SP 500 and NDX Futures Daily Charts - Well Meaning and Clueless, or Reckless and Self-Absorbed



The Bailout

“When bad men combine, the good must associate; else they will fall one by one, an unpitied sacrifice in a contemptible struggle.”

Edmund Burke

In general, I to to apply the maxim that one ought never to attribute to bad intent what can more easily be attributed to well-intentioned stupidity.

I bring this up now, because I continue to struggle with the thought processes of a government and a central bank that seem intent on creating another bubble and subsequent financial crisis.

The first time it was shame on them, and this was the tech bubble and Y2K, that were quickly forgotten in the tragedy of 9/11.

The second time it was the housing and credit fraud bubble, and it was shame on us for idly standing by and allowing ourselves to be robbed and denied justice in the bailout. But in our defense, frightened people often agree to do and accept foolish things.

 

I also wish to remind ourselves of the obvious, that this is not the US or the Fed acting alone.  There seems to be an almost unnatural unanimity in this amongst the Western powers.  The bubble breaks, and some people somewhere are victimized, even if they had relatively little to do with it.  The story is always painted, that they are lazy and foolish, and had it coming to them.

Will there be a third time, yet another financial crisis that shakes the financial system?   Powerful and reckless people often find the changes enabled by a crisis to be both rewarding and exhilarating, in the exercise of raw power and the stuffing of their own pockets.

So, if there is in fact a third financial crisis in the world, we might well expect to see the furtive hand of the financial system reaching into the public's pockets once again, supported by their politicians urging them to give way to save themselves.  And this may happen again in any part of the Western world.

And at that point the most effective course of action may be for the public to gather themselves as a people and say 'enough!'  And with all due process, civility, and respect for justice and the law, to cut that hand off, figuratively speaking.  And then they may proceed on to the difficult business of reform.

Have a pleasant evening.

 

Princes of the Yen: Central Banks and the Transformation of an Economy

"Central banks have the power to create economic, political and social change. This is how they do it."

While I cringed at some of the early parts of the film and the mid-century American attitudes towards the Japanese, even if it was in the aftermath of a long and viciously fought war, I think this documentary provides some valuable insights into the evolution of the modern economy that is Japan.  I direct your attention to the things that we are often saying about different peoples today.

 

I struggle very hard not to judge other periods, cultures, and people with a righteous and twice removed temporal prejudice, enhanced by distance and hindsight.  And I believe such liberality might serve us well, given that we will most likely appear like blundering, hapless baboons to our great grandchildren some day.  What were they thinking!?

 

As a general observation based on experience, people everywhere are just people. Unless you are wearing the goggles of ignorance, fear, and hatred. And wicked men in business and government often encourage that sort of thing for their own ends.   But, in the end, the madness serves only itself.

 

But some cultures do tend to encourage and reward certain traits of personality and behavior more than others.  This has deep roots in their cultural, social, and religious heritage.  So the same economic conditions in two different cultures might provide two very different outcomes.

I recall explaining some of this to a professor from England whom we had in business school.  He could not quite understand how some of the things that were happening in Japan (Japan Inc. as it was known then) that ought not to be occurring in a two party system. The answer of course was that Japan at that time, in the early 1990's, was essentially a single party system with heavy ties to an embedded bureaucracy in partnership with corporate cartels.  And Richard Werner does a fairly good job at describing the evolution and nature of that system.

I think this structure helps to explain the long economic stagnation in Japan that puzzles so many, and has the Keynesians so befuddled.   They have never met any stimulus that they didn't like, even when it was being poured into and abused by a corrupt and inefficient system. 

 

Rather than being naturally more successful at its financial engineering, as fellows like Bernanke have snarkily suggested in their American exceptionalism,  I think it is becoming painfully obvious that the US is 'turning Japanese' in its serial policy errors propagated by an insular, ruling elite and the moneyed interests with their political power.

 

Speaking of financial engineering, Professor Richard Werner has been a long time economic advisor to Japan, and coined the term quantitative easing for his recommendations to them.

 

Japan, and the 'Asian tigers' as well, were mercantilist in their outlook and crony capitalist in their composition.  The enormous amounts of monetary stimulus were dissipated in supporting zombie corporations, a ruling elite, unproductive investments, and widespread soft corruption and insider dealing.

To engage in 'free trade agreements' under these circumstances with other command and control economies is foolish, especially when it puts domestic labor, social services, and the environment at par.  Especially when such processes are disguised under layers of complex rules and commissions, and easily manipulated by global corporations.   These are the bonds of global repression of the common people by concentrated power.

