About that FDIC Controversy, and Some Other Internet Rumours

I answered a few emails on this a week or so ago, but the issue seems to have come back again.

There was a change in the aggregation of accounts at the FDIC as of 31 Dec 2012. That change rolled back a consideration that had been granted for 'non-interest bearing transactional accounts' held at a bank. Such an account is what is normally considered a checking account. Those were to be aggregated with the other accounts of the account holder.

But in terms of aggregation, nothing else changed. Some people said the rule would aggregate ALL accounts at ALL banks to a single Social Security number in the amount of $250,000.

This is not what the FDIC said, not at all.  And there updated information from 1 January 2013 confirms this.

The aggregation rules are still based on a 'per bank' basis. And within that bank, those rules are roughly as follows per the FDIC's webpage.

I do not know the future. Some will ask, 'well do you trust the ....?'    Probably not, and I tend to trust in God, and look at the data for everything else. But there is a wide gap between blind trust and just making things up.   And it is there that we must make our stand, on as firm a ground as we can find.

It is not unreasonable to believe that dollar debts will be paid in devalued dollars, and there will be de facto defaults as well.   This has been going on for quite some time, and there is plenty of historical precedent.  Much of the hoohah going on in politics revolves around the allocation of financial pain.

There are legitimate concerns, and fears, and phantoms.   The difference between the first two is the difference between probability and possibility.  And with regard to the last, it is a terror of the imagination that is inimical to reason and to a rewarding life and the refuge of despair.

We entering a time of rumour and hysteria. I have been hearing some rather crazy things, about the Mormons buying up all the real estate of California, and the Queen of England buying up Nevada.  And some other things I do not care to even mention in this Café, from the usual repugnant sources of fear and hatred and violence about the usual victims of prejudice. 

Because to do that is not to stand with the truth as we can know it, even if we think we are wallowing with those in the mud for 'the right ends' and things we may sincerely believe.   That merely serves the madness, which serves none but itself.  

If hatred and fear crowd out the reason, and love, in our words and our minds, we have probably gone off the path.

Prime Minister Abe's Radical Plan for Japan's Constitution

Here is a notice of an upcoming talk at the Foreign Correspondents Club of Japan that I found to be of interest.

I am sure there is some political hyperbole here, and there are also some big 'ifs.'  But this sort of thing does seem to be the general trend amongst the developed nations. 

Democracy was an innovation imposed on Japan in the aftermath of the second World War.  Most westerners do not realize that for the majority of its political life, the postwar government of Japan has been a government dominated by a single party, the LDP in partnership with their corporate combinations, or keiretsus.  

And this 'Japan Model' of concentrated political power in a partnership between government and their corporations is responsible for the lack of reform that led to Japan's 'lost decade.'

The Constitution and its integrity takes on an added importance to those devoted to the democractic freedoms and individual protections for this reason.

The Foreign Correspondents Club of Japan
Shinzo Abe's Radical Plan to Change Japan's Constitution

Lawrence Repeta, Professor, Meiji University School of Law
Masako Kamiya, Professor, Gakushuin University Faculty of Law
Yoichi Kitamura, Representative Director, the Japan Civil Liberties Union

12:00-14:00 Thursday, February 21, 2013

Japan's Liberal Democratic Party has made no secret of its plan to comprehensively reform the Constitution, which it says was 'imposed' on the country after World War 2. On April 28, 2012, it revealed what these plans are. The date was chosen to commemorate the sixtieth anniversary of the San Francisco Peace Treaty.

In Diet interpellations on January 30, Prime Minister Shinzo Abe declared that the party would move forward with these plans under his leadership. For many years, debate over constitutional amendment has focused on the war-renouncing Article 9 but the LDP reform plan is far more radical.

If successful, the party would delete Article 97, the Constitution's most powerful declaration of human rights, and make several other far-reaching changes, including elevating maintenance of "public order" over all individual rights; adding a new requirement that citizens "respect" the kimi ga yo hymn and the hinomaru flag; eliminating free speech protection for activities "with the purpose of damaging the public interest or public order, or associating with others for such purposes"; and reducing parliamentary majorities required for constitutional amendments.

If the party achieves these goals, it will create a Constitution that mandates citizen obligations to the state rather than the other way around. This would effectively mean a rejection of popular sovereignty and a return to Japan's prewar order. The LDP and its allies secured more than two-thirds of the House of Representatives in December elections. If they can achieve the same level in the House of Councilors, the door will be open to a new Constitution to match Mr. Abe's vision.

A panel of experts has agreed to come to the FCCJ and explain the significance of these enormously important proposals. Lawrence Repeta is a professor at Meiji University Faculty of Law. Masako Kamiya is a Professor of Law at Gakushuin University and representative director of the Japan Civil Liberties Union. Yoichi Kitamura is a representative director of the same union and a co-counsel in many noteworthy cases, including litigation that led to the historic 2005 Supreme Court decision that found the Diet in violation of the Constitution for failing to adopt adequate voting procedures for Japanese who reside abroad.

