SP 500 and NDX Futures Daily Charts - Said the Joker to the Thief

4Q 2011 Advance GDP is out tomorrow morning.

The selling today had little volume behind it, and it looked more like a consolidation than a top, at least so far.

I'm flat the market now, and waiting to see what happens next.

A Closer Look At the Gold Chart For a Break and Run Possibility

Keep an eye on gold for the next few days to see how it handles any consolidation here.

The formation, at least so far, is remniscent of the breakout that led gold to the all time high last year.

It could fail and retest some lower support level. We need to be aware of that possibility. But a consolidation with a subsequent gap higher and breakout run could be a wild ride.

Gold Daily and Silver Weekly Charts - Sharp Metals Rally Off the FOMC Policy Statement

The big news today was the FOMC's decision to set an explicit inflation target of 2% using the PCE indicator. Bernanke expressed some of the reasons for choosing PCE rather than the more popularly watched CPI.

Intraday commentary on the Fed's statement is here.

The metals, which had been depressed ahead of the announcement, took off like a rocket, reaching up to overhead resistance as the metal bears scrambled to cover their option expiration trade.

So what next? The rally may be a bit overdone in the short term, and now that the put buyers are washed out the trading desks may take aim at the call option holders in the 1680 to 1700 range.

The last time we had a major failed option expiration like this the metals went on a tear higher that led to the breakout from the infamous 'cup and handle' formation. Let's see if that happens again.

The move by the Fed is more of a stealth bailout of the banks and creditors in the financial sector than it is a remedy for the real economy. The markets are still not efficient or safe, and the economy is being managed for the benefit of the money masters.

So I expect this move by the Fed will merely serve to precipitate further economic damage that will eventually lead to a strong public reaction and constructive change, albeit via a highly troubled and sometimes dangerous path.

Keep an eye on stocks. I'll believe this rally is going to last if they decide to bring out the Facebook IPO which has been parked on the shelf for some time now. Otherwise just watch out for the next wash and rinse. There are few real investors in these markets anymore.

SP 500 and NDX Futures Daily Charts - Benny Pledges to Inflate

Stocks rallied hard off the FOMC statement and subsequent press conference. The intraday commentary on this is here.

So what next? Somewhat discounted in the paper party is the dull fact that Ben and the Fed are driven by the dire state of the economy, despite their cheerful words to try and calm the markets.

And monetary policy is a blunt instrument, ill-suited to stimulating an economy that is broken and in serious need of rebalancing and reform.

Nothing good will come of this, but it may take some time to work itself out.

The MF Global Bankruptcy Filing: Did the Regulators Sell Out the Public for JP Morgan?

What seems fairly obvious is that the law calls for MF Global to file a Chapter 7 bankruptcy in which customers are given seniority to creditors, rather than a Chapter 11 non-broker bankruptcy in which the customer interests are not upheld.  The rationale for Chapter 11 has always seems to be contrived to favor a particular creditor bank.

Prior CFTC rulings and 'Rule 190' seems to have dealt with this in the past.  Statements by various CFTC commissioners of late also seem to suggest that customers absolutely have a senior claim to any assets.

Why then did the SEC, with Gary Gensler's purported assent, seem to ignore the precedent and their own rules and cut a deal in a secret meeting to favor the Banks, specifically JP Morgan?

The personal involvement of Gary Gensler seems a little ambiguous based on the facts at hand, but it is obvious that the bankruptcy filing is being mishandled, and the SEC and CFTC are doing too little to represent the interests of the customers.

Obviously this should be more explicitly addressed and the customers need to be relieved of this travesty of justice. 

President Obama may speak brave words in his speeches, but the actions of his Administration show that there is little teeth in their supposed championing of the public interest over the powerful interests of Wall Street.   Actions speak louder than words.

MFGFacts
CFTC Warnings When Bankruptcy Codes Conflict: And a Still Secret Meeting

Last week we witnessed lawyers dueling in the bankruptcy court on the details of exactly what code of law supports customer priority in liquidation of the parts of MF Global Holdings, and gosh!….is the Holdings is even a broker ? Why are lawyers debating these questions at this late date?

First we’ll cover what started the fight and then move onto the genesis of why it has come to this so far into the proceedings. Do stick with the story as it might sound like legal minutiae, but does have everything to do with recovery of customer funds.

It started with the Sapere Wealth Management, LLC assertions (among others) that the MF Global estate must be administered under 17 C.F.R paragraph 190. Remember paragraph 190 as you will hear more about this in the next weeks. Applying this clause of the bankruptcy code to the liquidation of MF Global Holdings would assure customer priority in the liquidation of MFGH, which is also claimed to have taken customer assets out of MFGI, the commodity brokerage unit of the Holdings company, MFGH — before and after the bankruptcy.

