Gold Daily and Silver Weekly Charts - Flight to Safety - The Reckoning

Roses are red, violets are blue,

The Swiss peg collapsed, the gold rig will too.

Gold had a fairly significant flight to safety rally today as the Swiss National Bank roiled forex markets by decoupling the Swiss franc from the Euro.

This caught almost all of the Street by surprise, except for a few analysts who saw the mounting costs of maintaining (an official euphemism for 'rigging') of the Swiss franc to the euro to support Swiss export trade as becoming problematic.

As you may recall, the Swiss National Bank instituted its peg to the Euro in September 2011, about the time that gold entered its bear market.  And now the peg has been removed.  The Swiss franc, like gold, is considered a safe haven, and the Euro is in a bit of trouble, with recession and QE looming.

 

The Swiss franc has been straining at the leash to run higher for some time as a traditional 'harder currency' and a flight to safety.  The Swiss Bank sought to restrain this trend in order to help the Swiss export trade which is a large part of their GDP.

 

Gold also has been restrained for some time by several of the Western central banks. 

 

When such a long term manipulation breaks down, the results can be impressive.   The gold rig has not broken down yet, but the Swiss-Euro rig has.

 

There will be a reckoning.

 

There is a fantasy that the US is a financial fortress, like the JP Morgan Balance Sheet, that does not condescend to notice developments overseas. Hah! The notion that large sovereigns with their own currencies are islands unto themselves, which some moderns are casting about as something new, is nonsense and rubbish.

 

Bloomberg financial TV become 'The View' for the one percent, and the level of discussion by the spokesmodels was not particularly useful anymore, especially since Adam Johnson left.   CNBC is not much better, with its cronyism.  So I think most of their viewers will be caught by surprise in whatever should come as they were in 2008, 2002, etc.  Forewarned is forearmed.

We live in a very interconnected world, with the financial sector providing a web of counterparty dependency. While there are certainly some who would like to see the US Dollar become the one world currency, that is highly unlikely to happen. And so the world remains interdependent. What the Fed and the Treasury do with the Dollar matters, and confidence is paramount.

The Swiss National Bank did not release this peg lightly. A 'stronger franc' is not good for Swiss business which is more export than import oriented. And while it might provide a little edge for the Swiss Banks, they are so internationalized that it makes little difference.

I suspect that this will be downplayed by the talking heads. The Bankers want to maintain the mystique of supra-natural competency and wisdom, and the funds who are getting blowtorched on the short side of this flight to safety want to get out with their skins intact.

Big things are happening. Gold has broken out, but silver has not followed yet, and certainly not seen its high beta breakout engines kick in, which is about as clear a sign of a flight to safety as I can imagine.

Give this one some time and don't chase it. Things will continue to move slowly in fits and starts. I do not think that this is the big one yet, but there is not a lot of doubt in my mind that the global financial system is heading for a reckoning with valuation. The actions of the economists and the Bankers, with their servile political servants, have been so counterproductive and arrogant that the next financial collapse has been almost assured.

Certainly no need to panic. But now is a good time to make sure that you have taken some measures to get yourself out of the blast zone of financial folly.

Have a pleasant evening.

 

SP 500 and NDX Daily Charts - One Way Or Another

I fled Him, down the nights and down the days;

I fled Him, down the arches of the years;

I fled Him, down the labyrinthine ways

Of my own mind; and in the mist of tears

I hid from Him, and under running laughter.        5

Up vistaed hopes I sped;

And shot, precipitated,

Adown Titanic glooms of chasmèd fears,

From those strong Feet that followed, followed after.

But with unhurrying chase,        

And unperturbèd pace,

Deliberate speed, majestic instancy,

They beat—and a Voice beat

More instant than the Feet—

‘All things betray thee, who betrayest Me.’

Francis Thompson, Hound of Heaven

As I am sure you have all heard by now, the Swiss National Bank shocked the markets this morning by dropping their export-trade motivated peg to the Euro.

This certainly moved the currency markets, and toasted those who were short the franc, of the hedge fund variety.

All this overshadowed the US economic news which, in the vernacular, blew chunks.

 

The Philly Fed slumped badly, the unemployment claims were much higher than expectations at 316,000, and Core PPI was higher than expected.   Holy hints of stagflation, Batman.

 

Stocks are really back down hard on support now, after putting in some wide ranging days over the past week or so.  This is described technically as 'not good.'

 

Barring some central bank kabuki words, which are getting a little thin by the way, we might see a continuance of a slack stock market where even 'ok news' gets sold.  

 

This seemed to be the case with Intel after the bell, that came in-line with its financials, and sold off.

 

Have a pleasant evening.

 

 

 

NAV Premiums of Precious Metals Trusts and Funds - Gold Rally, Swiss Made

The Swiss National Bank shocked the currency markets this morning by dropping its manipulation of the Swiss Franc in the currency markets against the Euro.

More on this later. They make seek to dampen the effect and diminish its importance, but this is huge.

One has to wonder what the SNB was seeing that made them roil the markets and take this kind of hit to their balance sheet, estimated at around $100 Billion, which is a good chunk of the Swiss GDP.

More on this later. Not many understand what is happening in the currency markets.

There is no such thing as a free lunch. unless you are taking someone else's.

