SP 500 and NDX Futures Daily Charts - Hope Isn't the Only Thing That Floats

Stocks came in weakly, but clearly had a push under them throughout the day.

Techs led the way higher, while the SP 500 lagged, weighed down in part by the awful earnings from Morgan Stanley and the financial sector.

After the bell IBM missed and lowered forecasts.

The Street would like to keep stocks growing higher for now.  Let's see if they can keep it going against such light selling.

Have a pleasant evening.

Martin Luther King: The Drum Major Instinct

The 'drum major instinct' according to Martin Luther King is the impulse to lead, to be praised, to be the center of attention, and to have more than others.

 It can become the basis of pride and selfishness, and corrosive to society, our relationships, and our personal well being.

Stephen Kinzer: The Brothers - Rise of Exceptionalism and Aspirations of Empire

“Exceptionalism”—the view that the United States has a right to impose its will because it knows more, sees farther, and lives on a higher moral plane than other nations—was to them not a platitude, but the organizing principle of daily life and global politics...

With a glance, a nod, and a few words, without consulting anyone other than the President, the brothers could mobilize the full power of the United States anywhere in the world."

Stephen Kinzer, The Brothers: John Foster Dulles, Allen Dulles, and Their Secret World War

Shanghai Gold Exchange Withdrawals Running at Record Pace

Withdrawals of gold from the Shanghai Exchange alone are at 1,958 tonnes for the year.   The first chart below compares that pace to the prior years.

As I noted the other day, the mispricing of value and risk in the gold market, primarily driven by traders in London and New York, is calling a form of Gresham's Law into action.

Gold in the New York and London vaults is heavily leveraged and hypothecated.  The full extent of this is not disclosed and can only be surmised.

If the tide of gold keeps going out at these amounts, we will see who is wearing what, as the old traders say.

Is this a 'problem' that we need to save them from?  Hardly.  This is a problem which they have created by manipulating this market and trading it with reckless disregard as they have done with so many others.

The only 'help' they require is to allow the market to set the price, and abide by some modest rules of leverage and risk management, rather than sacrificing safety and fairness for short term gains.

Gold is flowing from West to East.  Of this there should be little doubt except for the most hardened apologists for the bullion banks.

Gold Daily and Silver Weekly Charts - Das Schwerste Gewicht der Außergewöhnlich

Gold and silver were relatively quiet most of the day.

The both were smacked down very late, into the New York close. It was not substantial, more gratuitously petty.

This barely qualifies as a retracement, which you may know I am looking for about here, and laid out in the overnight posting A Closer Look At the Gold Chart Formation:  Three Scenarios.

I don't think I can stress enough that the trading in gold, and to a lesser extent silver, has become 'virtual' in that it is trading almost like a stock, or an option, rather than a commodity.  The coupling with the physical market has drifted away, and the reconnection of the paper and the physical markets will be impressive.

And today I put out another thought on this notion of a paper market that has become divorced from the physical transactions, which have clearly shifted to Asia.   You might wish to read about this split markets in the precious metals here in Nova Scotia Apparently Backing the Meager Action In Comex Gold.

The more I step back and look at what the precious metals have become the more amazed I am that no one has taken this on, whether it be a big trader or a regulatory body.

Perhaps this is all a part of the unbearable lightness of being exceptional?  Uniquely one of a kind?

No, the gold market in New York and London, within the context of the greater global market, is the poster child for fragility.  It is a very old story, and lately almost cliché, about overreach, the abuse of trust, and reckless greed.

And the same goes for silver, although that market has a slightly different set of challenges and oddities of its own.

I sure that time will sort all of this out.

Have a pleasant weekend.

SP 500 and NDX Futures Daily Charts - Option Expiration - All Quiet on the Western Front

Stocks had their October option expiration today.

The antics were abundant as stocks came in lower, but drifted higher during the day, and were jammed higher into the close for a gain.

The obsessive compulsive Street has decided that all is quiet on the Western front, and VIX has dropped back down to the 'new normal.'

The meme is that the Fed will not be raising rates in the foreseeable future, and all that selling in China is done now that margin debt has been unwound.

The economy is lousy, and risks are mispriced, but why worry? The Fed can always bail us out.

Have a nice weekend.

Nova Scotia Apparently Backing the Meager Action in Comex Gold - Gresham's Law

Gresham's law is an economic principle that states that when an official market or cartel overvalues one type of money or asset and undervalues another with respect to its fair market value and risks, the undervalued money or asset will leave the country as best it can, or will disappear from circulation into hoards, while the overvalued money or assets will flood into circulation.

Let me stipulate up front that when it comes to the global gold market, the Comex has actual gold flows that are so meager compared to the amount of trading which occurs on paper that I have said it is starting to look like The Bucket Shop.

And in recognition to the disclaimer statement that appears on all of their documents, the exchange makes no claims and accept no liability that any of these numbers are accurate. They are taking the originators of these numbers at their word, some of which are Banks which have recently been shown to be serial offenders when it comes to their financial dealings, pricing, and representations.

As of Wednesday, only 171,613 ounces (5.13 tonnes) were 'up for delivery.'   In a global market where the daily deliveries are measured in metric tonnes, that is a very small amount.

In terms of overall active Comex contracts, that represents a paper to physical leverage of roughly 263 to 1, compared to a historic trend of about 24:1.

And as I looked things over, I was struck by the fact that of those meager ounces available, 101,312 (3.2 tonnes) were from the vaults of Nova Scotia, or roughly 60% of the total.

That struck a chord in my memory, so I looked over the list of deliveries for the month of October.

Of the pathetically small amount of 240 contracts, or 24,000 ounces (.75 tonnes) delivered in the entire month, 17,600 have come from the 'house account' at Nova Scotia.

And the 'takers' of those few ounces have been the 'house accounts' at JP Morgan and HSBC.

So what I am trying to prove with all this?  Nothing.   I am merely showing an interesting trend change that has gone largely overlooked, except in some notable exceptions of the 'smart money.'

And I am documenting some facts for those who have a mind to see them, and to establish a record that people can refer to when these jokers blow up yet another market through their reckless obsession with gambling large.

It shows that in a world of global gold flows, very little is moving in the Comex warehouses, and the little that is changing hands seems to be moving between the houses of three of the big bullion banks.

And it tend to support a hypothesis that the gold trading in London and New York has taken on the character of currency crosses, and lost their ties to the physical commodity nature of the product.  This divergence may be convenient for the management of the price, and for easy profits for those managing the game.

But it has longer term consequences which will eventually come back to shock the markets.  Where have we seen these types of divergences among risk, valuation, and the underlying realities before?  In just about every financial fraud and following crisis in the modern era at least.

So remember this when the next crisis comes, and the distraction, dissimulation, and duplicities are put forward, and the search for non-consequential scapegoats is underway. And you are expected to bail out these jokers once again 'to save the system.'

I am fairly confident that all of this will come to pass if things do not change, and serious reform and enforcement of the rules of the markets are not undertaken.  So far the changes we have are largely cosmetic.  In a plutocracy big money manages the government and the media;  they have bought and paid for it.  And eliminating government only serves to eliminate the middleman.  Transparency and reform are the only sustainable answer.

The big action in the precious metal bullion markets is in Asia.

And gold and silver bullion are steadily flowing from West to East because of a mispricing of valuation and risks.   And the reason for the stunning drop in physical trading activity in the West is because in a manifestation of Gresham's Law,  the hypothecated paper metals are driving out the bullion out of the market.

This is a trend, and it has significance to those who are willing to see it.