That all customer property as defined in paragraph 190 of the code, must be returned to commodity customers free and clear of other claims is also supported by others parties, including the CFTC. The CFTC, however, also asserts that existing principles of law are available to ensure this, but first the court needs to make “antecedent determinations.” In other words, the CFTC legal team is playing the adult and indicating that we already have the laws on the books to deal with this once the court figures out what laws it wants to use.

So why is the question if MFGH is even a broker so important? Again, the key paragraph 190, which legally secures customer priority and distributions can only be applied to a brokerage Chapter 7 bankruptcy, which is used for brokerage bankruptcies, but was not used for MFGH, which is the holding company of MFGI. MFGH was filed as a Chapter 11 bankruptcy. This Bankruptcy Code is used for non-broker entities, seeking re-organization.

Also, and to use the words of the Sapere plea to the court, “A decision by the court that 17 C.F.R §190 applied to MFGH’s estate can, among other things, obviate the need for titan law firms representing MFGH and MFGI, respectively, to engage in battles with one another funded by “other people’s money,” i.e., at substantial costs to the estates of MFGH and MFGI.”

The ability to use many millions of customer funds locked in the estate to pay trustees and their “titan” law firms representing MFGH and MFGI is possible because the bankruptcy was filed as a Chapter 11 for the Holdings and Chapter 11 SIPC filing for MFGI, the commodity brokerage, and not under Chapter 7 for both.

As regular readers know, from the start of this sorry saga, MFGFacts.com has focused on the questions around why a Chapter 11 SIPC bankruptcy with almost non-existent securities accounts when neither SIPC nor Chapter 11 address brokerage liquidations. Additionally, Chapter 11 is the choice when a restructuring is planed, which is not so with MFGH.

A Breaking Investigative Report

Fortunately, these question are now receiving greater scrutiny in the industry press as we read in this investigation published last week by Mark Melin of Opalesque Futures Intelligence who contacted MFGFacts.com while conducting his investigation, Sold Out: How A Private Meeting Between Regulators Gave Away MF Global Investor Protections. In short, as Melin reports, “Deciding upon a Securities industry SIPA liquidation process for an FCM over the Commodity Exchange Act (CEA) liquidation and section 7 of the US Bankruptcy Code was a legal maneuver with far reaching consequences for customers with segregated funds and property with custodial banks. The selected SIPA liquidation does not recognize fund segregation or futures industry account regulations. The process considerably favors creditors.”

In other words, when the SEC threw the liquidation process to SIPC under for a Chapter 11 securities liquidation, and with the CFTC’s immediate agreement (under the conflicted Chairman Gensler who had not yet to recuse himself from MF Global issues), a framework of law was chosen where customers were — for the very first time ever — made creditors and their assets thrown into the entire MF Global estate. Many say what! And the industry is now asking how?

According to the report, the speculation is this: Robert Cook, SEC Director of Division and Trading and Markets is said to have been the lead regulator at the key meeting, the details of which are still not public. “Before joining the SEC, Mr. Cook was a partner at the powerful Washington D.C. law firm of Cleary Gottlieb Steen & Hamilton LLP, which represents JP Morgan, among other clients,” Melin reported. We all know that JP Morgan is the largest creditor to MF Global Holdings. Readers may reach their own conclusions about that. Yet, making the liquidation of MF Global Holdings and its parts a Chapter 11 and SIPC bankruptcy, set the stage for expensive dueling among lawyers over the fact if MF Global is even a broker or not. This also and — most importantly — tremendously enhanced the recovery position for non-customer creditors over all customers.

The CFTC Warned in the 1980s of Potential for Abuse and Problems when Bankruptcy Codes Conflict with a Duel Registered Entity

As Melin shares, that the CFTC – to the agency’s great credit — recognized and dealt with this problem: Citing the exemplary record in the futures industry in the event of bankruptcies, former CFTC Director of the CFTC Division of Trading, Andrea Corcoran writes in a January 1993 issue of Futures International Law Letter “As early as 1980, however, concerns were expressed about the ability to retain this record in the event of the bankruptcy of a dually-licensed firm – that is, a firm registered as both a futures commission merchant (FCM) and a securities broker-dealer.”

To rectify this, the CFTC then drafted rules we find under then now famous Part 190 where Corcoran writes, “In the final rules, the Commission noted that Section 7(b) of SIPA (read Securities Investors Protection Act) …proved that a trustee in a SIPA liquidation shall be subject to the same duties as a trustee in a commodity broker bankruptcy under Subchapter IV of Chapter 7 of the Code.”