 

It rips the heart out of local autonomy and democracy under the banner of 'competitiveness.' It is corrosive of precious freedoms, and tramples the Constitution. But money has helped to ease the consciences of Western politicians.

Even moreso, can there be any doubt that the US, rather than helping to provide a positive example of a different way to Asia, inculcating freedom through its success of democratic and free markets, is in fact falling into the same model, a kind of a lowest common denominator of inverted totalitarianism under the standard of globalization.

 

I would like to think that Chalmers Johnson would most likely agree that if the Bank of Japan's economists are indeed the 'princes of the yen,' this is because they are now and have long been liege lords in the Empire of the American Dollar and the Anglo-American banking cartel.

Gold Daily and Silver Weekly Charts - Metals Bears Shocked By Unusual Intra-Day Reversal

"Through the mills of God grind slowly, yet they grind exceeding small;

With patience He stands waiting, with exactness He grinds all."

Baron Friedrich von Logau, Sinngedichte

As you know the Swiss gold referendum was defeated this Sunday, along with all the other initiatives issues like tax reform and immigration.

 

The metals bears were licking their chops and counting their chickens, and gold and silver both opened sharply lower in overnight futures trading.  At one point silver broke the 15 handle and gold was testing 1150.  And this was after the big price smack down in an otherwise dull holiday market on Friday for month's end. 

 

The usual suspects, the metal perma-bear squirrels and shills, were exuberant over the folly of those wretched, foolish creatures, the goldbugs, which is anyone who might be long gold.   Not to be confused with the new situation comedy called The Goldbergs which by the way is hilarious.  

 

Even though spokespeople who work for companies that sell gold and related gold service like to deride those damn goldbugs and the yellow dawg whenever they have an opportunity like this.  By the way, whatever happened to Kitco's Jon Nadler? 

 

Well, that is how it is when the metals are down and things are at their darkest.  I turned off the terminal and wrote it all off to the usual antics.  I had added gold longs on the weakness last week late, some silver, and went into the Friday close buying volatility and shorting the Russell 2000.

 

Getting up early I had to drive in to the city to pick up some visiting relatives who had been on a little vacation, and so I missed all the action this morning. 

 

When I came back home I was trying to brace myself for what the markets would show.  And as I flipped on the television, Bloomberg TV was talking about the gold market slumping down over fifty dollars. 

 

And then my trading terminal finally booted up and I had a pleasant surprise.  I wrote about that intraday here.



Rod the Happy Hawaiian

What a reversal.   What the heck happened.  Gold was up about seventy dollars off the overnight lows, and silver was screaming higher with a seventeen percent gain.  

 

The bears had come marching in last night like miles gloriosus, but were going out in the afternoon like the Italian army pursued by George S. Patton. 

 

I was especially happy today when my long time friend and silver surfer, Rod the Happy Hawaiian, sent me an email saying that he locked in a silver buy last night with a 14 handle on it.   Nice late 'Black Friday' buy. kaikaina.

 

So does this mean that the bear market in the metals is over and done?   Not yet.

 

We can see from the charts that gold failed to break the downtrend yet, and has more upside work to do before we can call a trend change. 

 

If you look at the delivery reports from last week you can see that we are now in a different month, a lot more active one to say the least.  JPM and HSBC were stopping December Gold contracts for their 'house accounts,' and HSBC, Barclays, and Nova Scotia were stopping December Silver for their 'house accounts.'

 

So one could make the case that this was a bear trap, and that some funds and specs had come in shorting like heroes and were shorn by the big market makers like sheep.  See the video excerpt below for some live action sequences.

 

That does not mean that this brutal bear market in the metals is over yet.  But it was certainly a nice change of pace.  Just because the sharks were swimming in our direction today does not mean that they will be doing so tomorrow. 

 

I will say that if we saw such a sharp V bottom reversal in most any other market we would be looking at some fairly bullish signals.  But not in the precious metals these days.

 

This Comex market is disconnected from the real world and any kind of fundamentals that I have been watching for quite some time.  It seems more like a game of Liar's Poker than an efficient method of price discovery and capital allocation for a global industry.

 

So, overall the markets are still perverse and unreformed, and there is a Non-Farm Payrolls report on Friday.  And I have lost any hope that the US markets will be reformed, unless they hit a very hard stop first, with all the collateral and commensurate carnage born from years of abusive practices. 

 

Apparently the lessons from 2001 and 2008 have already been forgotten.  One can appeal to reason and justice, and even to the most practical exigencies of common sense and informed self interest, but it is hard to stop a group of privileged insiders who are consumed by greed, and feel arrogantly entitled to do whatever they wish, whenever they wish, to whomever they wish, and become inordinately wealthy by doing so.

