SP 500 and NDX Futures Daily Charts - Fed Say What?

"Several participants emphasized that the Committee should be prepared to vary the pace of asset purchases, either in response to changes in the economic outlook or as its evaluation of the efficacy and costs of such purchases evolved. For example, one participant argued that purchases should vary incrementally from meeting to meeting in response to incoming information about the economy.

A number of participants stated that an ongoing evaluation of the efficacy, costs, and risks of asset purchases might well lead the Committee to taper or end its purchases before it judged that a substantial improvement in the outlook for the labor market had occurred.

Several others argued that the potential costs of reducing or ending asset purchases too soon were also significant, or that asset purchases should continue until a substantial improvement in the labor market outlook had occurred.

A few participants noted examples of past instances in which policymakers had prematurely removed accommodation, with adverse effects on economic growth, employment, and price stability; they also stressed the importance of communicating the Committee’s commitment to maintaining a highly accommodative stance of policy as long as warranted by economic conditions.

In this regard, a number of participants discussed the possibility of providing monetary accommodation by holding securities for a longer period than envisioned in the Committee’s exit principles, either as a supplement to, or a replacement for, asset purchases...

Similarly, one member raised a question about whether the statement language adequately captured the importance of the Committee’s assessment of the likely efficacy and costs in its asset purchase decisions, but the Committee decided to
maintain the current language pending a review, planned for the March meeting, of its asset purchases...

Ms. George [Kansas City Fed] dissented out of concern that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in inflation expectations.

In her view, the potential costs and risks posed by the Committee’s asset purchases outweighed their uncertain benefits. Although she noted that monetary policy needed to remain supportive of the economy, Ms. George believed that policy had become too accommodative and that possible unintended side effects of ongoing asset purchases, posing risks to financial stability and complicating future monetary policy, argued against continuing on the Committee’s current path."

FOMC, Fed Minutes, January 2013

Stocks dropped hard today, albeit from a lofty height reached with few corrections. The trend is not yet broken.

The cause was said to be the release of the January Fed minutes, which suggested that QE will not be everlasting.

I think the correction was as much concerned about the lack of serious work being done in Washington about the sequester, and in particular to address a broken economy.

But in reality the stock market was reaching into bubble territory, with complacency at an extreme.  And the economy has simply not caught up with pricing.  And it may not for some time.

Forecasters keep reaching for the ever receding recovery. And I think it will keep receding, because of the policy error of the Federal Reserve and the Treasury in supplying stimulus to rescue bankers and traders from their own mismanagement and speculation, without performing their most imporatant obligations to the public and the real economy.

The cynical nature of Washington these days is hard for most people to understand.  Those political denizens of the Beltway just do not care, judging by their servile attention to special interests, and preoccupation with personal enrichments and power.  It is probably the tail end of a long running trend, culminating in the rise of a generation which has suckled on the gospel of greed.

SP 500 Futures Intraday

In all our quest of greatness,
like wanton boys, whose pastime is their care,
we follow after bubbles,
blown in the air.

John Webster

Stocks took a serious turn lower after the January Fed minutes release caused some concern that the Fed would begin to diminish their QE strategy.

Well, they might switch it to some other more effective method of providing relief for the monetary mismanagement of the financial system, but the idea that they would do so because the economy is recovering or the banking system is healthy is ludicrous.

Forecasters Keep Seeing a Recovery Just Around the Corner

I attribute this to jawboning, perhaps wishful thinking, and certainly more perception management.

Bernanke and the boys are caught in a box of their own construction, and they do not see a clear way out.  Or perhaps they do, but they are too servile to the monied interests to take it.

Intermediate Gold Chart Revisited - Range Trade in the Currency War

"There is not a crime, there is not a dodge, there is not a trick, there is not a swindle, there is not a vice, that does not live by secrecy."

Joseph Pulitzer

I think that gold is caught in a range trade since its big run up to a record high.

The range is roughly between 1550/1570 and 1800.

I do not think the government is funding this directly, but indirectly the funds are coming from the Fed and its cronies, and well as de facto policy endorsement from the government, so that the regulatory bodies turn a blind eye to the massive shorting at opportune times.