The CFTC was well prepared for a MF Global-like event. Against this background, and as Melin also reports, the choice of a Chapter 11 SIPC bankruptcy code for the liquidation of a futures broker, makes Chairman’s Genslers “give away” even more baffling. We’d call it a throw away and ask if Chairman Gensler invited a single CFTC attorney into that early hour meeting before agreeing to file MFGI under MFGH as a Chapter 11 SIPC bankruptcy? Regardless, with that decision the fate was sealed. And not only were customers and the industry severely damaged, but there was a complete disregard of the decades of work, preparation and public service by the many professionals in the CFTC to which Chairman Gensler was entrusted.

And now we have the spectacle of “titanic” lawyers in one of the largest bankruptcies ever arguing if an entity is a broker or not.

FOMC Statement - Targets 2% Inflation - Highly Accommodative Monetary Policy Until 'Late 2014'

The Fed extended its window of highly accommodative monetary policy to 'late 2014.' In a separate statement the Fed said it is targeting "2% inflation" as a target. This is the first time they have named an explicit inflation objective. The limiting factor of this decision is the value of the US dollar relative to hard goods, and not other fiat currencies which are subject to similar manipulation and soft devaluation.

The inflation target will be measured using PCE rather than any variation of CPI.

So unless there is a major policy error, deflation seems to be 'off the table' as an option at least as far as the Fed is concerned.

The initial market reaction is for stocks to come off their lows, and gold and silver to rally sharply. Now we know why they were sitting on them so hard. If they had not I suspect we would see gold breaking out over 1700 and silver well past 33. This goes beyond the management of perception into the realm of a control fraud by the banks. I hope that when the truth comes out that people will not be persuaded to ignore that distinction.

This statement shows a longer term commitment to de facto QE at least. The Fed does not need to further expand its balance sheet just yet, but rather deploy those funds strategically while engaging in swaps with other central banks to counter the financial risks globally.

I suspect that before they formally announce a further expansion of their balance sheet the Fed will go 'off-balance sheet' in the easing as financial firms are often wont to do when engaging in opaque accounting. The swaps and non-competitive bidding for balance sheet assets may be a part of this.

I do not object to stimulus per se, but rather this type of blunt policy that does not address or repair the problems that led to the financial bubble and collapse in the first place, which is largely the reform of the financial system, the yawning gap between productive labor and mere money manipulation, and the hard choices required to resolve the TBTF banking problem and unsustainable concentration of both power and risk.

This is against the backdrop of the extended infomercial for crony capitalism coming from the financial conclave at Davos. Demagoguery and deception in support of the status quo seems to be the rule of the day in the financial sector and its associated professions and exclusive clubs.

Therefore self-regulation, restraint, and reform are a thin bet to say the least. The crisis is more like to continue to expand, and the taint of corruption and crime continue to spread.

"When a man has so far corrupted and prostituted the chastity of his mind as to subscribe his professional belief to things he does not believe, he has prepared himself for the commission of every other crime."

Thomas Paine

So the set up and trend seems to be for a more notably historic impulse for change.

For immediate release
Federal Reserve Open Market Committee
January 25, 2012

Information received since the Federal Open Market Committee met in December suggests that the economy has been expanding moderately, notwithstanding some slowing in global growth. While indicators point to some further improvement in overall labor market conditions, the unemployment rate remains elevated. Household spending has continued to advance, but growth in business fixed investment has slowed, and the housing sector remains depressed. Inflation has been subdued in recent months, and longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects economic growth over coming quarters to be modest and consequently anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that over coming quarters, inflation will run at levels at or below those consistent with the Committee's dual mandate.

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.

The Committee also decided to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Sarah Bloom Raskin; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who preferred to omit the description of the time period over which economic conditions are likely to warrant exceptionally low levels of the federal funds rate.

For immediate release

Information received since the Federal Open Market Committee met in December suggests that the economy has been expanding moderately, notwithstanding some slowing in global growth. While indicators point to some further improvement in overall labor market conditions, the unemployment rate remains elevated. Household spending has continued to advance, but growth in business fixed investment has slowed, and the housing sector remains depressed. Inflation has been subdued in recent months, and longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects economic growth over coming quarters to be modest and consequently anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that over coming quarters, inflation will run at levels at or below those consistent with the Committee's dual mandate.

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.

The Committee also decided to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Sarah Bloom Raskin; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who preferred to omit the description of the time period over which economic conditions are likely to warrant exceptionally low levels of the federal funds rate.

Net Asset Value of Certain Precious Metal Trusts and Funds

Gold Daily and Silver Weekly Charts

Gold and silver took a pause in their rally today.

The FOMC announcement is tomorrow and gold option expiration is on Thursday.

SP 500 and NDX Futures Daily Charts - APPL After the Close

YHOO hit EPS but missed revenues, but APPL is the big tickle and will be announcing their results shortly.

