SP 500 and NDX Futures Daily Charts

Another big downward plunge in the morning, and a steady drift up from there for much of the afternoon on light volumes.

The US markets will be closed on Monday for the Martin Luther King holiday.

Sachs: The Price of Civilization

What I am currently reading is The Price of Civilization by Jeffrey Sachs.

This financial crisis and the failure to address it effectively is the natural outcome for a society that embraced the golden calf of selfishness and greed,  the will to power, and anything goes in the pursuit of wealth, with its roots in the 1980's at least.   As we have seen throughout history and in our own experience, the heirs of other people's hardship and unearned wealth through luck or birth often become dissolute and corrupt in their later years.   And so it can be with the character of a generation.

As an American economist, Sachs bears some past responsibility for this situation in past actions and advice given. It does seem he has had an epiphany of sorts in the past few years. But one has to wonder if the baggage he carries will permit him to become truly part of the solution.  Nevertheless, his points are often well-taken. I wonder if the changes can even begin to come from those who are so vested in the existing system.

The problems are too deeply rooted in corruption to be cured by changing one thing, even a pivotal element such as adopting a different monetary standard, reducing leverage, or the Volcker rule. Those may help but if only it were that simple. And destroying the government to reform it is surely the most naive folly of them all.

How can a gold standard protect people when the financial interests now feel free to loot their accounts of it, and will probably go relatively unpunished?   How can the Volcker rule, or any regulation for that matter, protect the public when laws are openly flouted, fraud becomes the general condition, and none are prosecuted for it? What is the deterrent then that provides the law its force in justice and example?   There is a certain watershed event in every outbreak of lawlessness that once passed brings an almost inevitable acceleration of the rise of the worst and the decline of civility.

It is not that this generation is worse than any other. Rather, it is because it thinks it is different, better, higher, above all others.   And out of this rises the ability to rationalize ideologically, and with lessening pangs of conscience, the worst of their excesses that is frightening. This is the path that allows the most powerful, the Übermensch, to rob, torture, starve, and euthanize the weak at their own discretion, or sometimes merely for the sake of expediency and enjoyment.  It is the most virulent moral epidemic of the early twentieth century, and the most pernicious vanity of human history, attempting a resurgence.  And the great voices of conscience and cultural transmitters are remarkably silent.

The greatest impediment to reform and renewal is the gullibility, vanity, and meanspiritedness of a self-absorbed cultural elite that pushes beyond all reason, flouting the laws that protect even them,  and strikes the Faustian bargain that eventually brings their self-destruction.   It is the fall of Rome, the British Empire and the Soviet Union.  It is an old story of hubris that leads to downfall and decline.

The Price of Civilization
Reawakening American Virtue and Prosperity
by Jeffrey D. Sachs

At the root of America's economic crisis lies a moral crisis: the decline of civic virtue among America's political and economic elite.  A society of markets, laws, and elections is not enough if the rich and powerful fail to behave with respect, honesty, and compassion toward the rest of society and toward the world. America has developed the world's most competitive market society but has squandered its civic virtue along the way. Without restoring an ethos of social responsibility, there can be no meaningful and sustained economic recovery.

I find myself deeply surprised and unnerved to have to write this book. During most of my forty years in economics I have assumed that America, with its great wealth, depth of learning, advanced technologies, and democratic institutions, would reliably find its way to social betterment.  I decided early on in my career to devote my energies to the economic challenges abroad, where I felt the economic problems were more acute and in need of attention. Now I am worried about my own country. The economic crisis of recent years reflects a deep, threatening, and ongoing deterioration of our national politics and culture of power.

The crisis, I will argue, developed gradually over the course of several decades. We are not facing a short-term business cycle downturn, but the working out of long-term social, political, and economic trends. The crisis, in many ways, is the culmination of an era-the baby boomer era- rather than of particular policies or presidents. It is also a bipartisan affair: both Democrats and Republicans have played their part in deepening the crisis.

On many days it seems that the only difference between the Republicans and Democrats is that Big Oil owns the Republicans while Wall Street owns the Democrats. (I beg to differ.  The FIRE sector and Big Pharma have considerably diversified their portfolios)  By understanding the deep roots of the crisis, we can move beyond illusory solutions such as the "stimulus" spending of 2009-2010, the budget cuts of 2011, and the unaffordable tax cuts that are implemented yea rafter year. These are gimmicks that distract us from the deeper reforms needed in our society.

The first two years of the Obama presidency show that our economic and political failings are deeper than that of a particular president. Like many Americans, I looked to Barack Obama as the hope for a breakthrough.Change was on the way, or so we hoped; yet there has been far more continuity than change. Obama has continued down the well-trodden path of open-ended war in Afghanistan, massive military budgets, kowtowing to lobbyists, stingy foreign aid, unaffordable tax cuts, unprecedented budget deficits, and a disquieting unwillingness to address the deeper causes of America's problems. The Administration is packed with individuals passing through the revolving door that connects Wall Street and the White House. In order to find deep solutions to America's economic crisis, we'll need to understand why the American political system has proven to be so resistant to change.