The short interest money flows are getting rather intense as the gold price dips lower to the bottom end of the range, showing increased resistance from stronger hands. This would also indicate a rising or stable interest rate caused by short selling rather than by long liquidation.

The metal bears spent quite a bit of time and ammunition in the middle of last year trying to break support.  So I think we might see another contest at that level hold again, or even become exhausted before we reach it.   I cannot know how strong the hands of the metal longs have become.  And of course, the ready supply of paper to throw at them. 

I think the leverage in the metals is creeping to higher highs.  It will be an interesting contest to watch, as the shorts keep expanding their bets, as indicated by changes in open interest, aided by a decrease in margin requirements at the Comex, and the longs hanging on to a brazen, relentless pounding from London and New York.

As an aside, some fellows talk about backwardation in the gold futures prices, but I see a normal contango.  This is merely an observation from the data. And when people talk about supply constraints, at least some data to show this would be useful to see to back that up.   One can infer it, but it is not really credible without some factual data. 

I don't think this is a bullion play, but rather a paper play, for now.  But as it goes on, it takes an obvious toll in the real world.  Just like the ongoing bailouts of the banks using the creation of currency. 

But at some point the tide will turn, and the timid will find their voice once again. It just is a matter of how much damage has been done, and what demagogues may arise to attempt to tap the wellsprings of confusion, hatred, and resentment.

The 'GotGold Report' shows an interesting chart, that the big short in gold is being driven by the 'managed funds' boys, which includes the hedge funds. This implies that their customers might get taken out to the woodshed in a high powered reversal.

Several commentators including Denver Dave, Harvey Organ,  Him Sinclair, and Dan Norcini among others, have been seeing the same things in the COT reports, but I like this chart which GotGold has created, as it is shown here.   There are none braver than those playing with Other People's Money, especially to the extent that they are insiders and the Others are not.

Peter Hug, the 'trading director' for Kitco Metals, was on Bloomberg TV today calling for a decline in gold to the 1525 level, probably based on the last chart shown below.   I know Kitco buys and sells metals on the retail side, but I wonder what trading they do to merit a 'trading director.'  Are they arbitraging customer sales and gold and silver held in non-allocated accounts?  I am sure that they are hedging their inventory exposures.  I do not think they offer managed funds, so they are probably trading for their own book.

So let's see what happens.  I have no crystal ball unfortunately. But I was willing to dump some  hedges today, in order to free up cash for some possible long buys in the near future.  I will have to watch how the 'sequester' plays out.  Kicked cans and down the road comes to mind.

It would be customary to get a plunge and then a snap back in a capitulation bottom.  However, there is a reasonable chance that the shorts capitulate, either based on an event or sheer exhaustion from trying to meet their downside price objective.

But longer term this is damaging the supply sources and the mining industry.  Desperate central bankers do not really care about this, but it will have its way, sooner or later.  They are truly frightened of losing control.

As a reminder, next week is Comex option expiration, and I suspect we will see a bottom either around that time, or later this week.  Maybe even today.  This is based on the structure of the options, which unfortunately is a fluid situation, so it is not as predictive as one might otherwise hope.

And I do think, almost beyond reasonable doubt, that this 'thrown rope' higher in the SP futures, with the exception of the dip around the fiscal cliff scare, is being driven indirectly by Fed and Administration policy.

“The stock market is the key player in the game of economic growth.”

Alan Greenspan to Maria Bartiromo

And besides targeted tax cuts and loopholes, there are few better methods of channeling liquidity to the one percent that are betting than the equity markets and bond markets, supplemented by privileged access to non-public information about policy, as well as managing public perception of policy and the economy.

"If we understand the mechanism and motives of the group mind, it is now possible to control and regiment the masses according to our will without them knowing it."

Edward Bernays

This bubble in stocks and tinkering with real world supplies of products will end badly, as always.  And it does not provide much comfort to think that the best defense against corruption for many of the leaders of the West is ignorance and incompetence.  It seems like a great confederacy of greed, shepherded by the rule of dark powers, and spiritual wickedness in high places.