The SP left a big hanging man doji candlestick formation. This could mark a top.

Benny and his merry money mavens will be making their announcements tomorrow afternoon. Gold and silver took a corrective hit today in honor of their pronouncement. Bear in mind they have come rather far fairly quickly.

All eyes on AAPL.

Net Asset Value of Certain Precious Metal Trusts and Funds

The Sprott Silver Trust premium remains depressed compared to historical norms. I believe that this is due to the 'underwriter effect' as they clear their over allotments obtained at 13.20.

The other premiums remain healthy, showing a reluctance to sell off hard in this metals correction, at least so far.

Gold Daily and Silver Weekly Charts

Nice up day in the metals.

The Fed will announce the results of their meeting on Wednesday.

This Thursday will be an option expiration in gold. The likely range is 1650 to 1700 based on the put/call ratios.

From the charts, it looks like gold will be hitting some fairly stiff resistance between 1680 to 1700.

The Republican presidential freak show kicks into high gear with tonight's Republican debate and the upcoming Florida primary election. So far it has not disappointed.

SP 500 and NDX Futures Daily Charts - Wobbly Day - VIX Recumbent

Joe Granville made a major bear call today, saying he expects the Dow to be down 4000 points by the end of the year, with the decline starting about now.

I can sympathize with a bearish outlook for stocks based on the economic fundamentals and the earnings reports so far.

The Fed will announce the results of their January meeting on Wednesday.

Tomorrow is the State of the Union message. I will not be able to fly in to Washington and spend the evening at Bullfeathers or The Palm as in the past, alas, sharing gossip and conviviality with old friends amongst the staffers and assorted beltway denizens. This is always most enjoyable in an election year.

The silence on MF Global is deafening.

Still running short stocks and long bullion.

The Ballad of the US Economy and Financial Markets

Corzine, MF Execs and JPM Named in RICO Lawsuit

Privately sponsored RICO lawsuits have a difficult time obtaining the types of information that are required to make a conspiracy case unless they get lucky in the discovery process or find a willing whistleblower. The defendants generally lawyer up and stonewall, using the types of court maneuvers that prove so effective in mortgage fraud cases, theft of customer funds, and mass foreclosures based on forged documents.

The chances of an Obama Administration investigation with teeth seems unlikely. Their Justice Department has strong ties to the big banks and mortgage companies and a very poor record of prosecuting fraud cases.

Of course there is little reason to hope for anything different from any Republican administration. Ron Paul would be honest enough, but it is hard to tell which laws he would choose to enforce and which ones would be considered an intrusion on free markets.

It might be more effective for the public to demand the appointment of a special prosecutor with a proven record of effective investigation of the big banks. Too bad Eliot Spitzer was taken out of the picture in a bank sponsored 'investigation' into his sex life by the Bush Justice Department.

Bloomberg
Corzine Sued for RICO Violation by MF Global Customers
By Linda Sandler
January 20, 2012, 6:42 PM EST

Jan. 20 (Bloomberg) -- Jon Corzine, MF Global Holdings Ltd.’s former chief executive officer, was sued under U.S. racketeering law by commodity customers alleging he and other executives “unlawfully” took money from their accounts and failed to segregate their money as the law requires.

The suit alleges that hundreds of millions of dollars were transferred from customers’ accounts to other MF Global units, at a time when the company was short of cash and faced calls for collateral as its risky Eurobond and other investments fell in value.

Named in the suit, JPMorgan Chase & Co., the company’s banker, should have noticed the “depletion” of customer money, and should have investigated, according to the plaintiff. The customers are seeking unspecified restitution and damages.

The suit, filed in federal court in Manhattan today on behalf of Robert Marcin and other MF Global segregated account holders by Grant & Eisenhofer PA of New York, is one of at least 10 against Corzine and other MF Global executives. Plaintiffs including the Virginia Retirement System have been competing to lead a consolidated lawsuit seeking so-called class-action status....

Read the rest here.

Gold Daily and Silver Weekly Charts

The metals were higher today led by silver.

Next Thursday January 26 is an option expiration for gold.

Here is the current list of option expirations in the metals.

As you can see in the stock commentary below I think the market is looking tired and a bit toppy. It may have another move up left, but now is a good time to get defensive again on equities.

I am still running the long bullion - short equity indices paired trade, and increased the bearish weighting a bit into the close.

SP 500 and NDX Futures Daily Charts - Turning Bearish, Keep an Eye on the VIX

Flat to down day with a little late pop into the close. All eyes are on the Greek situation.

Earnings were a disappointment especially with GOOG but IBM carried the Dow Jones Industrials higher.