The American economy increasingly serves only a narrow part of society, and America's national politics has failed to put the country back on track through honest, open, and transparent problem solving. Too many of America's elites-among the super-rich, the CEOs, and many of my colleagues in academia-have abandoned a commitment to social responsibility. They chase wealth and power, the rest of society be damned.

We need to reconceive the idea of a good society in the early twenty-first century and to find a creative path toward it. Most important, we need to be ready to pay the price of civilization through multiple acts of good citizenship...

SP 500 Futures Daily Chart Intraday

So far just another day in the 'hood with the hoods.

Cute bear raid in the metals.

Gold Daily and Silver Weekly Charts - Breakout Attempt Smacked Back For Now

I see where Alf Field called an end to the gold correction today. I am not quite willing to do that yet. I would like to see a sustained breakout on volume.

These markets are like carnie games anymore.

SP 500 and NDX Futures Daily Charts - Trading 2012 - "Money Owns This Town"

Yet another late day turnaround on light volumes and vapors.

Banks kick off their earnings season with JPM tomorrow.

I wonder if there will be a footnote category in the income statement for 'missing customer funds.'

"Money Owns This Town" by Alabama3



JPM = Dave Hester 'The Mogul'
Morgan Stanley = Jarrod 'The Young Gun'
Bank of America = Darrell 'The Gambler'
Citi = Barry 'The Collector'
with Dan & Laura = SEC and CFTC

Thanks and apologies to my friend Barry Weiss for this. lol

Net Asset Value of Certain Precious Metal Trusts and Funds

Gold Daily and Silver Weekly Charts

There are nine requisites for contented living: health enough to make work a pleasure; wealth enough to support your needs; strength to battle with difficulties and overcome them; grace enough to confess your sins and forsake them; patience enough to toil until some good is accomplished; charity enough to see some good in your neighbor; love enough to move you to be useful and helpful to others; faith enough to make real the things of God; hope enough to remove all anxious fears concerning the future.

Johann Wolfgang von Goethe


Lead, kindly Light, amid th' encircling gloom, lead Thou me on;
The night is dark, and I am far from home; lead Thou me on:
Keep Thou my feet; I do not ask to see
The distant scene-- one step enough for me.

John Henry Newman


We think sometimes that poverty is only being hungry, naked and homeless. The poverty of being unwanted, unloved and uncared for is the greatest poverty. We must start in our own homes to remedy this kind of poverty. Love begins by taking care of the closest ones - the ones at home.

Mother Teresa of Calcutta

SP 500 and NDX Futures Daily Charts - Zzzzzzz

Light volume, subdued volatility relative to the range where it has been, and a late day push higher.

January 8: Andrew Jackson Day Remembered

"It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes. Distinctions in society will always exist under every just government. Equality of talents, of education, or of wealth can not be produced by human institutions.

In the full enjoyment of the gifts of Heaven and the fruits of superior industry, economy, and virtue, every man is equally entitled to protection by law; but when the laws undertake to add to these natural and just advantages artificial distinctions, to grant titles, gratuities, and exclusive privileges, to make the rich richer and the potent more powerful, the humble members of society — the farmers, mechanics, and laborers — who have neither the time nor the means of securing like favors to themselves, have a right to complain of the injustice of their government.

There are no necessary evils in government. Its evils exist only in its abuses. If it would confine itself to equal protection, and, as Heaven does its rains, shower its favors alike on the high and the low, the rich and the poor, it would be an unqualified blessing."

Andrew Jackson, Veto of the Second Bank of the United States


"Gentlemen! I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country.

When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin!

Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I have determined to rout you out, and by the Eternal, (bringing his fist down on the table) I will rout you out."

From the original minutes of the Philadelphia bankers sent to meet with President Jackson February 1834, from Andrew Jackson and the Bank of the United States (1928) by Stan V. Henkels

On our dinner cards tonight is a medallion portrait of a man who gave a memorable toast, "The Federal Union, it must be preserved."

This meeting tonight, in the City of Washington, is one of many hundreds being held throughout our forty-eight States and territorial possessions and even on board ships at sea, in honor of the memory of a great General, a great President, Andrew Jackson. To all of you I extend my most sincere and heartfelt greetings.

I am happy to stand here tonight and declare to you that the real issue before the United States is the right of the average man and woman to lead a finer, a better and a happier life. And that was the same issue, more than a hundred years ago, that confronted Andrew Jackson.

I speak tonight to this Democratic meeting, to these Democratic meetings throughout the Nation, in the same language as if I were addressing a Republican gathering, a Progressive gathering, an Independent gathering, a Farmer-Labor gathering, a gathering of business men or a gathering of workers or farmers. There is nothing that I say here tonight that does not apply to every citizen in the country no matter what his or her political affiliations may be.

