Gold Daily and Silver Weekly Charts - Bottom Scraping the Silly Season

Gold and silver popped a bit today, from what can only be described as a 'deeply oversold' condition.   And weakness in the dollar index certainly was a factor, although again it is good to keep in mind that the DX index is largely outdated, and just the inverse of the Euro which is undergoing its own set of secular and systemic problems.

Bottoms and tops tend to be marked by extremes.  There are extremes in sentiment of course, and extremes in the measures by which those who feed off the productive economy seek to hand off their 'investments' to others, and to wring the last dimes out of the public.

I think we might be approaching such a point in the bond and equity markets.  And we have certainly been seeing extremes in sentiment with regard with gold and silver in both directions here.

Of course we are well familiar with the 'pet rocks' crowd, who are falling all over themselves to say increasingly absurd and self-referential things largely about personal taste and bias that do not reference the current reality and even history.  The central banks of the world became net buyers of gold in 2006 or so, and this buying of physical bullion is continuing to grow in statistics that are easily discovered if one looks for them.  This is not to be disregarded, and yet it is.

But in fairness, such times also give rise to some hyperbole on the part of the beleaguered metals bulls, and some misconstruing of what is happening in some of the markets, in their enthusiasm.  There is a creeping inflation in sensational headlines for internet 'clicks' which translate to readership and dollars.  

A recent example was describing the actions of JPM in making a large amount of bullion available to cover demand recently as dramatically 'saving the exchange from default.'

As I have taken some pains to explain in the past, the Comex is unlikely to default, given its current structure and nature which I have described colloquially as The Bucket Shop.  

There is not enough physical action on the Comex in the metals, with the exception of silver which is largely due to the actions of CNT which is using it as a wholesale delivery mechanism, to warrant many serious concerns about a physical default.

But for those who may call out this sort of excessive language as a strawman for ridiculing all examination of the antics at The Bucket Shop is equally misfooted and silly.

Any analysis of supply and demand and delivery that does not consider price, the price setting mechanisms, and the major players dominating the game is probably naive, and possibly a bit disingenuous.  To talk about supply and demand without regard to price is misleading and meaningless.

For the Comex, to consider all the inventory held in their certified warehouses as deliverable at the current price is presumptuous.  This is like saying that all the people in the country are there to provide labor at any price without regard to the job or their willingness to do it.  Certainly you could say you will not run out of labour if you can conscript everyone at will, but that is hardly a market.

Once bullion has been certified acceptable into a Comex warehouse there is some incentive to keep it stored there if one is merely using it for speculative purposes, because you are merely holding a warehouse receipt for it, and taking it out of the system adds some friction and expense to the transaction if you intend to bring that bullion it back in again.

By the way, as Koos Jansen informs us, this is the rule at the Shanghai Gold Exchange.  If you take delivery of gold it is withdrawn out of that system.  And this rule does not seem to deter people from doing business there, as their deliveries dwarf the Comex.  The SGE is oriented towards actual buyers and sellers, and not so much to facilitate mere price speculation.

It is no accident that only '2% to 4% of the contracts at the Comex' actually take delivery of the metal.  That is what opens it up to large scale paper speculation if the regulators and exchange permit it.   And the chart of the ratio of contracts open to ounces deemed deliverable by the owners now at historic highs compared to the norm at the Comex itself!

Price matters.

If a person decides that the current price is an acceptable price for any number of motivations, they may rather easily place their eligible inventory at the Comex up for delivery to another by declaring it to be 'registered.'

Excessive attention to the technical details of how things are done in a certain place, while ignoring other equally important dimensions of the equation  may cause one to completely overlook all the other positions, motives, and conversations that may be occurring amongst the players, as we saw recently in the case of LIBOR and the London gold fixes.

Talking about even detailed supply and demand, without considering who is delivering what and at which price,, in the context of the current market dynamics of sizing and positioning is just talking without considering the underlying information that makes the market.  And I would like to think that most people familiar with markets and speculation would know this.

People tend to talk their books and their biases.  I get that.  And people may legitimately disagree about things, and still be friends, as long as they are acting in good faith and with a civil manner.  That is essential to sorting things out.

But when an argument starts off with an ad hominen characterization, as so many precious metal comments seem to be couched in this bottom scraping silly season, then one has to raise a hand and say that this is more distraction, a very weak argument, and not useful information.  And there is certainly enough of that in the 'pet rock' school of analysis.

Those who are standing for reform in the markets are a small minority these days indeed.  And for them to cut off others because they do not find their politics or their religious beliefs or race or any other of the myriad of things that make a person who they are in good conscience, are asking to fail alone in a contemptible and miserable struggle.