I think we are nearing a short to intermediate term top in stocks. \

The SP could have as much as 20 points left, but we'll look at the VIX to signal a top and reversal if there is one.

This is a difficult call because the monetary and sovereign debt considerations are somewhat exogenous and may trump the slowing economy.

But even with the pumping the market looks tired.

I increased the short weighting in the long bullion - short stocks pair trade into the closing rally.

Metals Options and Futures Calendar for the First Half of 2012

Source: CME Group 2012

Jan. 26 Comex February gold options expiry
Jan. 26 Comex February copper options expiry
Jan. 27 Comex February miNY gold futures last trading day
Jan. 27 Comex January silver futures last trading day
Jan. 27 Comex January copper futures last trading day
Jan. 27 Comex February E-mini copper futures last trading day
Jan. 27 Nymex January platinum futures last trading day
Jan. 27 Nymex January palladium futures last trading day
Jan. 31 Comex February gold futures first notice day
Jan. 31 Comex February silver futures first notice day
Jan. 31 Comex February copper futures first notice day
Jan. 31 Nymex February palladium futures first notice day
Feb. 23 Comex March silver options expiry
Feb. 23 Comex March copper options expiry
Feb. 24 Nymex February platinum futures last trading day
Feb. 24 Nymex February palladium futures last trading day
Feb. 27 Comex February gold futures last trading day
Feb. 27 Comex February copper futures last trading day
Feb. 27 Comex February E-micro gold futures last trading day
Feb. 27 Comex March E-mini copper futures last trading day
Feb. 27 Comex March miNY silver futures last trading day
Feb. 29 Nymex March palladium futures first notice day
Feb. 29 Comex March silver futures first notice day
Feb. 29 Comex March copper futures first notice day
March 16 Nymex April platinum options expiry
March 20 Nymex April platinum futures first notice day
March 27 Comex April gold options expiry
March 27 Comex April copper options expiry
March 28 Comex April miNY gold futures last trading
March 28 Comex March silver futures last trading day
March 28 Comex March copper futures last trading day
March 28 Comex April E-mini copper futures last trading day
March 28 Nymex March palladium futures last trading day
March 29 Comex April E-mini gold futures last trading day
March 30 Comex April gold futures first notice day
March 30 Comex April copper futures first notice day
April 25 Comex May copper options expiry
April 25 Comex May silver options expiry
April 26 Comex April gold futures last trading day
April 26 Comex April copper futures last trading day
April 26 Comex April E-micro gold futures last trading day
April 26 Comex May E-mini copper futures last trading day
April 26 Comex May miNY silver futures last trading day
April 26 Nymex April platinum futures last trading day
April 27 Comex April silver futures last trading day
April 30 Comex May silver futures first notice day
April 30 Comex May copper futures first notice day
May 24 Comex June gold options expiry
May 24 Comex June copper options expiry
May 26 Comex June miNY gold futures last trading day
May 29 Comex May silver futures last trading day
May 29 Comex May copper futures last trading day
May 29 Comex June E-mini copper futures last trading day
May 29 Comex June miNY gold futures last trading day
May 31 Comex June gold futures first notice day
May 31 Comex June copper futures first notice day
May 31 Nymex June palladium futures first notice day
June 26 Comex July silver options expiry
June 26 Comex July copper options expiry
June 26 Comex July silver futures last trading day
June 27 Comex June gold futures last trading day
June 27 Comex June copper futures last trading day
June 27 Comex June E-micro gold futures last trading day
June 27 Comex July E-mini copper futures last trading day
June 27 Comex July miNY silver futures last trading day
June 27 Nymex June palladium futures last trading day
June 29 Comex July silver futures first notice day
June 29 Comex July copper futures first notice day
June 29 Nymex July platinum futures first notice day

Gold Daily and Silver Weekly Charts

Gold was capped while silver continued to rally off physical buying that might be attributed to the Sprott Physical Trust expansion.

SP 500 and NDX Futures Daily Charts

Google missed after the bell taking some of the air out of big tech. Intel and IBM beat. Microsoft beat earnings and missed revenue.

Frothy market.

New Revelations On MF Global and Bank Complicity in 'Missing' Customer Funds

Financial violence and repression with impunity.

CFTC Rips Trustee, Says Customers Must Be Paid First

FSA Pressures NY Banks To Release Customer Funds

JP Morgan At the Center of the MF Global Failure

Futures Industry Regulator: No Way To Stop Brokers From Stealing
Especially in a culture of corruption and privilege where crimes are rarely prosecuted,
fraud is widely tolerated, and there is a general contempt for the customers and the law.

JP Morgan Chase Accused of 'Brazen Bankruptcy Fraud'

Maybe this was their warm up for the shenanigans in the MF Global bankruptcy case. Or their long term manipulation of the silver market. 