It is true that we Americans have found party organizations to be useful, and indeed necessary, in the crystallization of opinion and in the demarcation of issues. It is true that I have received many honors at the hands of one of our great parties. It is nevertheless true that in the grave questions that confront the United States at this hour, I, as President of the United States, must and will consider our common problems first, foremost and preeminently from the American point of view.

To most of us, Andrew Jackson appropriately has become the symbol of certain great ideals. I like best to think of him as a man whom the average American deeply and fundamentally understood. To the masses of his countrymen, his purposes and his character were an open book. They loved him well because they understood him well—his passion for justice, his championship of the cause of the exploited and the downtrodden, his ardent: and flaming patriotism.

Jackson sought social justice; Jackson fought for human rights in his many battles to protect the people against autocratic or oligarchic aggression.

If at times his passionate devotion to this cause of the average citizen lent an amazing zeal to his thoughts, to his speech and to his actions, the people loved him for it the more. They realized the intensity of the attacks made by his enemies, by those who, thrust from power and position, pursued him with relentless hatred. The beneficiaries of the abuses to which he put an end pursued him with all the violence that political passions can generate. But the people of his day were not deceived. They loved him for the enemies he had made.

Backed not only by his party but by thousands who had belonged to other parties or belonged to no party at all, Andrew Jackson was compelled to fight every inch of the way for the ideals and the policies of the Democratic Republic which was his ideal. An overwhelming proportion of the material power of the Nation was arrayed against him. The great media for the dissemination of information and the molding of public opinion fought him. Haughty and sterile intellectualism opposed him. Musty reaction disapproved him. Hollow and outworn traditionalism shook a trembling finger at him. It seemed sometimes that all were against him—all but the people of the United States.

Because history so often repeats itself, let me analyze further. Andrew Jackson stands out in the century and a half of our independent history not merely because he was two-fisted, not merely because he fought for the people's rights, but because, through his career, he did as much as any man in our history to increase, on the part of the voters, knowledge of public problems and an interest in their solution. Following the fundamentals of Jefferson, he adhered to the broad philosophy that decisions made by the average of the voters would be more greatly enduring for, and helpful to, the Nation than decisions made by small segments of the electorate representing small or special classes endowed with great advantages of social or economic power.

He, like Jefferson, faced with the grave difficulty of disseminating facts to the electorate, to the voters as a whole, was compelled to combat epithets, generalities, misrepresentation and the suppression of facts by the process of asking his supporters, and indeed all citizens, to constitute themselves informal committees for the purpose of obtaining the facts and of spreading them abroad among their friends, their associates and their fellow workers.

I am aware that some wise-cracking columnist will probably say that good old Jackson no doubt realized that every red-blooded American citizen considered himself a committee of one anyway. Nevertheless, Jackson got his ideas and his ideals across not through any luxurious propaganda, but because the man on the street and the man on the farm believed in his ideas, believed in his ideals and his honesty, went out and dug up the facts and spread them abroad throughout the land.

History repeats—and I am becoming dimly conscious of the fact that this year we are to have a national election. Sometimes at the close of a day I say to myself that the last national election must have been held a dozen years ago—so much water has run under the bridge, so many great events in our history have occurred since then. And yet but thirty-four months, less than three years, have gone by since March, 1933.

History repeats—in those crowded months, as in the days of Jackson, two great achievements stand forth—the rebirth of the interest and understanding of a great citizenry in the problems of the Nation, and an established Government which by positive action has proved its devotion to the recovery and well-being of that citizenry.

Whatever may be the platform, whoever may be the nominee of the Democratic Party—and I am told by the Chairman that a Convention is to be held to decide these momentous questions—the basic issue, my friends, will be inevitably the retention of popular Government—an issue fraught once more with the difficult problem of disseminating facts and yet more facts, in the face of an opposition bent on hiding and distorting facts.

And that, my friends, is why organization, not party organization alone—important as that is—but organization among all those, regardless of party, who believe in retaining progress and ideals, is so essential.

That is why, in addition to organization, I make this specific recommendation—that each and every one of you who are interested in obtaining the facts and in spreading those facts abroad, each and every one of you interested in getting at the truth that lies somewhere behind the smoke screen of charges and countercharges of a national campaign, constitute yourself a committee of one. To do this you need no parchment certificate, to do this you need no title. To do this you need only your own conviction, your own intelligence and your own belief in the highest duty of the American citizen.

To act as such a committee of one you will need only your own appointment, an appointment which carries with it some effort, some obligation on your part to carry out the task you have assigned to yourself. You will have to run down statements made to you by others which you may believe to be false. You will need to analyze the motives of those who make assertions to you. You will need to make an inventory in your own community, in order that you may check and recheck for yourself and thereby be in a position to answer those who have been misled or those who would mislead.

