Gold Daily and Silver Weekly Charts - Pretty Much as Expected, With a Twist

"There is something on earth greater than arbitrary or despotic power. The lightning has its power, and the whirlwind has its power, and the earthquake has its power; but there is something among men more capable of shaking despotic thrones than lightning, whirlwind, or earthquake, and that is, the excited and aroused indignation of the whole civilized world."

Daniel Webster


"In the realm of economics, price controls are designed to constrain volatility on the grounds that stable prices are a good thing. But although these controls might work in some rare situations, the long-term effect of any such system is an eventual and extremely costly blowup whose cleanup costs can far exceed the benefits accrued.

The risks of a dictatorship, no matter how seemingly stable, are no different, in the long run, from those of an artificially controlled price."

Nassim Taleb, The Black Rose of Cairo, Foreign Affairs v.90 iss 3

In the best of times, the market is often a short term indicator of itself and its own internals, and little else.  Although it generally maintains some connection with the underlying reality of what it is intended to represent.  It is over the longer term that value is properly discovered and priced, if allowed to proceed without undue interference.

In times like these with genuine investors in short supply, and traders and automated programs gaming nearly everything based on internals, one has to be careful not to read too much into daily moves in market price.  That is a sad artifact of a poorly regulated market, and especially of one that is being manipulated by some temporary, albeit powerful, force.

There was nothing unexpected in what Bernanke or the Fed had said. What surprised me was the depth of the stock sell off AND the fact that while stocks were falling, VIX was falling as well. Although VIX did come back a bit into the close. Traders are certainly petrified aren't they. Not.

I hear a thin crowd turned up to hear Obama speak in Berlin today, as compared to the adoring masses that turned out for his last speech there. And that approval by the people of the Congress is hovering around 10 percent.

Is the bloom off the rose? O rose thou art sick.

Let's see what tomorrow brings. But there was nothing in what Bernanke said today that leads me to conclude that things are improving significantly in the economy AND the Fed will end its highly accommodative monetary posture anytime soon.    But I also doubt we will see efficient and honest markets in that time horizon either.

SP 500 and NDX Futures Daily Charts - VIX Sells Off With Stocks?

I thought it was kind of odd that as stocks were falling hard, so was the VIX, which is generally viewed as counter market 'insurance' to the downside.

NAV Premiums of Certain Precious Metal Trusts and Funds

As expected the FOMC did little more than jawbone with an 'improving outlook' but no taper.

The traders did a dipsy doodle on the futures, down and up, and now markets are waiting for Bernanke's press conference.

The 'Spicer family' of Central Funds of Canada continue to underperform.

Gold Daily and Silver Weekly Charts

The precious metals were hit on the first day of a two day FOMC meeting. How unusual. NOT.

Let's leave the speculation aside until Benny tells us what is on his mind in the announcement and his press conference afterwards.

SP 500 and NDX Futures Daily Charts

Stocks rallied higher on the first day of the FOMC meeting.

Tomorrow afternoon could be interesting.

SHIBOR Signaling Stress in the Financial System - Liquidity Crunch

Here is some interesting data out of China. The story is by Matt Phillips.

The inter-bank liquidity crunch is a classic banking problem for which the central bank as lender and regulator was created.

It would be nice if the bankers could get in front of these problems as they develop, and not merely throw the public's money at them after the fact when bad bank management, official corruption, and excessive greed have made the system vulnerable.

LIBOR itself is quiet, which suggests that this problem is particular to China, at least for now.  The only LIBOR stories breaking are charges against bank traders for manipulating that interbank rate.

Shibor
Here’s what’s behind the Chinese cash crunch
By Matt Phillips

"Remember Libor? When that once obscure measure of short-term interest rates shot higher in 2007 and 2008, it was one of the earliest warnings signs of what would eventually become the financial crisis. Now, its Chinese cousin—known as Shibor—is telegraphing the rising stress in the opaque financial system of the world’s second largest economy.

What does the spike in rates mean? Large banks are increasingly leery of tapping into their pools of cash to lend to each other. Recent reports that China Everbright Bank failed to repay a short-term loan to Industrial Bank Co. aren’t helping. Industrial Bank says that report is “untrue and exaggerated.” But short-term lending markets suggest other bankers are skeptical.

So what’s the solution? Chinese authorities tamed short-term interest rate spikes before. They could create new cash to lubricate lending, or lower reserve requirements for banks, which would boost liquidity. According to the Wall Street Journal, that’s what bankers are hoping for..."

Read the complete original here.

NAV Premiums of Certain Precious Metals Trusts and Funds

As expected we have a bear raid on the precious metals in honor of the FOMC meeting.

Make no mistake, this is political messaging. Buy our paper.

And a great deal of the world is ignoring it.