If these allegations are true, why doesn't the California Attorney General or the Justice Department investigate this criminal conspiracy to abuse the legal system? (rhetorical question).

The only presidential candidate that the bankers fear and respect is Ron Paul.

Courthouse News Service
Chase Accused of Brazen Bankruptcy Fraud
By MATT REYNOLDS
January 17, 2012

LOS ANGELES (CN) - JPMorgan Chase routinely fabricated documents to deceive bankruptcy judges, going so far as to Photoshop documents to "create the illusion" of standing "in tens of thousands of bankruptcy cases," according to a federal class action.

Lead plaintiff Ernest Michael Bakenie claims that Chase's "pattern and practice of playing 'hide-and-seek' with debtors, judges and other bankruptcy players" bore rich fruit: that Chase secured motions for relief of stay and proofs of claim in 95 percent of its cases.

"Through the use of fabricated assignments, endorsements and affidavits that purport to transfer deeds of trust, notes and the rights to all monies due under the terms of tens of thousands of non-negotiable promissory notes (the 'MLNs'); Chase has demonstrated a pattern and practice of playing 'hide-and-seek' with debtors, judges and other bankruptcy players," the complaint states.

"Chase intentionally conceals the identity of the true parties in interest entitled to enforce the tens of tens of thousands of residential non-negotiable promissory notes (the 'MLNs') for its own financial benefit, at the expense of the class and to the detriment of the integrity of the bankruptcy system."

Bakenie says Chase used a network of attorneys to file more than 7,000 motions for relief from automatic stay in bankruptcy cases in the Central District of California, "wherein they falsely claim to be the party entitled to monies due under the terms of MLNs."

Chase rewards attorneys based on how quickly they can secure the stays, and uses fabricated documents to establish chain of title on loans, according to the complaint...

Read the rest here.

Gold Daily and Silver Weekly Charts

I hate the correlation of the metals and stocks here, as the equity markets look fluffy and puffed up on light volumes.

These are trader's markets.

PSLV came out at the low end of the range. I heard but have not confirmed that the offering was placed at least in terms of the secondary distribution channels. I do not know about the underwriters and their allotments.

SP 500 and NDX Futures Daily Charts

Markets are overbought but volumes are light.

Only 47% of firms are beating their numbers this earnings season so far according to Bloomberg.

Notice the tight uptrending channels on the charts. This looks like a 'market operation.' Try not to get in front of it, but choose your positions wisely and plan for the worst.

The low VIX gives traders a freer hand to play their games. But make no mistake, if some headline falls on this market it could deflate rather quickly. Still, that's a big 'if.'

Larry Summers Considered As US Choice to Head the World Bank

The Rubin Legacy continues on. Change we can believe in.

Hans Nichols does an exceptional job of covering the Washington beat for Bloomberg.

Bloomberg
Obama Considering Summers for World Bank
By Hans Nichols
Jan 18, 2012 11:47 AM ET

President Barack Obama is considering nominating Lawrence Summers, his former National Economic Council director, to lead the World Bank when Robert Zoellick’s term expires later this year, according to two people familiar with the matter.

Summers has expressed interest in the job to White House officials and has backers inside the administration, including Treasury Secretary Timothy Geithner and the current NEC Director, Gene Sperling, said one of the people. Secretary of State Hillary Clinton is also being considered, along with other candidates, said the other person. Both spoke on condition of anonymity to discuss internal White House deliberations.

Lael Brainard, the under secretary of Treasury for international affairs, is compiling a list of potential candidates to replace Zoellick, who was nominated to a five-year term that began in July of 2007 by then-President George W. Bush. By tradition, the U.S. president chooses the leader of the World Bank while the head of the International Monetary Fund is selected by European leaders. The nomination is subject to approval by the World Bank’s executive board.

You may recall the unfortunate tenure of arch-neocon and Iraq war architect Paul Wolfowitz at the World Bank.

"O, wonder! How many goodly creatures are there here! How beauteous mankind is!
O brave new world, That has such people in it!"

William Shakespeare, Tempest, Act 5, Sc. 1

World Bank Warns: Hope for the Best, Prepare for the Worst

In case your domestic financial press fails to deliver this important message to you so clearly, as the World Bank has done for the rest of the world's leadership.  

Hope for the best, and prepare for the worst.

Equities are pricing in a rosy scenario, but the bonds and precious metals are saying 'beware.'

The western central banks will contine to print money in response to this financial crisis, both before and certainly after the fact.

'How much' is a policy decision, but the choice seems compelling. Rather than limiting their printing, they will most likely attempt to manipulate and mask the perception and awareness of their actions through programs of buying sovereign debt, engaging in disinformation campaigns, and allowing blatant price manipulation in the markets by insiders.