After my Annual Message to the Congress last Friday evening, I received many appreciative letters and telegrams from all over the country, and I think it will interest you to know that within a few hours I received more of these than at any time since the critical days of the spring of 1933. I have carefully read those letters and telegrams and I found two facts that I think are worthy of repeating to you tonight. The first is that out of the many, many hundreds, a very large number were sent to me by families who evidently heard my Message while grouped together in the family home. "My wife and I want you to know how much we appreciate," and so forth—or "The Jones family, gathered tonight with our friends, sends you this message of confidence." In other words, as greatly as and perhaps even more greatly than on any other occasion since I have been in the White House, I have the definite feeling that what I have said about the great problems that face us as a Nation has received a responsive, an appreciative and an understanding answer in the homes of America. This means a lot tome.

The other interesting fact about these letters and telegrams is the very great number of them that come from business men, from storekeepers, from bankers and from manufacturers. The gist of their messages to me is that they are grateful, that they appreciate my statement that it is but a minority of business and finance that would "gang up" against the people's liberties. I reiterate that assertion tonight. By far the greater part of the business men, industrialists, and other employers of the Nation seek no special advantage; they seek only an equal opportunity to share in the common benefits, the common responsibilities and the common obligations of their Government.

I am naturally grateful for this support and for the understanding on their part that the Government of the United States seeks to give them a square deal and a better deal—seeks to protect them, yes, to save them from being plowed under by the small minority of business men and financiers, against whom you and I will continue to wage war.

We can be thankful that men and women in all walks of life realize more and more that Government is still a living force in their lives. They understand that the value of their Government depends on the interest which they display in it and the knowledge they have of its policies.

A Government can be no better than the public opinion which sustains it.

I know that you will not be surprised by lack of comment on my part tonight on the recent decision of the Supreme Court. I cannot and will not render offhand judgment without studying, with the utmost care, two of the most momentous opinions, the majority opinion and the minority opinion, that have ever been rendered, in any case before the Supreme Court of the United States. The ultimate results of the language of these opinions will profoundly affect the lives of Americans for many years to come. It is enough to say that the attainment of justice and the continuance of prosperity for American agriculture remain an immediate and constant objective of my Administration.

Just as Jackson roused the people to their fundamental duties as citizens, so must the leadership of this era do its utmost to encourage and sustain widespread interest in public affairs. There was something of eternal youth in the spirit of Andrew Jackson. The destiny of youth became the destiny of America.

Tasks immediately before us are as arduous as the conquest of the frontiers a century ago. The Nation is still young, still growing, still conscious of its high destiny. Enthusiasm and the intelligence of the youth of the land are necessary to the fulfillment of that destiny.

As I understand the temper of the people, particularly the temper of youth, no party of reaction, no candidates of reaction can fulfill the hope and the faith of that everlasting spirit. It is the sacred duty of us who are vested with the responsibility of leadership to justify the expectations of the young men and women of the United States.

We are at peace with the world; but the fight goes on. Our frontiers of today are economic, not geographic. Our enemies of today are the forces of privilege and greed within our own borders.

May a double portion of Old Hickory's heroic spirit be upon us tonight. May we be inspired by the power and the glory and the justice of his rugged and fearless life.

The people of America know the heart and know the purpose of their Government.

They, and we, will not retreat.

Franklin D. Roosevelt, Jackson Day Dinner Address, Washington, D.C.
January 8, 1936

Remember these leaders, these giants, from days gone by, and their unselfish defense of liberty and the people, as we look upon the empty suits, self-serving spokesmodels, and heartless mannequins, vetted and strutted out by the corporate interests, who pretend to the leadership of their great nation in its time of greatest need.

And let us not blame them, for the fault is ours in not having the courage to stand for the truth, even in the most incidental ways, to pass the honest message on, to resist the allure of demagogues, prejudice and old hatreds, the fear of otherness, the seductive mouthpieces and clever arguments of powerful and the monied interests, and support the voices of fundamental reform and equal protection for all people under the law.

What is remarkable is not how many sell themselves and their honor, but how eagerly, how cheaply. But the profit does not matter if one considers their soul to be worth nothing.

And if lawlessness increases, the hearts of many will grow cold. And then comes the downfall, and hell comes with it.

Gold Daily and Silver Weekly Charts - The End Of Year Paint Job Is Peeling

Gold and Silver have had a nice rally since the first of the year, but this seems like a correction back from a very artificial price smackdown performed by the two or three big metals shorts who wanted to minimize their losses at mark-to-market.

So bullion is now back to square one. Let's see where it goes from here.

SP 500 and NDX Futures Daily Charts - Tell Me About the Rabbits Again, George...

"The reason 2012 feels so empty now is that voters on both sides of the aisle are not just tired of this state of affairs, they are disgusted by it. They want a chance to choose their own leaders and they want full control over policy, not just a partial say. There are a few challenges to this state of affairs within the electoral process – as much as I disagree with Paul about many things, I do think his campaign is a real outlet for these complaints – but everyone knows that in the end, once the primaries are finished, we’re going to be left with one 1%-approved stooge taking on another.

