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The divergence between gold and the broad stock indices is highly encouraging that the precious metals have put in at least a short term bottom, and may threaten to break out over the next couple of weeks.
This is still a very slow time of the year, and seasonally weak for precious metal investments. But favorable winds are just around the corner.
On a breakout, the intermediate target for gold will be around $1755, with some pauses and at least one larger pullback along the way.
Fairly disappointing Jobs Report, but Wall Street has its eye on earnings season and the puffed up corporate numbers that will start rolling out next week.
Watch out for the short term noise, and keep your attention focused on guidance, rather than current numbers which are two parts accounting fluff and three parts Fed subsidies.
If the consumer is not healthy, American business will not be healthy. The effects may just show up with a lag.
Additionally, I have included the daily cash charts of the SP 500 and the NDX with some indicators that seem to suggest that the markets are overextended for the short term, and are ready for some consolidation and perhaps a pullback after this amazing run higher. It can of course become even more overbought in the short term.
A weak report, but not as tragically dramatic as the silly revisions higher that preceded it based on the ephemeral ADP report.
Traders and politicians like the volatility that emotions bring to the decision making process. Jolting the herd from here to there serves to distract them while moving them along in the desired direction.
The recovery is weak, returning to the weak job growth that was evident prior to the crash of 2008, within the bounds of 2005-2006 for those wearing their Bush goggles. The economy is sick, and could possibly take a turn for the worse. It badly needs a structural reworking, and unfortunately that discussion is not even on the table. The monied interests are setting the agendas and shaping the news.
Simple short term stimulus will not 'fix it,' and fiscal austerity is snake oil from the same con men and grifters that brought you the financial crisis with a sick, unbalanced economy on its way to third world status. What is the 'industrial policy' of the US. I would submit that it is still deregulation, the deification of ideal markets that do not exist, and the shifting of more capital to the few in hopes of a trickle down effect that never really occurs. The funds are used to further bind the real economy with artificial impediments and rents.
From budget surplus to death spiral in a little more than a decade. Gee, where did we go wrong?
You all know what needs to be done. But there is not nearly enough to slake the greed of the powerful. So down this road we must go.
Here's one for those who favor giving tax breaks on offshore funds for multinationals who use accounting gimmicks and loopholes to realize their income in tax haven countries. The program allows corporations like GE to repatriate their stashed cash on the cheap, and pay it out in tax free dividends to wealthy shareholders and bonuses for their executives.
It is a powerful incentive to send even more employment and economic activity offshore, and for countries to engage in state directed mercantilism. There are no Porterian 'natural competitive advantages' involved, but there is a strong artificial disincentive to allow domestic consumption and advancement of the mercantilist's own middle class. There is, at the end of the day, the least common denominator of the health and freedom of the many as the unifying corporate objective, and the principle of one world government.
Trickle down is a canard. Globalization and 'free trade' is a means of beating down all independent public policy and local sovereignty. There is no purely objective macroeconomics without major policy assumptions as to the public 'good.' Naturally efficient and rational markets are the economic equivalent of Piltdown Man.
And there is no such thing as sustainable 'free trade' between independent political entities under fiat currency regimes, without assuming a perfectly rational system run by angels. The game is rigged and the regulators and politicians are bought, always and everywhere, under this type of artificial construct, with a nationless oligarchy as its ultimate objective.
In case you were wondering what the Congress and the Administration were doing with all those faxes, cards, phone calls, and letters you were sending in about the need for financial reform and tougher law enforcement, they decided to make it official policy not to aggressively prosecute the laws against white collar crime in 2008. Another innovation in outsourcing justice through extended self-regulation.
Apparently they told this privately to the Wall Street banks and their lawyers in 2008, but neglected to copy the American public on the memo.
Some have noticed the lack of reform, but the monied interests have done quite a successful PR job in refocusing the national discussion on priorities involving social issues, and the reform of the support systems for the weak, the unfortunate, and the elderly. Turning one group against another, and objectifying your intended victims through slogans and stereotypes, has always been an effective method of bending the herd to your will. Score one for Edward Bernays.
As W.C. Fields said, 'Never give a sucker an even break.'
How about it, feeling more confident yet? We know some people who are.