 

Have a pleasant evening.

 

 

 

 

 

 

 

They marched into the metals pits overnight like conquerors, and were carried out in the afternoon on stretchers.

SP 500 and NDX Futures Daily Charts - End of Month Paint Is Dry

Stocks were slumping today from the open, with AAPL having taken a dive, and a few of the major indices with it.

There was no particular reason for this fundamentally.

My own theory was that the funds were painting the tape with some seriously heavy handed brushstrokes into the end of the month in quiet trading last week. And today was the start of a new month. The paint was dry, and the market had a 'technical correction.'

Whether this was correct or not it 'worked' for my portfolio which was long volatility and short the Russell 2000 coming into this mess.

Non-Farm Payrolls later this week.

 

US Corporate Debt Sales Topped the $1.5 Trillion mark this year for the first time.  One might feel more optimistic about this if so much of this debt wasn't being consumed by stock buybacks to support management compensation packages.

 

 More nonsense like this to follow we can assume, until the music stops.

 

There is no reform in the markets, which are still possessed of markedly criminogenic tendencies.  And so there is not likely to be any sustainable reform, with the body politic afflicted by toxic blood poisoning through its financial and political processes.  How could we expect anything else?

 

This is a shame, and the indifference of our 'ruling elite' to it is a disgrace. 

Have a pleasant evening.

 

 

NAV Premiums of Certain Precious Metal Trusts and Funds - Bloomberg TV Blows It Big Time

Sometimes you just have to chuckle.  I had been out all morning picking up some visiting in-laws in the City.  When I came home I flipped on the news, and turned on the equipment in my home office.

The mid-day news highlight on Bloomberg TV at about fifteen minutes after noon today was to say that gold was down sharply, over fifty dollars, because of the Swiss gold referendum vote.  

 

Yikes!  But then I looked at my trading terminal and said, 'huh?'  Gold is rallying hard, and silver is taking the shorts out of the pits on stretchers.  What is up with this? 

 

And as a reference they cited this 'highly popular story' they ran from early this morning.  In the updates they mentioned absolutely nothing about gold's spectacular comeback in the morning trade, as if it had not even occurred. 

Swiss Gold Rejection Deals Blow to Investors Hurt By Slump

What is the point of a real time television network when you maintain the immediacy of daily newspaper?

A clue to this might be the presence of Willem Buiter in the early morning feature, the Citigroup chief economist who says some almost absurdly myopic things about gold every so often.  Buiter Fitfully Obsessing About Gold

I really don't mind that they put out this feature story piece about the big gold decline early this morning.  After all, it must have taken some production planning.  And their spin on this must have been premeditated since this is the same the same Mr. Willem Buiter who has recently surpassed most of his prior howlers with the sage estimation that Gold Is In a 6,000 Year Bubble.   Stupid Egyptians, Greeks, Chinese, and Romans.   

 

Yes I don't mind such an oddly phrased feature story, but to then completely ignore the big reversal that occurred during the morning New York trading hours in the later daily updates makes one wonder about their mission as a financial news network first and foremost, when the preconceived features get in the way of the straight news. Someone is asleep at the credibility switch.

 

Would Bloomberg TV be this far behind the curve on stocks or bonds, for example, if they had declined sharply and then corrected all the way back up and then broken out higher?   They certainly followed the rebound in AAPL this morning quite keenly, and it did not begin to match the rebound in gold.

Granted, some of the US financial spokesmodels seem remarkably uninformed about what is happening outside the confines of North America.  China?  What is that, a supplier to AAPL?  A subsidiary of BABA?   The difference between US based news anchors and those from the same networks based in Europe and Asia is often remarkable.

 

But to be this behind the curve on their own Bloomberg news terminal quotes, a first rate service by the way, on an important global commodity and resurgent paracurrency is appalling.   Central banks went from long time net sellers to net buyers of gold around 2006 and that means nothing?  Russia and China and their central banks are buying gold hand over fist, and it doesn't even merit a mention in their meme?

 

Gold and silver are certainly in bear markets, and still are even after today's surprising reversal.  Whether that changes or not who can say?  We will have to wait and see.

 

But there are many unusual and newsworthy things happening in the world of global finance and central banking these days.  And choosing to ignore them is not necessarily effective financial management.   There is something going on called 'the currency war,' and its effects make be significant, and quite possibly historic in its importance.

 

The tremendous sea change that has been occurring in the international monetary markets is apparently buried under a barrage of barbarous fiatscos.  And only a few can see the implications.