Most likely, it’ll be Mitt Romney versus Barack Obama, meaning the voters’ choices in the midst of a massive global economic crisis brought on in large part by corruption in the financial services industry will be a private equity parasite who has been a lifelong champion of the Gordon Gekko Greed-is-Good ethos (Romney), versus a paper progressive who in 2008 took, by himself, more money from Wall Street than any two previous presidential candidates, and in the four years since has showered Wall Street with bailouts while failing to push even one successful corruption prosecution (Obama).

There are obvious, even significant differences between Obama and someone like Mitt Romney, particularly on social issues, but no matter how Obama markets himself this time around, a choice between these two will not in any way represent a choice between “change” and the status quo. This is a choice between two different versions of the status quo, and everyone knows it."

Matt Taibbi, The Meaningless Sideshow Begins

The spokesmodels on financial television were unusually excited that the stock indices made a higher high today, but this attempt at a breakout was absolutly not confirmed on the charts given the volume and the weak close.

They have another try at it tomorrow obviously, but this is hardly anything to get too excited about yet.

The earnings reports will weigh heavily on stocks in the weeks ahead and of course the headline risk is enormous.

Gold Daily and Silver Weekly Charts - Calm Before the Storm

An eerie quiet is over the US markets. The SP 500 has slid sideways in an exceptionally narrow range for the past five sessions despite some intraday intramurals.

Gold was hit with a half-hearted bear raid today, while silver remained stalwart.

SP 500 and NDX Futures Daily Charts

A dull day with light volume and little conviction.

Forbes: Regulators and Trustees Suppressing Details on MF Global

I seem to recall predicting this coverup when the MF Global scandal broke at the end of October.

Eventually the regulators and financiers will spin a story and it might stick together. But there is also a possibility that it may come unhinged, and the coverup, not the theft of funds itself, will bring down careers and institutions.

And the scandal is much wider than MF Global and their unfortunate customers. This is not the sort of thing that those in positions of stewardship might wish to see come uncorked in an uncontrolled manner.

This ongoing farce with the financial sector should send a chill down the spines of all retail investors and the public.

It is good to see a respectable media publication like Forbes being so forthright in its ongoing coverage of the scandal, when the propensity to dismiss fraud and cheerlead the financier's agenda is the primary impulse of much of the financial press and mainstream media.

If the full extent of the fraud, manipulation and insider dealing that has occurred, and is still taking place, in Washington, Wall Street and the City of London were made known, the public might react strongly in their righteous anger.

This is really appalling.

Forbes
The Neverending MF Global Story: Regulators Block The Truth
By Francis McKenna
January 9, 2012

Instead of looking out for MF Global investors – and customers who are still waiting for their money – it looks like regulators and the bankruptcy trustees are busy suppressing information. Instead of full transparency, regulators and the trustees are holding onto crucial details that might tell us all who was asleep at the wheel when the broker/dealer and futures commission merchant (FCM) headed over the cliff.

Bob English, an independent trader and contributing editor to the blog, Economic Policy Journal, published a post this morning that raises serious questions about the Securities and Exchange Commission’s program of regulation for broker/dealers and, in particular, the agency’s role in keeping the truth from the public about what went wrong at MF Global.

We’re also being kept from the truth about other broker/dealers who may be putting risky trades on their books or whose controls over segregation of customer assets may be weak or non-existent.

“It seems that sloppy scanning and filing standards combined with preferential treatment for certain large brokers has substantially reduced the value of this part of the SEC’s public filing system. Since this is often the sole repository for disclosures about private companies, including broker dealers that do not have public holding companies, investors are being deprived of timely and critical information.

Even for those broker dealers that do have public holding companies, such as MF Global Inc., the financial notes of the broker audits disclose different, and oftentimes, more substantial information. Since it is now apparent that Louis Freeh, the former FBI Director cum MF Global Holdings trustee, is running cover for MF’s largest creditors, not the least of which is JP Morgan Chase, it is all the more critical that the integrity of the SEC’s public filing system be scrutinized."

On November 4, 2011, days after the bankruptcy filing, I described in an American Banker column the information the regulators and investigators should be looking for:

“Since MF Global is a broker-dealer and a Futures Commission Merchant, PwC’s job went well beyond a standard audit. The auditor for a firm like this must annually review the procedures for safeguarding customer and firm assets in accordance with the Commodity Exchange Act. The annual audit must include a review of a firm’s practices and procedures for computing the amounts that, by law, have to be set aside in clients’ accounts each day. MF Global also had to send regulators an annual supplemental report from PwC. This report would describe any material inadequacies existing since the date of the previous audit and any corrective action taken or proposed.

I’m sure the CFTC wants to know if PwC ever documented any material inadequacies in MF Global’s controls over safeguarding customer assets. But wouldn’t they already know that? Regulators like the CME Group, the CFTC, the SEC, and FINRA received audited financial information annually, unaudited information semiannually and monthly reports that provided a capsule view of MF Global’s financial position. MF Global is required to perform calculations daily (by the CFTC) and weekly (by the SEC) to ensure that the proper amount of customer funds is set aside in the separate accounts.