At least they have not overtly played the disability or the race card - yet. But things are relatively calm, and why be glum, the night is still young.
New York Times
Behind the Gentler Approach to Banks by U.S.
By GRETCHEN MORGENSON and LOUISE STORY
July 7, 2011
As the financial storm brewed in the summer of 2008 and institutions feared for their survival, a bit of good news bubbled through large banks and the law firms that defend them.
Federal prosecutors officially adopted new guidelines about charging corporations with crimes — a softer approach that, longtime white-collar lawyers and former federal prosecutors say, helps explain the dearth of criminal cases despite a raft of inquiries into the financial crisis.
Though little noticed outside legal circles, the guidelines were welcomed by firms representing banks. The Justice Department’s directive, involving a process known as deferred prosecutions, signaled “an important step away from the more aggressive prosecutorial practices seen in some cases under their predecessors,” Sullivan & Cromwell, a prominent Wall Street law firm, told clients in a memo that September.
The guidelines left open a possibility other than guilty or not guilty, giving leniency often if companies investigated and reported their own wrongdoing. In return, the government could enter into agreements to delay or cancel the prosecution if the companies promised to change their behavior.
But this approach, critics maintain, runs the risk of letting companies off too easily.
“If you do not punish crimes, there’s really no reason they won’t happen again,” said Mary Ramirez, a professor at Washburn University School of Law and a former assistant United States attorney. “I worry and so do a lot of economists that we have created no disincentives for committing fraud or white-collar crime, in particular in the financial space."
While “deferred prosecution agreements” were used before the financial crisis, the Justice Department made them an official alternative in 2008, according to the Sullivan & Cromwell note.
It is among a number of signs, white-collar crime experts say, that the government seems to be taking a gentler approach.
The Securities and Exchange Commission also added deferred prosecution as a tool last year and has embraced another alternative to litigation — reports that chronicle wrongdoing at institutions like Moody’s Investors Service, often without punishing anyone. The financial crisis cases brought by the S.E.C. — like a recent settlement with JPMorgan Chase for selling a mortgage security that soured — have rarely named executives as defendants..."
Read the rest of the story here.
The metals continue to move higher, in fairly steady manner, after the coordinated smackdown at the Comex for the July options expiration.
Gold and silver are typically capped and then hit on a US Non-Farm Payrolls report. Today was the capping of price. Let's see if they can hold their own tomorrow. If they do get pushed down hard, it may very well set up a short term entry point, providing the asset markets do not start liquidating based on some failure or exogenous event.
It is interesting to see the strong negative correlation between the dollar and stocks. It almost looks like they are moving asset allocations around the plate, trying to whistle up the wind of retail buying.
The metals will be entering a seasonally stronger period of the year after July based on the last ten years, barring the liquidity panic of 2008.
Major players are reported to be calling around Wall Street to reassure the bankers that the US budget deficit debate is a show piece to allow the politicians to serve up some meaningless symbolic diversions to their various constituents. Not to worry, the deal will be done, with token sacrifices from the wealthy and a further erosion of the economic viability of the middle class, the elderly, and the weak. And remember to send in those corporate donations in time for the 2012 elections.
JPM was found by the SEC, at the prompting of the states and some exceptionally blatant evidence, to be bribing officials and systematically corrupting bond markets over a long period of time.
They have settled with the SEC, and issued a press release blaming rogue traders who operated without the knowledge of management.
JPMorgan Chase does not tolerate anticompetitive activity or other violations of law. The firm assisted the government agencies in their investigations and is pleased to have resolved this matter with its regulators. The majority of the funds being paid under the settlement agreements will be distributed to municipalities and other tax-exempt issuers.
The investigations focused on a small desk that was discontinued and on certain employees who are no longer with the firm. These employees concealed their conduct from management.
The firm's policies -- both now and during the period in question -- expressly prohibit the conduct that gave rise to these proceedings. During the course of the investigations, the firm initiated enhanced supervisory protocols and worked with its regulators to further strengthen its compliance programs in the public finance business. These improvements included
implementing a heightened supervision program, increasing surveillance, and increasing antitrust, ethics and other compliance training. The firm will continue to strengthen these programs.
