SP 500 and NDX Futures Daily Charts - Freedom From Want

"When an industry becomes necessary for the proper functioning of our society, it wields an unhealthful amount of power. Specifically, it is in the perfect position to engage in what economists call 'rent seeking.'  (monopolies on 'essentials' are the dream of our modern capitalists, and healthcare and Banking are prime examples - Jess)

Generally speaking, busi­nesses earn profits in one of two basic ways. The first is by providing goods and services more productively than others and selling them at a price people are willing to pay. The second is by seeking rents.

'Rent,' in the economic sense, refers broadly to any excess benefits that people and businesses receive simply because they have power over something that others need. Patents are a form of rent, as are cable-TV monopolies.

For economists, rent-­seeking is everywhere, and is a common way that economies go awry. Crudely speaking, productivity enhancement is good, because it makes society richer over all. Equally crudely, rent-­seeking is bad, because it makes the people who are already rich even richer.

Rent-seeking tends to be a force against innovation and for stagnancy, in large part because its focus is on the past — on maintaining power and influence gained long ago, often at the expense of innovation.

Businesses built around rent-­seeking don’t try to increase the size of the pie; they just want to make sure they get a bigger slice. (If a company doesn’t seem to care about your opinion of it as a customer, there’s a good chance that it is seeking rents.)"

Adam Davidson, Wall Street Using Dodd-Frank Against Itself

The biggest problem we have is that the President and the Congress have no moral courage. If we had only a portion of the resolve to reform that led the New Deal, we would not have the threat of another financial crisis hanging over our heads.

The 'problem' is that the politicians and the regulators have been corrupted by Big Money, and their paychecks demand that they see no obvious solutions.

The stock market looks a little unsteady here, but it will take 'something' to push it into a rollover. So it in the meanwhile it can keep muddling along on light volumes and 'a six lane highway of $100 bills.'

Have a pleasant evening.

 

 

 

 

Need Little - Want Less - Love More

Chindia: The Steady Increase in Gold Demand From China and India

It is an interesting phenomenon that is often overlooked and underappreciated outside of the certain small circles of those who watch these sorts of things.

Gold is flowing from West to East.   What it means and will mean is worth considering.

In the bottom portion it is easily seen that the monthly offtake is steadily increasing.  And it is also apparent that China is outpacing India in the accumulation of gold.

These charts are from Nick Laird, who chronicles all things gold and silver, at Sharelynx.com.

Shanghai Gold Exchange Withdrawals 42.5 Tonnes For the Week

Gold is moving from West to East.

You may read about the roots of this phenomenon here.

This chart is from Nick Laird at Sharelynx.com.


Related:  Germany Leads Western Gold Buying

Gold Daily and Silver Weekly Charts - Non-Farm Payrolls Next Week - Risk Management

There is quite a bit of macroeconomic data coming out for the US next week. I have included the calendar below.

Among these will be the Non-Farm Payrolls number for May, which will be released on Friday.

This data will be watched closely because while the markets are sloughing off the newly revised contraction for GDP in the 1Q, they are nervously trying to maintain their belief in the story that this was some sort of weather-related anomaly.  The more contemporaneous data is showing higher than expected unemployment claims and a truly awful Chicago PMI has them edgy to say the least. So next week's data will be very important since it is so current.

There was overnight commentary on the gold market.  It is a broad summary of the market that paints a broader picture of what may be going on.   It also sets the stage for the currency war.  I urge you to read it here.

Of course there are other ways to explain all these things.   I have read these explanations presented by very serious people.   But I have been following this map or model of what is unfolding since roughly 2000, and it continues to surprise me as encompassing many more pieces of data from different places quite well without major modifications.  

If there has been any major adjustment it has been the timing elements.   These things seem to unfold much more slowly than one would expect.   And the audacity of the oligarchs, which is a counterpart to the surprising apathy of the public to scandal after scandal, is also a bit surprising.

Moreso than ever I am convinced that the lack of reform and gross mispricing of risk is going to catch up with the US financial system, and the results may be quite impressive.  There are bubbles which are being ignored again with a cavalier dismissal.  

 

So I do now think we are going to see a third financial crisis sometime within the next two years.   And there may be noticeable political consequences because of this.

Have a pleasant weekend.

 

 

SP 500 and NDX Futures Daily Charts - Fed's Policy Errors and Gross Mispricing of Risks: Nuts

"It took the Fed 95 years to build up a balance sheet of $1 trillion and only six years to go from there to the present level. The Federal Reserve was providing this stimulus to improve the growth of the economy,but it is my view that three quarters of the money injected into the system through the purchase of bonds went into financial assets pushing stock prices up and keeping yields low.

If I am right, the Fed contributed almost $3 trillion (some may have gone into bonds) to the $13 trillion rise in the stock market appreciation from the 2009 low to the current level, earnings increases explained $9 trillion (1.5 x $6 trillion) and other factors accounted for $1 trillion. You could argue that the monetary stimulus financed the multiple expansion in this cycle."

Byron Wien, The Fed basically put $3 trillion into the stock market

I think Byron is being generous with the contribution of earnings, which are increasingly questionable artifacts of dodgy accounting and stock buybacks fueled by cheap debt.

But this is the very point on which I have been pushing so hard for what, six years now? There is nothing wrong with stimulus, but stimulus for its own sake being pushed top down into a largely unreformed financial system is a willful kind of policy error, with its foundations in an insular world view, if not a collective madness that takes its unfortunate victims over the abyss. 

And the great majority of economists have been on board with this latest financial folly, either through active rationalization or timid acquiescence.   Professions that are build on powerful connections and 'reputations' often degenerate into a stubborn sort of self-referential herd mentality.

Let's not talk around this, or expend too many words on it.

This is nuts.

Stocks were sagging after the expected revision of the 1Q GDP to a contraction, which is what we said when the first 'positive' reading came out a month or so ago.   Ho hum.

 

So now we are 'looking forward' and the Chicago PMI, which is a reasonably current number, missed by a mile, and threw cold water all over this anomaly story for 1Q's slump.

 

And given the track record of the American ruling elite, I have little doubt they will keep doing the same things until they crash the financial system for the third time in less than twenty years. 

 

And they will recklessly view this as just 'another opportunity.'

Have a pleasant weekend.

 

 

 

 

NAV Premiums of Certain Precious Metal Trusts and Funds

Sprott has made a formal offer for the Central Gold Trust which has certainly pulled the discount to NAV in quite a bit since they first disclosed their plans some time ago.

 

The Gold/Silver ratio remains historically high at 71.

 

The Sprott funds have their usual precious metals flat market price with a slight discount to NAV.  Few animal spirits there.