PwC’s report to the SEC of internal control discrepancies for 2010, and there is one according to the filing index, is private. None of the auditor’s reports specific to the broker/dealer and FCM are available to the public on Edgar for 2011.

Is this just sloppy scanning? It’s no coincidence to me that auditor PricewaterhouseCoopers may also be playing a role in keeping uncomfortable or incriminating information from the public about its audit clients which include MF Global as well as Bank of America, JP Morgan, and Barclays...

Read the rest here.

NAV Premiums of Select Precious Metals Trusts and Funds

The premium on PSLV looks like a short squeeze or some other anomaly.

It does not appear to be otherwise rational given the relatively modest premiums on silver in quantity available at publicly quoted sites like Tulving.com which are offering silver in quantity at between 1.99 to 2.69 over spot for Maples and Eagles.

I think the higher premium on American Eagles is due to the restrictions on IRA ownership. Otherwise it makes little sense other than 'marketing.'

Perhaps something else is going on behind the scenes.

But given the low estimated cash levels in PSLV and the likelihood of another unit offering from their shelf that premium looks a little out of historical bounds.

Gold Daily and Silver Weekly Charts - Rounding Errors In the Big Scheme of Things

The markets did a 'pop and flop' on the 'better than expected' payroll numbers. While the number did beat expectations, it was largely due to temporary hiring for Christmas delivery and sales that was not properly deseasonalized.

I did not write something about this, but I do wish to point out something new. The BLS has always rounded the headline number of course, but now they are starting to round the 'raw number' as shown in the first picture below. That I have never seen before.

Considering that the headline number these days is around a couple hundred thousand, rounding the raw number to the nearest hundred thousand is almost bizarre.

Gold and silver moved around after the big rally at the first of the week. I think this is the market level they would have been at before the very conscious smackdown at the year end to make the mark-to-market on their short positions look better.

What next? Earnings season starts on Monday with Alcoa, and there will be another European debt meeting on Monday.

Have a great weekend.

SP 500 and NDX Futures Daily Charts

Sleepy day, typical of this first week with wide range in prices finishing largely unchanged on light volumes.

On Monday Alcoa kicks off earnings season.

Also on Monday there is another meeting on the Europe situation. That may drive some of the action.

The markets pretty much ignored the 'better than expected' employment report today and for good reasons. The beat was largely based on part time seasonal hiring that was not correctly deseasonalized.

Gold Daily and Silver Weekly Charts - QE à l'infini Selon les Besoins

In other words, QE to infinity as required.

That will be the solution the Fed will accept when the Treasury prints bonds that have no buyers except for the Fed and its cartel of banks.

Of course they will stop before infinity is reached. The only question is, "What will stop them?" Especially if they engage in off balance sheet shenanigans like certain types of swaps and mutual devaluation with other central banks for example.

Will the economy turn around and a combination of growth and inflation overcome the excessive debt burdens? Or will they simply reach a point and engage in a de facto default as Russia did and reissue a 'new dollar?'

These are the important questions to think about. But I doubt very much that the Fed will stand aside and allow a hard default on the bonds.   They will attempt to make the dollar look good by making all other currencies look bad. 

The default will be de facto and as nominal as the cynical toleration of a denaro buffo will allow.

SP 500 and NDX Futures Daily Charts - Fear and Trembling

Another wide ranging day that closed relatively unchanged from the open, as traders tossed the hot potatoes back and forth.

Non Farm payrolls for December is tomorrow. ADP had a big beat on their employment number, but this means little as the correlations are broken, probably on seasonal adjustments.

The bigger issue will be the European meeting on Monday the 9th.

A Closer Look at the Daily Gold Futures Chart

Here is the daily Gold Futures Chart for the February 2012 contract.

I transacribe this action to the 'big picture' chart which I publish nightly.

This is the one I watch intraday.

Gold *could* be in the process of making a huge double bottom. The measuring objective of such a breakout would be well in excess of 2,000 BUT it needs to breakout of the obvious downtrending channel in red first. The 'proof is in the pudding' as they say.

Playing the 'Free Markets' Canard and the Myth of Self Regulation

ca·nard/kəˈnär(d)/

Noun:

a. An unfounded or false, deliberately misleading story : a fabricated report
b. a groundless rumor or belief.

Anyone who has seriously studied applied macroeconomics knows that crony capitalists hate free markets, with all the fairness and transparency that they imply. Competition is a serious drag on enormous profits and introduces significant uncertainty and risk.

As soon as the game is underway, successful capitalists are constantly pushing the envelope of the rules, seeking to establish rents, monopolies, unfair advantages, and debt traps to snare the bulk of the players and stifle the profit-eroding tendency of real competition.

The 'efficient markets' hypothesis and the denigration of regulation serves to despoil markets of their capacity to create wealth and distribute it in a meritorious fashion.