Under the terms of the settlements, JPMorgan Chase will pay a net amount of $211.2 million as follows: $50.0 million to the IRS; $51.2 million to the SEC; $35.0 million to the OCC; and $75.0 million to the State Attorneys General. Of those funds, $129.7 million will be eligible for distribution to municipalities and other tax-exempt issuers. The settlements are not expected to have any material impact on the firm's earnings.
One wonders if the Justice Department will be pursuing specific criminal charges against these individuals, in addition to banning them from participation in the securities markets, but allowing them to remain free to enjoy their enormous salaries and bonuses.
Stay tuned as more of these control frauds continue to fall apart, and the corporate media and the monied interest's demimonde try to ignore them and move along.
As in the case of the Madoff Ponzi scheme, if trading results are improbably and too consistently good, there is a high likelihood that fraud and corruption is being concealed.
Tomorrow is the Non-Farm Payrolls report for June.
This market rally is over-extended, but it could drift higher in the absence of news founded in economic reality.
There is optimism over the earnings season which starts shortly.
The boyz are quite anxious for mom and pop and a few of the institutions to put some cash in this market. You can't keep passing around a hot potato forever.
Tomorrow eyes will be on the Non-Farm Payrolls report.
The sovereign debt crisis looms large although largely ingnored for now in the United States of Amnesia.
Informed sources and major players are assuring Wall Street that the US Congress will reach a deal on the debt limits, and what transpires for now is to impress the various constituencies as to their seriousness in dealing with the problem.
Such serious charges of bribery and corruption that are settled with fines and no admission of guilt despite overwhelming evidence often initiated by the States, is a merely the cost of doing business when one is occasionally discovered in an ongoing confidence game.
This global financial cartel robs billions from the public on a regular basis across a wide range of financial and commodity markets.
The fines are paid, a highly compensated individual takes the nominal 'punishment' while keeping the proceeds, the politicians and regulators are paid, and the fraud continues on.
As Bloomberg TV snarkily observed today, the $238 million dollar fine represents less than ONE day's take for JPM, only six hours work in the markets. The stock was up on news of the favorable settlement.
Where is the reform? Where is the justice? Where is the deterrence?
Why not ban the institution who failed to control itself and its employees from participation in Federal Reserve banking subsidies and in government financial markets for some reasonable period of time?
Better yet, why are those who speculate in and manipulate the markets for their own gains with one hand, also taking cheap subsidy money from the government to 'improve the economy' and economic confidence with the other? Where is the repair of the public trust betrayed? Is this yet another fallacy of the efficient and perfectly rationale, self-regulating markets?
It is hard to determine what Obama really is, what he stands for, behind the artfully crafted, histrionic façade. He seems at times to be a sort of Herbert Hoover, or even a Neville Chamberlain, consistently giving ground to the bankers' bully boys. Or is he just another power groupie like so many others these days, without principle or character, wishing to 'get his share,' wishing to be accepted?
I suspect that like most of the politicians and bureaucrats he is without a moral compass, rationalizing a grotesque selfishness above honor, oath, and duty, despising the many, worshipping at the altar of greed.
The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustained recovery.
SEC
SEC Charges J. P. Morgan Securities with Fraudulent Bidding Practices Involving Investment of Municipal Bond Proceeds
Washington, D.C., July 7, 2011 – The Securities and Exchange Commission today charged J.P. Morgan Securities LLC (JPMS) with fraudulently rigging at least 93 municipal bond reinvestment transactions in 31 states, generating millions of dollars in ill-gotten gains.
To settle the SEC’s fraud charges, JPMS agreed to pay approximately $51.2 million that will be returned to the affected municipalities or conduit borrowers. JPMS and its affiliates also agreed to pay $177 million to settle parallel charges brought by other federal and state authorities.
“JPMS improperly won bids by entering into secret arrangements with bidding agents to get an illegal 'last look' at competitors’ bids,” said Robert Khuzami, Director of the SEC's Division of Enforcement. “Municipal issuers and investors didn't stand a chance against the fraudulent strategies JPMS and others used to guarantee profits."
Elaine C. Greenberg, Chief of the SEC's Municipal Securities and Public Pensions Unit, added, “When powerful financial institutions like JPMS conspire with each other to intentionally violate regulations designed to ensure fair investment prices, the integrity of the municipal marketplace becomes corrupted. Rather than playing by the rules, the rules got played.”