Reform must be a broad principle that unites diverse peoples.   Because the greed and pride that unites their opposition is certainly stronger and more broadly funded, and relying on the kind of weakness in character that finds at least some place in most people's hearts.

Based on the number of financial scandals in a remarkably broad range of major global markets, those who think that we are not enduring a time of excessive market manipulation and pervasive dishonesty must be living in a cave, or in a deep well of subjectivity.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - How This Wall Street Asset Bubble Will End

Stocks were in rally mode today despite the poor economic news out of China over the weekend, or perhaps because of it.

Some of the Streetsweepers noticed that Fed Gov Lockhart did not say 'September' in his latest pronouncement about his bias towards raising rates, barring an economic Armageddon.

Why in particular a three month difference in raising rates off the zero bound by 25 basis points strikes me as odd.

More likely today's rally was a 'just because' excuse to start a new wash-rinse cycle, because after all, the little people were selling into the fears of last week, so it is now time to turn the greediators back on and heat this bubble back up.

This market is so bent that it is hard to be cynical enough about it.

Let's see if they can keep this going, with a little help from Shake Shack after the bell.  What an emblem for our financialized economy.

Everyone would like to know when this bubble will end.   Timing is difficult.  But the 'how' it may look is a little more approachable.  For an idea on what it might look like, see the video below.

Have a pleasant evening.

First They Came for the Opposition, and then the Weakest and the Most Vulnerable

It is surprising how many people do not know about, have never even heard about, the first victims of the Nazi concentration camps and Euthanasia programs.

The first victims of the Konzentrationslager, concentration camps, were largely the political opposition to Hitler:  the Social Democrats, the intellectuals, the communists.

"The first concentration camps in Germany were established soon after Hitler's appointment as chancellor in January 1933. In the weeks after the Nazis came to power, The SA (Sturmabteilungen; commonly known as Storm Troopers), the SS (Schutzstaffel; Protection Squadrons—the elite guard of the Nazi party), the police, and local civilian authorities organized numerous detention camps to incarcerate real and perceived political opponents of Nazi policy.

German authorities established camps all over Germany on an ad hoc basis to handle the masses of people arrested as alleged subversives. The SS established larger camps in Oranienburg, north of Berlin; Esterwegen, near Hamburg; Dachau, northwest of Munich; and Lichtenburg, in Saxony. In Berlin itself, the Columbia Haus facility held prisoners under investigation by the Gestapo, the German secret state police, until 1936."

But as brutal as they were, these first concentration camps were meant to remove and intimidate opposition to the regime.  We must never forget how the people of conscience among the German people were cowed into submission, to remove and silence their voices and serve as an example to the rest.

The first victims of mass murder were the disabled, the emotionally impaired, and the unproductive.  Hitler personally signed an order to begin the 'mercy killings' of men, women and children who were in state run hospitals and schools, and even in private care.   The reason they were murdered is that they were deemed to be too expensive to live, too unrproductive, too much of a drain on the people and the state.  This even included people with what today might be considered treatable and transitory mental illnesses such as depression.  If you showed the wrong kinds of weakness, you were disposed of, and often brutally by starvation.

Why have most of us never heard about this?  For two or three reasons perhaps.

First, of course, is that the weakest, then as it is now, have few to rise up and speak on their behalf against the power of an over-reaching State and the sociopaths among us.  Where is the lobby that speaks on behalf of the poor and the disabled, the sick and the defenseless?   Yes, the churches and different groups may speak out, but they are easily marginalized and overwhelmed by slogans and insults.

Second, the sad truth is that this first mass killing compromised the greater part of the German professional class:  the lawyers, the doctors, the nurses, the economists, the media, and other ambitious placeseekers.

People who knew what was happening either approved or pretended not to see it.   It was a very poor career decision to oppose such a policy, especially since as I noted above the most visible opponents of the new regime were being carted off to Dachau starting in 1933.

And German propaganda was weighing heavily from early days on the notion that some people were not fit to live in a society that must be economically and physically tough.  They hardened the peoples' hearts, slowly but surely.   The needs of 'the State', which was really a gang of self-absorbed sociopaths caught in the will to power and riches, resembling thugs and gangsters, were judged to be the highest priority.

Officially starting in 1935, although the actual persecution began in 1933, homosexuals were considered to be unproductive members of society.