This is the basis of all aristocracies, which are merely the institutionalisation of privilege.  Once they make it they bloody well want to change the rules to hang on to it, and take the risk out of their equation. They foster a culture of two sets of books, two sets of rules, and two systems of justice. They are given over in their personal and professional lives to the benefits of hypocrisy and cheating, with little conscience to restrain them. There is a predatory class that is nationless, without allegiance to anything, any principle, but their own greed and lust for power.

The wealthy, not only by private fraud but also by common laws, do every day pluck and snatch away from the people some part of their daily living. Therefore, when I consider and weigh in my mind these commonwealths which nowadays do flourish, I perceive nothing but a certain conspiracy of rich men in procuring their own commodities under the name and authority of the commonwealth.

They invent and devise all means and crafts, first how to keep safely without fear of losing that which they have unjustly gathered together, and next how to hire and abuse the work and labor of the people for as little money and effort as possible."

Thomas More, Utopia

This failing is not particular to capitalism per se, but to any human system. So why not just dispense with rules and let the market have its way? If the system is so much work to maintain and keep free of corruption, why have any system at all?

THOMAS MORE What would you do? Cut a great road through the law to get after the Devil?

WILLIAM ROPER I'd cut down every law in England to do that!

THOMAS MORE Oh? And when the last law was down, and the Devil turned round on you, where would you hide, Roper, the laws all being flat?

This country's planted thick with laws from coast to coast, man's laws, not God's, and if you cut them down, and you're just the man to do it, do you really think you could stand upright in the winds that would blow then?

Robert Bolt, A Man For All Seasons

Anyone who thinks human systems function naturally well without rules and enforcement has never driven on a modern motorway in rush hour. To support this theory they must believe in the natural goodness and rationality of all people when motivated by self interest, which is the biggest sucker bet in history.

And when crime pays, it becomes prevalent. Bad behaviour that on the whole succeeds drives out the good, making it impractical. This is the lesson of the recent financial crisis.

Good government takes hard work and constant renewal and reform. Human systems do not maintain themselves, and are almost never self-improving, but rather given to entropy, manipulation, and deterioration.

But there are plenty of economists, authors, and editorialists who are willing to say for pay, to talk their own or someone's book, since there is little accountability for promoting quack thoughts, as there are for quack medicines that kill.  

Merit works, but Privilege pays. And so the one continually undermines the other unless some restraint is applied. And that is the purpose of society and the law in the service of freedom.

Gold Daily and Silver Weekly Charts - Up Against Resistance

"The secret of great fortunes without apparent cause is a crime forgotten, forgotten because it was properly done."

Honoré de Balzac

Keep an eye on the silver market, and on any expansion of the Sprott Silver Trust that may suck up more scarce deliverable silver of bullion quality.

The risks in all markets remain unusually large.

SP 500 and NDX Futures Daily Charts - Crouching Tiger, Hidden Dragon

“Our problems stem from our acceptance of this filthy, rotten system...People say, 'what is the sense of our small effort?' They cannot see that we must lay one brick at a time, take one step at a time. A pebble cast into a pond causes ripples that spread in all directions. Each one of our thoughts, words and deeds is like that. No one has a right to sit down and feel hopeless. There is too much work to do.”

Dorothy Day

It is almost hard to believe this is the first week of the year, given the exceptionally light volumes.

The old saw 'as goes January so goes the year' might be worth remembering.

There is a Non-Farm Payrolls report on Friday, but the big variable is the European debt situation. There is a meeting on the 9th of January.

This market is like cotton candy. It would not take much to knock the air out of it. But do not get ahead of it on the short side for the same reason, that it is in the hands of the trading systems who can spin rallies out of very little material.

Net Asset Value Premiums of Certain Precious Metal Trusts and Funds

The number of shares outstanding in the Sprott Silver Trust have been reduced slightly. The cash levels in that fund are very low. A new tranche of units from their shelf is indicated.

I would be quite surprised if plans are not underway, with the sticking point being the negotiation for large quantities of silver available for delivery at these prices in some reasonable timeframe.

MF Global Sold Assets to Goldman While It Was Looting Their Customer Accounts

It turns out that MF Global sold hundred of millions in assets to Goldman in the last two business days before its bankruptcy. It is not clear that MF Global actually received the payment for the sale, or if the funds were held by their clearing agent and banker, JP Morgan, who knew that they were going to be bankrupt.

That revolving line of credit at JPM of $1.2 Billion is about the size of the missing customer funds.

I wonder if JPM withheld payment on the sale of Goldman assets, and took customer assets as collateral for the credit line. As MF Global's banker they were at the center of most if not all of these transactions.

The idea that the customer money was 'missing' is ludicrous. It would be more correct to say that the ownership of the money was disputed, and was in the hands of JP Morgan and perhaps Goldman.

These are serious offenses. But it becomes even worse if JPM afterwards sought to withhold the stolen funds and cover up the transactions, impeding an official investigation. And then their legal maneuvering afterwards to cut the customer interests in the courts is of course beneath contempt.