Typically, when investors purchase municipal securities, the municipalities temporarily invest the proceeds of the sales in municipal reinvestment products until the money is used for the intended purposes. Under relevant Internal Revenue Service (IRS) regulations, the proceeds of tax-exempt municipal securities generally must be invested at fair market value. The most common way of establishing fair market value is through a competitive bidding process in which bidding agents search for the appropriate investment vehicle for a municipality.
The SEC alleges that from 1997 through 2005, JPMS’s fraudulent practices, misrepresentations and omissions undermined the competitive bidding process, affected the prices that municipalities paid for reinvestment products, and deprived certain municipalities of a conclusive presumption that the reinvestment instruments had been purchased at fair market value. JPMS’s fraudulent conduct also jeopardized the tax-exempt status of billions of dollars in municipal securities because the supposed competitive bidding process that establishes the fair market value of the investment was corrupted. The employees involved in the alleged misconduct are no longer with the company.
According to the SEC’s complaint filed in U.S. District Court for the District of New Jersey, JPMS, acting as the agent for its affiliated commercial bank, JPMorgan Chase Bank, N.A., at times won bids because it obtained information from the bidding agents about competing bids, a practice known as “last looks.” In other instances, it won bids set up in advance for JPMS to win (“set-ups”) because the bidding agent deliberately obtained non-winning bids from other providers, and it facilitated bids rigged for others to win by deliberately submitting non-winning bids.
Without admitting or denying the allegations in the SEC’s complaint, JPMS has consented to the entry of a final judgment enjoining it from future violations of Section 15(c)(1)(A) of the Securities Exchange Act of 1934 and has agreed to pay a penalty of $32.5 million and disgorgement of $11,065,969 with prejudgment interest of $7,620,380. The settlement is subject to court approval. (This judgements to 'not do it again' are routinely ignored even by their own records. Why do they even bother?)
In a related enforcement action, the SEC barred former JPMS vice president and marketer James L. Hertz from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, and from participating in any penny stock offering. This sanction is based on Hertz’s December 6, 2010 guilty plea to two counts of conspiracy and one count of wire fraud for engaging in misconduct in connection with the competitive bidding process involving the investment of proceeds of tax-exempt municipal bonds. The Commission recognizes Hertz’s cooperation in the SEC’s investigation and investigations conducted by other law enforcement agencies...
Metals are trying to stick a bottom here after being pushed down artificially last week for Comex options expiration.
There is some inclination of the perception managers and sorcerer's apprentices to hit the metals around a Non-Farm Payrolls number, especially if it is below expectations, in order to provide reassurance that all is well in the paper chase.
Market is ignoring bad news and is focused on the Non-Farm Payrolls Report on Friday, and the beginning of earnings season next week.
Could the manipulation of gold and silver prices last week for option expiration at the Comex have been any more obvious?
The divergence between the paper markets and the physical economy is becoming increasingly stark on a number of fronts. This is a phenomenon that often marks the late stages of a control fraud, or a Ponzi scheme, as it begins to lose traction and confidence.
Gold and silver had rather healthy rallies today after the artificial pounding which they had taken in pre-holiday markets in honor of Comex futures options expiration.
Mining shares tended to outperform the metals as the relationship between the miners and the metals began to converge again to a more normal correlation.
This afternoon all the safe havens including the dollar took a leg up as it became clear that the banking cartel will not allow Europe up for air.
The looting will continue until reforms are enacted and criminal penalities for rigging markets and defrauding the public are enforced.
I remain long the metals and miners and short the broad indices, although I did make some adjustments today and took some mining profits off the table, with their associated hedges.
Stocks levitated on light volumes ahead of the ADP report on Thursday and the June jobs report on Friday.
Moody's downgraded Portugal's credit rating around 2 PM NY time, and this took some of the wind out of the market's sails. Nice of them to wait until after the European close to do so. The agencies remain the creatures of Wall Street, and possibly, of US government policy.
This rally is full of air. But try not to get in front of it.
Obama speaks this evening on the efforts of the US to reach a budget agreement that raises revenue in addition to cutting spending before the Treasury exhausts the ability to meet its obligations.