Net Asset Value Premiums of Certain Precious Metal Trusts and Funds

US Ready To Strike Back Against Chinese Cyberattacks

"At some point we do have to call the Chinese out on this," said Michael Chertoff, Homeland Security secretary under President George W. Bush and now chairman of the Chertoff Group, a global security firm. "Simply rolling over and averting our eyes, I don't think is a long-term strategy."

It is worth keeping an eye on this.   It has not been very widely reported.

The implications of this are broader than most people think, especially with regard to the globalization meme and 'free trade.'  China has been very aggressive in this area for some time.

The currency war is opening a new cyber front. But I find it hard to believe that Obama will do anything substantial.

AP
US ready to strike back against China cyberattacks
By Lolita C. Baldor

WASHINGTON (AP) — As public evidence mounts that the Chinese military is responsible for stealing massive amounts of U.S. government data and corporate trade secrets, the Obama administration is eyeing fines and other trade actions it may take against Beijing or any other country guilty of cyberespionage.

According to officials familiar with the plans, the White House will lay out a new report Wednesday that suggests initial, more-aggressive steps the U.S. would take in response to what top authorities say has been an unrelenting campaign of cyberstealing linked to the Chinese government. The officials spoke on condition of anonymity because they were not authorized to speak publicly about the threatened action.

The White House plans come after a Virginia-based cybersecurity firm released a torrent of details Monday that tied a secret Chinese military unit in Shanghai to years of cyberattacks against U.S. companies. After analyzing breaches that compromised more than 140 companies, Mandiant has concluded that they can be linked to the People's Liberation Army's Unit 61398.

Military experts believe the unit is part of the People's Liberation Army's cyber-command, which is under the direct authority of the General Staff Department, China's version of the Joint Chiefs of Staff. As such, its activities would be likely to be authorized at the highest levels of China's military...

Read the rest here.

Gold Daily and Silver Weekly Charts - Option Expiration Next Monday

Intraday commentary here.

Another day, another raid by the gangs of New York. And an abject failure of leadership, globally.

"Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.  True they have tried, but their efforts have been cast in the pattern of an outworn tradition.

Faced by failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence.

They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.

The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit."

Franklin D. Roosevelt, First Inaugural Address

SP 500 and NDX Futures Daily Charts - Don't Fight the Fraud

There are many reasons offered to buy equities.

One of the reasons being touted lately is that with bonds in a bubble, and nowhere to go but down, and money leaving commodities, equities are the only place for money to go to obtain a fair return.

But there was another reason offered today on US financial television that had me gobsmacked, as my British cousins say.

The guest said that the market was 'rigged to go higher.'

So obviously one should not short it, and staying out of it is not such a good play either. Rather, if you know the dice is going to come up the same way each time, you need to get in on the betting, whether it makes sense otherwise or not.

Now I've heard everything. Don't fight the fraud.

After the bell, Dell beat earnings by a penny.

What hath Ben wrought.

Don't ask why; just buy.

Comex Metals Option Expiration For Remainder of the Year - Hedge Fund Buying Metal Shares

As a reminder, next Monday is the March option expiration for gold and silver at the Comex.

Here is an interesting blurb on the steps the government of India is taking to dampen gold imports: fractional reserve bullion. I wonder where they got this idea?

"The government recently stopped requiring gold-backed exchange-traded funds to hold physical gold in the amount of their sales. Instead, the funds will be allowed to deposit some gold with banks who in turn can lend it to jewelers, which in theory should reduce imports for a time."

India Cultural Demand Defies Gold Curbs

And there is this tidbit:

"SAC Capital Partners LP, a $20 billion dollar group of hedge funds founded by Stephen A. Cohen, quietly positioned itself in over $240 million dollars worth of gold, silver, and mining share investments during Q4 2012.

Of great interest is the structure of those positions. They are indicating, that the firm is expecting a massive spike in both gold and silver, as well as a staggering move higher in the mining shares."

SAC Puts $240 Million into Gold/Silver/Mining Shares Investments

As you may recall, it is Stevie Cohen's cohorts who are being frisked up for having traded on non-public information. Naw, couldn't be.