds, upholding the very abuses by Wall Street that they had originally organized to protest.  As propaganda campaigns go, it does not get much better this.  No wonder the monied interests are so emboldened of late.