There are those who foolishly desire such a default, as yet another opportunity to loot the real wealth of the nation, and to foment unrest as an occasion to increase their power.
Such is the way to tyranny.
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Until there is reform, there will be no security, no growth, and no peace.
Reuters
Moody's cuts Portugal ratings by 4 notches to junk
Tue Jul 5, 2011 2:11pm EDT
NEW YORK, July 5 (Reuters) - Moody's Investors Service on Tuesday cut Portugal's credit rating by four levels to Ba2, two notches into junk territory, saying there is great risk the country will need a second round of official financing before it can return to capital markets.
Reuters
FOREX-Euro snaps six-day advance as Moody's cuts Portugal
Jul 5, 2011 7:36pm BST
NEW YORK, July 5 (Reuters) - The euro slid against the dollar and the Swiss franc on Tuesday, snapping six straight days of gains, after Moody's cut Portugal's credit rating to junk.
Weak euro zone data and concerns on China had already weighed on risk sentiment and boosted safe-haven currencies. Concerns about Greece have not faded despite the approval of 12 billion-euro loan by euro zone finance ministers, and the Moody's downgrade of Portugal only added to risk aversion.
Moody's Investors Service cut Portugal's credit rating by four levels to Ba2, two notches into junk territory, saying there is great risk the country will need a second round of official financing before it can return to capital markets.
"This renews the question of whether or not just Greece but the other peripherals are likely to need more bailouts," said Brian Dolan, chief currency strategist at Forex.com in Bedminster, New Jersey. "These issues were not extinguished last week. There was a nice dose of water poured on them, but they are still smoldering, and this is like adding gasoline to those smoldering ashes."
The euro dropped 1.7 percent against the safe-haven Swiss franc EURCHF=EBS to a low of 1.21150, francs, pulling back from a five-week high touched on Monday on trading platform EBS.
The euro was down around 0.8 percent against the dollar at $1.44267 EUR=EBS on EBS, taking a breather from recent gains made after Greece approved tough austerity measures last week. The euro had gained more than 2 percent against the greenback last week in its best weekly performance since January.
On Monday the euro hit a one-month high versus the dollar at $1.45800.
Traders cited talk of stops through $1.44400-$1.44500 ahead of bids $1.44300/$1.44350.
The Portuguese credit ratings cut followed another setback for Greece on Monday when ratings agency Standard & Poor's warned it would treat a rollover of privately held Greek debt, now being discussed, as a selective default.
Greece also needs a second aid package worth some 110 billion euros, which euro zone finance ministers said would be made final by mid-September.
Falls in the euro accelerated after the Markit Eurozone Purchasing Managers' Index showed growth in the euro zone's dominant services sector slowed to its weakest pace since October.
Euro zone retail sales data was also lower than forecast.
One factor capping losses in the euro was Thursday's ECB policy meeting, An ECB rate increase has been well factored in by the market, analysts said.
Price moves post meeting will hinge on the language that ECB President Jean-Claude Trichet uses at his news conference after the formal announcement, with investors focused on what he says about inflation.
"Dropping the reference to 'strong vigilance' would signal a short pause at least in the tightening cycle and likely see the euro rally fade again," said Shaun Osborne, chief currency strategist at TD Securities in Toronto.
Earlier, Chinese media reports about a possible rate rise in China this weekend and a report by rating agency Moody's saying the scale of problem loans to local governments in China may be much bigger than previously thought also hurt risk appetite, lifting the dollar as well.
"We have gathered here to affirm a faith, a faith in a common purpose, a common conviction, a common devotion. Some of us have chosen America as the land of our adoption; the rest have come from those who did the same. For this reason we have some right to consider ourselves a picked group, a group of those who had the courage to break from the past and brave the dangers and the loneliness of a strange land.
What was the object that nerved us, or those who went before us, to this choice? We sought liberty; freedom from oppression, freedom from want, freedom to be ourselves. This we then sought; this we now believe that we are by way of winning.