Please reserve in advance, 3211-3161 or on the website (still & TV cameras inclusive). The charge for members/non-members is 1,700/2,600 yen, non-members eligible to attend may pay in cash (menu: braised chicken with rosemary and cream sauce). Reservations canceled less than one hour in advance for working press members, and 24 hours for all others, will be charged in full. Reservations and cancellations are not complete without confirmation. For meal service, please enter the room by 12:25.

Weekend Viewing: Shakespeare, For All Time

In Search of Shakespeare by Michael Wood is a wonderfully entertaining overview of the life and career of William Shakespeare, of whom we know quite a bit. And Wood gives us a deeper insight into Shakespeare, the man.

I enjoy Michael Wood's popular investigations into history and geography.  He brings an intellectual excitement and wonder to his documentaries that never seems to lose its edge, or to become cloying.  I do not know if this is his persona, or his genuine character.  But he is remarkable in his ability to share his knowledge and joy of learning with ordinary people, which is the hallmark of a teacher.  

Below is Part Four of the series, dealing with the last part of his life.  I recommend the entire series to you, as well as some of his other works. 

I spent quite a bit of time reading and studying Shakespeare at school. I was lucky to have two Harvard educated teachers, one in high school and one at University, who were very knowledgeable literary men, who had a deep learning of Shakespeare, his sonnets and his plays. 

And I read widely about him and his works on my own.  Reading was a solace, an entertainment, and at certain times a refuge.  I suppose as a  working class young man, Shakespeare provided a view of life that lifted me above what I saw each day, and gave me a broader, renovated vision.  This is the power of art, to uplift and transform, to speak to others across the vast gulf of place and time.

Literature, music and the visual arts are often denigrated in 'hard societies,' and abased to the pedestrian use of the State as diversion and propaganda. But even in the most heavily laden social environments, beauty in the arts can bloom. And they do so much more with the encouragement, rather than repression, of the culture.

What is remarkable about the wealthy class in America is that they have such narrowly limited educations, in the manner of clerks and technicians and professional conmen, and thereby have so little appreciation of art. 

Their expectations of themselves are exhausted in material acquisition.  They are given to banal and garish displays, imposing but lifeless edifices of power.  They have deadened their sentiments in pursuit of the material. It reminds one of the monumentally lifeless art of National Socialism, a cultural 'dead end' without any higher prospects.

And cut off from the organic fertility of its culture, the artistic impulse becomes increasingly introspective and eccentric, formless, fruitlessly growing inward, howling its shock and isolation from within deep wells of subjectivity.

Creativity is a sign of life. If a society has no arts, it has no creative life.  Look at the manner in which a people put their creativity to use, and one will see what they hold in high regard, what they love, and serve.

Intermediate Gold Chart - 1550 to 1570 For a Range Trade, If It Gets There

This looks like a long consolidation, with a range trade of 1550 to 1800.

If we do get down as low as 1570 one might be inclined to step in and buy, adding to longer term holdings and for a trade, with an eye to that 1550 as a low and an upside target north of 1700.

I am sure most traders on the Street are seeing/thinking the same thing. So it might take some agility, and scaling in. And of course if too many specs pile on there, the bullion banks will deliver a short term smacking on general principle. That's what they do. It is tough playing against the house, especially when they get to deal your cards face up.

But I will also be keeping an eye on the stock markets, to see if they correlate with the metals, or if not, and how the VIX fares.

Gold Daily and Silver Weekly Charts - Hedge Funds and Specs Selling

The Commitments of Traders chart below is courtesy of GoldSeek.

That report suggests that the Banks are starting to cover, and that the small specs and the hedges are doing the short selling.  Let's see what next week's report says to confirm this, since it will include today's big selling operation.

In the silver market the banks are having trouble taking new longs at these prices, causing some to speculate that they are stuck a bit on the big short.  I'll wait to see more evidence on that.

After the bell, the SEC says traders front running the options market in the Heinz - Buffett announcement netted $1.7 million, and that the SEC presumably intends to do something about it.  Small fry most likely if they do.

Intraday commentary on the metals market here and here and here.

Remember that Monday is a national holiday in the States.

Have a pleasant weekend.

SP 500 and NDX Futures Daily Charts - Bernanke Says 'Economy Is Recovering'

Actually he did NOT say that.

But that is what the spokesmodels on Bloomberg TV were saying most of the afternoon, citing that as the reason for the sell off in the metals and the late strength in the stock market.

Here is what he really said, according to Bloomberg (in print):

"Federal Reserve Chairman Ben S. Bernanke said the U.S. economy is far from operating at full strength and reiterated his commitment to record easing.