The Nazis believed that male homosexuals were weak, effeminate men who could not fight for the German nation. They saw homosexuals as unlikely to produce children and increase the German birthrate. The Nazis held that inferior races produced more children than 'Aryans,' so anything that diminished Germany's reproductive potential was considered a racial danger.

Of course all of this line of thinking found its full fury in some of the most horrific organized mass killings in human history, primarily of the Jews, and to some extent the Slavs.  Although it certainly included other non-Aryan groups like gypsies.  It was a terrible and horrible act.  It is hard to imagine where and how far it might have gone if it had not been finally stopped.

But people also tend to forget that although there was organized murder on a large scale beyond any question, the camps were also important hubs of slave labor, with the weakest being murdered outright, and the rest slowly worked to death in the war factories and special projects.  Always the decisions had a strong economic element of 'practicality.'  It was the triumph of utilitarianism and madness.

Like most terrible and horrible acts, it did not begin with a single event, a single decision.   It began with a profound intolerance for other people, ideas and dissent; and then, when it found its political footing and felt more confident, it found the will to murder the weakest, the most vulnerable, and those who had no one to speak for them.  And its unquenchable thirst for power, money and blood was unleashed.  For when all the laws of God and men have been knocked down and flattened, who then can stand when the cold winds blow across the land.

This is how a nation and a people can begin their long and painful descent into barbarism and bestiality:  by a program to stifle dissent, and then to use the media and the journals to harden the hearts of the people with fear, and corrupt practical ideas about who is or is not 'worthy of life,'   marginalizing the poor, the vulnerable, and the different.

People craft romantic images of themselves and their group as strong and more cunning and ruthless than most, exceptional, like predators entitled to their prey.  And so over time they become truly distorted and corrupt, grotesques, and make themselves into beasts.

This is how it is always with the will to power.  And in the end it only serves itself, consuming all.





Aktion T4 - A Timeline of the Nazi Euthanasia Program

Gold Daily and Silver Weekly Charts - Not Bad For a Non-Farm Payrolls

"For thousands of years gold has been, in times of war and crisis, the ultimate store of value and medium of exchange. Gold is virtually indestructible, anonymous, mobile and almost universally acceptable.

In times of crisis and uncertainty the presence of a sizeable gold holding boosts confidence of creditors, not least because gold is the highest quality asset: unlike foreign currencies, it is not a claim on a debtor (bank or government) and therefore does not have the same risk of default in times of crisis."

Staff Report, Bank of England, 1988

The Jobs Report came in weakly, but not enough to deter the Fed which is staunchly in favor of breaking the ribbon on the first rate increase since they instituted an alphabet soup of programs culminating in QE and ZIRP to rescue the financial system and the very wealthy.  That must have been their motive, because that is about the only thing that they have accomplished.

The precious metals are being manipulated by a pool.  I am not entirely sure who all of the participants may be, but a few of them are hard to miss.

But no matter.   These things have happened before.  And we know what they look like, and what happens to them over time.

And this instance will be no different.   It will enrich some and cause significant damage to many, with the few giving their actions little thought, much less any shame.  Such are the works of the selfish and the self-important.  It is a phenomenon as old as Babylon and as evil as sin.

Have a pleasant weekend.

SP 500 and NDX Futures Daily Charts - The Great Debate - Panem et Circenses

“Our pundits and experts, at least those with prominent public platforms, are courtiers. We are captivated by the hollow stagecraft of political theater as we are ruthlessly stripped of power. It is smoke and mirrors, tricks and con games, and the purpose behind it is deception.”

Chris Hedges, Empire of Illusion


“A true opium of the people is a belief in nothingness after death - the huge solace of thinking that for our betrayals, greed, cowardice, and murders that we are not going to be judged.”

Czesław Miłosz

Like so many of our public moments and instruments, such as the financial markets and public figures, the First Republican Primary Debate last night can best be described as 'a spectacle.'  But that was clearly its design and intent, from start to finish.

There was never any mention of the risks in the financial markets and reform, except to repeat the hollow slogans of deregulation and the gods of the markets. There was posturing and personal gossip galore. There is less phony pandering to the crowd in a singles bar on a Friday night.

The closing chorus of the Pharisees was almost too much to bear.

I know this is 'politics.'  And there has always been exceptional bad behaviour among the rich and powerful.

But at least in my lifetime we are setting the bar lower and lower, in so many ways.  I remember Nixon and McCarthy.  While we may have feared them for a time, we always knew what they were, and so did they.

Last night was awkwardly boorish, self-consciously shallow, garishly hypocritical, and embarrassing.

Have a pleasant weekend.

David Cay Johnston: Is There a Pension Crisis?