What do we mean when we say that first of all we seek liberty? I often wonder whether we do not rest our hopes too much upon constitutions, upon laws and upon courts. These are false hopes; believe me, these are false hopes. Liberty lies in the hearts of men and women; when it dies there, no constitution, no law, no court can even do much to help it. While it lies there it needs no constitution, no law, no court to save it.
And what is this liberty which must lie in the hearts of men and women? It is not the ruthless, the unbridled will; it is not freedom to do as one likes. That is the denial of liberty, and leads straight to its overthrow. A society in which men recognize no check upon their freedom soon becomes a society where freedom is the possession of only a savage few; as we have learned to our sorrow.
What then is the spirit of liberty? I cannot define it; I can only tell you my own faith. The spirit of liberty is the spirit which is not too sure that it is right; the spirit of liberty is the spirit which seeks to understand the mind of other men and women; the spirit of liberty is the spirit which weighs their interests alongside its own without bias; the spirit of liberty remembers that not even a sparrow falls to earth unheeded; the spirit of liberty is the spirit of Him who, near two thousand years ago, taught mankind that lesson it has never learned but never quite forgotten; that there may be a kingdom where the least shall be heard and considered side by side with the greatest.
And now in that spirit, that spirit of an America which has never been, and which may never be; nay, which never will be except as the conscience and courage of Americans create it; yet in the spirit of that America which lies hidden in some form in the aspirations of us all; in the spirit of that America for which our young men are at this moment fighting and dying; in that spirit of liberty and of America I ask you to rise and with me pledge our faith in the glorious destiny of our beloved country.”
Judge Learned Hand, 21 May 1944
With Greece and the end of QE2 under its belts, it was 'risk on' for Wall Street as the VIX plummeted and the safe havens of gold, bonds, and the dollar were shunned by funds eager to squeeze the shorts in the equity markets.
What next? Today was very light volumes with Canada Day and the July 4th holiday weekend, and next week will likely also be light trading, with many North Americans away on holiday.
Let the market come to us. The short term trend reversals look overdone, but they may not be over because they suit the FED and the government quite well.
This *could* be a kind of stealth QE3 - market interventions through third parties and jawboning.
And yet at the same time there has been a 'stunning plunge' in commercial gold shorts.
A coincidence of the Greek crisis and the end of QE2 had a lot of bears leaning into the short side of the market. When Greece was finessed for the short term, and the end of QE2 did not produce the forecast immolation, the short term trends turned sharply, and it was 'risk on' with the dollar and gold and bonds weakly falling and stocks soaring.
So what next? In the short term this equity move looks a bit overdone, but until volumes pick back up it may drift even higher unless something happens. I think it would be hard to be too cynical about this market and the US governance model in general. Lies, easy money, oath-breaking, and double dealing seem to be prevalent.
Zynga Files One Billion Dollar IPO
Late breaking Friday after the close news, the SEC is escalating their investigation of St. Joe's and names chairman Bruce Berkowitz.
Overall the problems in the economy and the financial system are not being dealt with effectively at the source, and the coverups continue. Any time a reform, or even an assertion of the law and justice, is undertaken, the financiers respond with threats of crashing the economy. This is due in large part to their faithful servants in the Republican and Democratic parties, and the weak-kneed American president.
Have a pleasant holiday weekend Americanos, and we'll see how Asia opens on Sunday evening your time.
Silver proved to be a little more resilient than gold today, although both held their levels fairly well as the Street was engaged what is snarkily called 'window dressing,' which basic means rigging the valuations of the market.
Nothing has changed. Let's see how the holiday shortened week trades as we kick off the third quarter, and in two weeks, US earnings season with Alcoa.
The US dollar index continued its decline, as fund managers put forward a herculean effort to optimize their bonuses by buying equities.
On the bright side, Hans Nichols of Bloomberg Washington is reporting that Timmy Geithner may be leaving the government after the budget deal is done. Just another compelling reason to hope for a quick resolution.
Or maybe not.
One shudders to think who Obama might put forward, and what the confirmation process might look like in Congress unless he chooses someone to the right of Andrew Mellon.
Given his past history of selecting unexpected candidates somewhat over-friendly to corporations and Wall Street, one can only wonder.
The paint was going on thick and heavy today for the end of quarter, as the trading desks and hedge funds were optimizing their bonuses. Let's see how we go into the US holiday weekend.