“With unemployment at almost 8 percent, we are still far from the fully healthy and vibrant conditions that we would like to see,” Bernanke said today at a meeting in Moscow of his counterparts from the Group of 20. “The United States is using domestic policy tools to advance domestic objectives...

The U.S. central bank has faced criticism from some foreign officials, including Brazilian Finance Minister Guido Mantega, who in October said that its accommodation has weakened the dollar, threatening to fuel a “currency war” of competitive devaluations. The Fed under Bernanke has expanded assets to a record exceeding $3 trillion and pushed down the benchmark interest rate close to zero.

“We believe that by strengthening the U.S. economy we are helping to strengthen the global economy as well,” Bernanke said...”

A Commentary on the Metals Markets: Gold and Silver Price Controls

This article excerpted below by Jeff Lewis seems to capture the nature of the recent action in the metals market. And the SP stock futures market, inversely. It is fairly heavy handed stuff.

I often watch 'the tape' throughout the day, and have been doing so, off and on, for the past fifteen years, and part time much longer, since 1976 at least.  What I see is how he describes it.

I have been through these cycles in metals and stocks many times, almost too many to count. And so I am not so overly moved one way or the other.  That is the benefit of no leverage, a proper allocation, and a suitably long time horizon. 

If I am concerned, it is because this sort of thing undermines the confidence in the markets and the financial system, and ultimately the currency.  And judging from the polls, the confidence and approval is quite low.

This fakery and gimmickry is not productive, and does not contribute anything to an economic recovery.  It does not recommend hard work, and savings, and sound investment. 

Quite the opposite, it teaches the arts of the conman,  greed and corruption, by example.  It makes the people cynical and ashamed of their leaders.  And that is corrosive of society as a whole, where the ends justify the means, honor means little, and oaths of office even less.

The plutocrats who recognize no justice but their own do not want to hear it, but this is the very essence of moral hazard.

"Consider for a moment the remarkably high volume of COMEX contracts traded during the days when the spot prices for gold and/or silver were driven sharply lower.

An illusion of weakness tends to prevail in these situations because the majority of precious metal traders do not seem to understand the difference between a paper claim and the real thing, nor do they seem to realize that only paper contracts or claims are being sold when the price of the precious metals drops — not the actual metal itself. Basically, the futures contract seller cannot be forced to deliver physical metal, and so sellers can simply settle their profit or loss on the trade in cash.

Furthermore, the fact that such price drops are typically initiated by the dumping of huge swaths of paper contracts by proprietary traders working at giant bullion banks that are too big to bail and/or fail, makes them seem more like manipulative attempts to scare the precious metals market into a selling panic.

No one is actually selling real bullion during these allegedly “not-for-profit”-led precious metal sell-offs.  Instead, the paper market is moving the metal prices as the tail seemingly wags the dog.

Perhaps this was once a civilized way to discover the fair price of a commodity, but in today's age — regardless of the obvious and highly questionable concentration of only a few sellers comprising the entire net short position of the futures market — every market trades in a high speed, momentum-based, and computer program monitored environment.

This manipulative activity is also permitted by regulators and exchanges in the equities market via dark pools that spoof and front-run millions of unsuspecting penny stock day traders who seem caught up in the race to catch the elusive Red Queen of a good trade.

Practically every notable move lower comes from concentrated short sellers intentionally destabilizing the market to force precious metal prices down, although the so-called exports never seem to see it this way. Furthermore, no matter how blatant the sudden dumping is, it is almost always painted and viewed publically as a 'longs selling' event.

If all of that were not enough, predictable sell-offs almost always occur after margin announcements. As a case in point, maintenance margins were lowered last week, thereby providing an incentive for unsuspecting momentum or technical oriented longs to enter the market.

As usual, these weak longs were quickly harvested in less than two trading sessions after the margin announcement was made...

The good news, or the flip side, is that open interest has remained high in the precious metals futures markets, despite the numerous downdrafts. This indicates that stronger hands are accumulating..."

Jeffery Lewis, The Untold Reality of Gold and Silver Price Controls

Gold at Technical Extreme In the 'Wash/Rinse' Cycle of This Decline

The data on this chart is from yesterday's close, but I have drawn in the price action.

The technical data indicate that gold is getting to the end of the 'wash' portion of the 'wash-rinse' cycle in this decline.

So we may get a bounce soon, and it may go as high as 1680. But gold needs to break this intermediate downtrend.

Note that the CRB does not reflect a similar price decline in commodity prices. The divergence of gold (and silver) from the CRB and stocks is remarkable.

I do think this is an indication of the currency war. So when it comes, I think the turn higher may be quite violent. Best for non-combatants to stay out of the way as best they can by not trading the short term and avoiding leverage.