Nasty business indeed. I wonder how long the Obama Administration and the Congress are going to cover this up. I am sure the details are known to the regulators already.

I still remain hopeful that the customers will receive their funds. I am not so confident at all that justice will be done. At least the UK has placed the last minute London traders bonuses at the end of the queue.

As far as the restoration of sound markets and money, the looting is only just begun.

Reuters
MF Global sold assets to Goldman before collapse: sources
By Lauren Tara LaCapra and Matthew Goldstein
January 3, 2012

(Reuters) - MF Global unloaded hundreds of millions of dollars' worth of securities to Goldman Sachs in the days leading up to its collapse, according to two former MF Global employees with direct knowledge of the transactions. But it did not immediately receive payment from its clearing firm and lender, JPMorgan Chase & Co , one of the sources said.

The sale of securities to Goldman occurred on October 27, just days before MF Global Holdings Ltd filed for bankruptcy on October 31, the ex-employees said. One of the employees said the transaction was cleared with JPMorgan Chase.

At the same time MF Global, which was run by former Goldman Sachs head Jon Corzine, was selling securities to Goldman to raise badly needed cash, the futures firm was also drawing down a $1.2 billion revolving line of credit it had with JPMorgan, according to one of the former MF Global employees.

JPMorgan spokeswoman Mary Sedarat said the bank did not withold money because of the line of credit. She declined further comment on details of the transactions.

JPMorgan has fought aggressively in bankruptcy court to protect its interests, and received a lien on some of MF Global's assets in exchange for granting the firm $8 million to fund its bankruptcy costs. The lien puts JPMorgan's interests ahead of MF Global customers who have not yet received an estimated $900 million worth of money from their accounts, which remain frozen as regulators search for missing funds.

The hastily crafted transactions and the seeming inability of MF Global to recoup some of the money in the sale to Goldman may start to explain why so much money remains unaccounted for at the futures firm.

It is unclear what type of assets Goldman bought from MF Global, but the securities were worth hundreds of millions of dollars, the former employees said. The sources spoke on the condition of anonymity...

Read the rest here.

Gold Daily and Silver Weekly Charts - Big Rally From Year End Mark-To-Market Boogie Woogie

It appears that the theory that the big shorts were slamming down gold and silver into the year end *might* be valid, given the huge rally today.

But it is too soon to say for sure. I have drawn a short term downtrend line on the gold chart that is a 'must take' for the bulls.

If they can take it out, that's a nice bull flag there on the chart that gets activated.

Non-Farm Payrolls report on Friday and the Euro-whiz kids meet again on the 9th to puzzle through their Gordian knot of a currency and political system.

I read the book Currency Wars by Rickards over the holiday. It was interesting, and is worthwhile for those not familiar with the money and metals markets. His history of the currency wars and old is enlightening. There is not as much 'meat on the bone' in this book as there was in Econned for example, and it is an easier read, but Rickards knows what he is talking about and says his piece well.

I took a 'test' that estimates one's political orientation last week, and it confirmed that I am still almost dead center, just a little to the liberal side but not much. I thought that this was the case and was glad to see the confirmation. 2012 is not going to be a good year for moderates.

I read somewhere today that sociopaths and psychopaths in business are not a problem because people just shun them eventually so the market is naturally self-policing and self-correcting. Ah, if only this pretty piece of idealism was the case. Of course it is just another variation of the efficient markets hypothesis .

This used to be a favorite argument of Bill Buckley and William Rickenbacker when they used to discuss the issue of market regulation.  Anyone who has been in security or fraud investigation knows it is utter nonsense.

Conmen are like cockroaches.  And the better class of white collar crooks are exceptionally devious and manipulative, and often set up sinecures and monopolies that are rather long-lived in addition to their various frauds which are easily replicated and recycled from place to place.

But people keep drifting back to the assumption that information is symmetric and transparent, markets inherently fair, and most people are good. Like a dog returns to its vomit, so idealists and the deluded return to the natural goodness of business and markets to justify some of the most outrageous howlers of arguments over and over again.

The number one son and his friends are home from University so this dad is deep into computer repairs and cooking favorite meals. It does not get much better than this.

SP 500 and NDX Futures Daily Charts - Pop Go the Weasels

Market popped with a big gap open and then chopped around finishing slightly lower than the open on the day, but still significantly higher on light volume. If you were long coming in to today you could make money.

The Non-Farm Payrolls for December is on Friday and there is another Europe meeting on the 9th so these events may cap a new rally until they unfold.

The Fed announced a new 'communications campaign' wherein they will release their economic outlooks. Consider how bad their forecasts have been in the past this looks like just a broadening of their jawboning reach for the management of market perceptions.

The big gap open set up the potential for an 'island top' if we get a gap down on the open tomorrow. So the ball is definitely in the bulls court. Since the volume is so low they can easily take the ball and run if there is no overnight news of the disturbing kind.

Net Asset Value Premiums of Certain Precious Metal Trusts and Funds