Jawboning and perception management aside, this is huge.

Gold Daily and Silver Weekly Charts - Same As It Ever Was

"We hardly need to be reminded that we are living in an age of confusion — a lot of us have traded in our beliefs for bitterness and cynicism or for a heavy package of despair, or even a quivering portion of hysteria.

Opinions can be picked up cheap in the market place while such commodities as courage and fortitude and faith are in alarmingly short supply."

Edward R. Murrow

Certainly sounds like a description for today, doesn't it?

The concept of alienation is nothing new, resounding throughout various authors and schools of literature from even the ancient classical period. We are strangers in a strange land.

In its most recent manifestation, in philosophers like Hegel, Marx, and Rousseau, it is the idea that in the past people lived in harmony, in a sort of natural state, and then the structures of production and civilisation caused people to feel disassociated, separated from the fabric of their own world grown to large for interaction, separated from their fellow men, and ultimately from creation itself.

We fantasize about the naturally good and brave pioneer, hands deep into the soil, living harmoniously with the land and the animals, with a natural kindliness and spirit of cooperation with others.

I have come to believe that this is nothing more than an echo of the transition from child to adolescent, and from adolescent to adult. 

Readers see the above quote and say, 'yes this is how it is.'   But they forget that this is how Edward R. Murrow was describing things in the so called golden days of the 1950s, which I remember reasonably well, and that were anything but placid and golden.  They were filled with turmoil, tension, and fear, that gave way to the youth revulsion, rejection, and revolution and of the Sixties.

 

Each generation grows up and faces the challenges of adulthood, and they seem new to them, especially if they have no real sense of history.    And this phenomenon can be exacerbated if the demographics favor a generation with larger than usual numbers.

We face NOTHING that has not been faced before, many times.  It seems new to us, because we personally may have been able to move through life in happy ignorance, while our parents and grandparents took care of the harder tasks of resisting corruption and fighting for their families.

 

The main difference is that it is our generation's turn to carry the baton, and burdens, of history.  And so we must brace ourselves for our duty, both large and small.

 

We can take some comfort from this, and some equanimity from this when the thought leaders attempt to sow fear, cynicism and confusion in the public. 

 

Terrorists, bomber, civil unrest, economic collapses, corruption and anarchists?  Read some of the less glamorous history of your own country and see what the last two generations faced. 

There is nothing really new under the sun, and 'modern' and 'new eras' are too often old cons and misbehaviours in different sounding wrapping.  Read the quotes from Wendell Berry in the stock commentary below this posting.  He cuts to the heart of our problem.  We think it is all new, when it is the same, age old struggle between the common good and private privilege, between justice and corruption and the need for like minded good people to associate for their own mutual protection. 

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

SP 500 and NDX Futures Daily Charts - The Dispossessed and the Alienated

"Most of us are still too sane to piss in our own cistern, but we allow others to do so and we reward them for it. We reward them so well, in fact, that those who piss in our cistern are wealthier than the rest of us.

Today, local economies are being destroyed by the pluralistic, displaced, global economy, which has no respect for what works in a locality.  The global economy is built on the principle that one place can be exploited, even destroyed, for the sake of another place.

A corporation, essentially, is a pile of money to which a number of persons have sold their moral allegiance.

No great feat is going to happen to change all this; you're going to have to humble yourself to be willing to do it one little bit at a time.

Every day do something that won't compute. Love the Lord. Love the world. Work for nothing. Love someone who doesn't deserve it. Plant sequoias. Be joyful even though you've considered the facts. Practice resurrection."

Wendell Berry

The Retail Sales results for December sucked out loud this morning sending stocks lower, although they tended to try and regain their footing throughout the day.

Oil caught a bid with USO showing a little snap to the upside. We paid 1.63 for full serve regular at Costco today.

There is no recovery. We are in the same 7 to 8 year financialisation with crisis cycle fed by goofy theories, deregulation, and political and financial corruption.

There is a school of thought that says this 'new normal' suits a goodly portion of the one percent just fine, and it is unlikely to change until the people rouse themselves. But most notably this Me Generation is too self-absorbed to do anything even for its own sake until all other options are exhausted. And the political class knows it.

Have a pleasant evening.

 

 

Gold Daily and Silver Weekly Charts - Mr. & Mrs. Toad's Wild Ride

The big story today was in the stock markets, with a hugely wide ranging outside reversal from buoyant expectations fueled by ECB QE to a steep decline on pessimism about earnings, sparked by KBH but other stocks with 'good earnings' that sold off like Alcoa.

And then when the markets started doubting Draghi's ability to prod Bubba and the EU to go along with QE, stocks sold off pretty hard, with a little bounce back to unchanged near the end of day.

Oil had a big selloff, and then a late day bounce on hopes/speculation that the reports coming out tonight and tomorrow would show a draw down in inventories.

So all in all it was an 'exciting' day if you were a trader, and if not, then it was just another day.

Silver held its gain for the day, but gold gave it up with a little retrenchment.  

 

After the last few days advances on what looked like a 'fear trade' or flight to safety we were due for a pullback as I had suggested.  It is the character of this pullback that will tell us quite a bit about the nature of this rally and any sustainability. 

Let's see if gold can gather itself together and take the next step to break out.

Have a pleasant evening.