The problem with this is that insiders stand to profit enormously while the public is used and abused rather badly. Power really does corrupt, not all at once, but in stages, one rationale at a time, with a privileged outlook or groupthink that comes to be widely separated from the shared reality of the public. And the opportunity to turn this to pillage is not wasted on the worst elements of those in the halls of power.

"And remember, where you have a concentration of power in a few hands, all too frequently men with the mentality of gangsters get control. History has proven that."

Lord Acton

There are others ways to do this that do not benefit the few at the cost of the many in such a disproportionate manner.

Financial Times
World Bank warns emerging nations
By Chris Giles in London
January 18, 2012 2:00 am

Developing countries should take steps to plan for a global economic meltdown on a par with 2008-09 if the European sovereign debt crisis escalates, the World Bank warned on Wednesday in its latest economic forecasts.

Predicting significantly slower global growth in 2012 than it expected last summer even if the eurozone muddles through its crisis, World Bank economists said that if financial markets deny funds to eurozone economies, global growth would be about 4 percentage points lower than even these figures, with poorer economies far from immune.

Andrew Burns, head of macroeconomics at the Bank, told journalists in London: “Developing countries should hope for the best and prepare for the worst.”

Stressing the importance of contingency planning, he added: “An escalation of the crisis would spare no one. Developed and developing-country growth rates could fall by as much or more than in 2008-09.”

The world economy would find it much more difficult to grow out of a new economic crisis, the World Bank warned, because rich countries had little monetary or fiscal ammunition available to stem any vicious circle and poorer countries now have “much less abundant capital, less vibrant trade opportunities and weaker financial support for both private and public activity [than in 2009]”...

Read the rest here.

Net Asset Value Premiums of Certain Precious Metal Trusts and Funds

Sprott Prices the Physical Silver Trust Offering at US$13.20

Sprott is bringing their deal out at the low end of the range. Quite a haircut for those who held the trust before the offering announcement, as I had warned. That thirty percent premium to NAV was completely undeserved and was most likely the result of a short squeeze.

It is a bullish deal for the silver market in general since it will take more than ten million ounces of silver out of the market and into the hands of longer term investment in the trust.

Sprott is giving the underwriters 15 percent of the offering in the over allotment if they choose to take it. They are Morgan Stanley and RBC Capital Markets in the United States and RBC Capital Markets and Morgan Stanley in Canada.

(RTTNews) - Sprott Physical Silver Trust (PSLV: News , PHS_U.TO) announced that it has priced its follow-on offering of 23 million transferable, redeemable units of the Trust at a price of US$13.20 per Unit.

As part of the Offering, the company said that it has granted the underwriters an over-allotment option to purchase up to 3.45 million additional Units.  (15 percent)

The gross proceeds from the Offering will be US$303.60 million or US$349.14 million if the underwriters exercise in full the over-allotment option.

The company stated that it will use the net proceeds of the Offering to acquire physical silver bullion in accordance with the Trust's objective and subject to the Trust's investment and operating restrictions described in the prospectus related to the Offering.

Under the trust agreement governing the Trust, the net proceeds of the Offering per Unit must be not less than 100% of the most recently calculated net asset value per Unit of the Trust prior to, or upon determination of, pricing of the Offering.

Sprott Physical Silver Trust PSLV Brings Out Its Follow On Offering

As predicted.  The cash reserves of the Trust had fallen to less than $350,000 by my estimates.

Let's see how this affects the price of silver.

According to a message to the Sprott Private Wealth clients:

PRICING: will be between $13.10 to $13.75 USD, which is a 5.6% to 10.0% discount from last trade, but a 12.3% to 17.9% premium to the latest Net asset value per unit.

PSLV closed regular trading today at $14.56, but traded as low as 13.33 after hours.

And as anticipated those buying the Trust at those 30 percent premiums will take about a ten percent hit on this offering.   The premiums must have been indicative of a short squeeze and not of a shortage in physical silver per se.   And the premiums were clearly at the outer bound of the historic range.

Of particular interest will be the allotment if any to the underwriters and at what prices. I would be surprised if deliverable silver has not already been discussed and arranged if this is going to be a deal in size.  The trust may be attractive once again at a more normal premium according to historic standards.

Press Release
Sprott Physical Silver Trust Announces Follow-on Offering of Trust Units
TORONTO, Jan. 17, 2012

(NYSE: PSLV) (TSX: PHS.U), a trust created to invest and hold substantially all of its assets in physical silver bullion and managed by Sprott Asset Management LP, announced today that it has launched a follow-on offering (the "Offering") of transferable, redeemable units of the Trust ("Units").

The Trust will use the net proceeds of the Offering to acquire physical silver bullion in accordance with the Trust's objective and subject to the Trust's investment and operating restrictions described in the prospectus related to the Offering.

Under the trust agreement governing the Trust, the net proceeds of the Offering per Unit must be not less than 100% of the most recently calculated net asset value per Unit of the Trust prior to, or upon determination of, pricing of the Offering.

From a Message Sent to Clients of Sprott Private Wealth

Sprott Physical Silver Trust (TSX: PHS.U, NYSE: PSLV) is issuing new units via an overnight follow-on offering. Anyone interested, please get back to me by 7:30 a.m. EST tomorrow (Wednesday, January 18) with their order quantity. Details are below.

The offering is expected to be for between $250 - $350 million USD. Eric Sprott will be participating as Sprott Inc., the Sprott Foundation and related entities or clients will invest at least $45 million in the offering.

PRICING: will be between $13.10 to $13.75 USD, which is a 5.6% to 10.0% discount from last trade, but a 12.3% to 17.9% premium to the latest Net asset value per unit.

Please note for Canadian investors, you can purchase silver at net asset value by buying the Sprott Silver Bullion mutual fund. Silver is Eric Sprott’s top investment thesis and as such, most of you already hold a substantial amount of silver through his Funds. As at December 30, 2011, 24% of the holdings in Sprott Canadian Equity Fund were silver bullion and for Eric’s Canadian hedge fund strategies, silver bullion makes up between 29-33% of the long portfolio.

If interested in this offering, if you have any questions or if you would like to take any other action with your portfolio, please send me an e-mail or call me.

Gold Daily and Silver Weekly Charts

Gold and silver are back in sync with equities.

The miners are struggling here.

SP 500 and NDX Futures Daily Charts - Manhattan Melodrama

There is quite a bit of 'tension on the tape' despite its calm outward appearance and rangebound trade.

They will either break this out into a new phase of the bubble, or the market will take a dive. I do not think we are more than a week or two away from a resolution to this, but it could drag on until the end of March and the final reckoning over Greece.

Whatever happens, go with the flow, because the pent up energy could provoke quite a move in either direction.

Or even better, get out and stay away until the situation clarifies in Europe and the Mideast unless you are an active, professional trader.

As may recall, the film Manhattan Melodrama was made famous by the introduction of the previously unrecorded song Blue Moon but with a different set of lyrics. It was such an attractive meldoy that the studio brought the song out afterwards with the original lyrics and a classic was born.

It was also the last film seen by John Dillinger before he was gunned down outside a Chicago theatre in the company of 'the lady in red' by Melvin Purvis and his G-men.

SP Futures Intraday

Cynical trade on light volume.

Within a range and a longer term trend, the markets and the supporting commentary from the financial news demimonde are pure manipulation.

And it appears that the Fed was aware of this artificiality as early as 2004 when it allowed the global banks inflate a fraudulent housing bubble in the US and in Europe, and failed in its responsibilities as regulator in addition to managing monetary policy and employment.

The better to loot them all, my dears. The privileged few must have their due, and honest work with all its risk is not on their agenda.

People's Bank of China Opens Direct Currency Swaps with Dubai and the UAE

This is not a particularly large deal, but it is another sign of the continuing erosion of the ad hoc Bretton Woods II currency regime and a growing disorder in global banking. Change is not just coming, it's here.

The usual US public reponse is dismissive: 'where else will they put their money?'

But behind the scenes the US is working very hard on this, often in conjunction with the Banks of England and at times Japan, to move to an alternative in the SDR based on a composition favorable to the dollar and the pound and the yen.   Europe is being held off balance by the ratings agencies, suffering from a crisis in leadership and coherent policy.  Germany is being urged to accept a 'separate peace' and assume a more powerful and controlling role on the Continent.

A significant area of contention is the petro-dollar, hence the heavy and continuing US military presence in the region.

But don't count out China, Russia, India and South America. Never play checkers when the other guys are playing chess (or Go).

Press Release
People's Bank of China

January 17, 2012 - People's Bank of China, Dubai and the UAE Central Bank have signed bilateral currency swap agreements, aimed at strengthening bilateral financial cooperation and promote bilateral trade and investment and jointly safeguard regional financial stability.

The 35 billion yuan swap / 200 million dirhams, is valid for three years and may be extended by mutual agreement.

Martin Luther King Day 2012

Martin Luther King's Last Speech



Speech from 3 April 1968, Church of God in Christ, Memphis, Tennessee

On 4 April 1968, Dr. Martin Luther King, Jr. was assassinated.

Gold Daily and Silver Weekly Charts

A pause and consolidation accentuated with an intraday bear raid that did not quite stick.

US markets will be closed on Monday for Martin Luther King Day.