SP 500 and NDX Futures Daily Charts - Marking Time Ahead of the Fed

It was a light trade of a technical, rather gamey nature.

Tomorrow is the Federal Reserve policy announcement, the last for 2013.

I suspect it will be much ado about nothing, if at most.

Have a pleasant evening.

Slouching Towards Bethlehem to be Born

"Capitalism is at risk of failing today not because we are running out of innovations, or because markets are failing to inspire private actions, but because we’ve lost sight of the operational failings of unfettered gluttony.

We are neglecting a torrent of market failures in infrastructure, finance, and the environment. We are turning our backs on a grotesque worsening of income inequality and willfully continuing to slash social benefits.

We are destroying the Earth as if we are indeed the last generation."

Jeffrey Sachs, Self-interest, without morals, leads to capitalism’s self-destruction

Self-interest, without morals, leads to capitalism’s self-destruction
By Jeffrey Sachs
Financial Times; January 18, 2012

Capitalism earns its keep through Adam Smith’s famous paradox of the invisible hand: self-interest, operating through markets, leads to the common good. Yet the paradox of self-interest breaks down when stretched too far. This is our global predicament today.

Self-interest promotes competition, the division of labor, and innovation, but fails to support the common good in four ways.

First, it fails when market competition breaks down, whether because of natural monopolies (in infrastructure), externalities (often related to the environment), public goods (such as basic scientific knowledge), or asymmetric information (in financial fraud, for example).

Second, it can easily turn into unacceptable inequality. The reasons are legion: luck; aptitude; inheritance; winner-takes-all-markets; fraud; and perhaps most insidiously, the conversion of wealth into power, in order to gain even greater wealth.

Third, self-interest leaves future generations at the mercy of today’s generation. Environmental unsustainability is a gross inequality of wellbeing across generations rather than across social classes.

Fourth, self-interest leaves our fragile mental apparatus, evolved for the African savannah, at the mercy of Madison Avenue. To put it more bluntly, our sense of self-interest, unless part of a large value system, is easily transmuted into a hopelessly addictive form of consumerism.

For these reasons, successful capitalism has never rested on a moral base of self-interest, but rather on the practice of self-interest embedded in a larger set of values. Max Weber explained that Europe’s original modern capitalists, the Calvinists, pursued profits in the search for proof of salvation. They saved ascetically to accumulate wealth to prove God’s grace, not to sate their consumer appetites.

Keynes noted the same regarding the mechanisms underpinning Pax Britannica at the end of the 19th Century. As he put it, the economic machine held together because those who ostensibly owned the cake only pretended to consume it. American capitalism, more secular and less patriotic, created its own vintage of social restraint. The greatest capitalist of the second half of the 19th century, Andrew Carnegie developed his Gospel of Wealth, according to which the great wealth of the entrepreneur was not personal property but a trust for society.

Our 21st century predicament is that these moral strictures have mostly vanished. On the one hand, the power of self-interest is alive and well and is delivering much that is good, indeed utterly remarkable, at a global scale. Former colonies and laggard regions are bounding forward as technologies diffuse and incomes surge through global trade and investment.

Yet global capitalism has mostly shed its moral constraints. Self-interest is no longer embedded in higher values. Consumerism is the world’s secular religion, more than science, humanism, or any other -ism. “Greed is good” is not only the mantra of a 1980s Hollywood moral fable: it is the operating principle of the top tiers of world society.

Capitalism is at risk of failing today not because we are running out of innovations, or because markets are failing to inspire private actions, but because we’ve lost sight of the operational failings of unfettered gluttony. We are neglecting a torrent of market failures in infrastructure, finance, and the environment. We are turning our backs on a grotesque worsening of income inequality and willfully continuing to slash social benefits. We are destroying the Earth as if we are indeed the last generation. We are poisoning our own appetites through addictions to luxury goods, cosmetic surgery, fats and sugar, TV watching, and other self-medications of choice or persuasion. And our politics are increasingly pernicious, as we turn political decisions over to the highest-bidding lobby, and allow big money to bypass regulatory controls.

Unless we regain our moral bearings our scope for collective action will be lost. The day may soon arrive when money fully owns our politics, markets have utterly devastated the environment, and gluttony relentlessly commands our personal choices. Then we will have arrived at the ultimate paradox: the self-destruction of prosperity at the very moment when technological knowhow enables sustainable prosperity for all.

Those who make peaceful revolution impossible will make violent revolution inevitable.

John F. Kennedy

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.

Silver Inventory Changes Since the Beginning of the Year

The changes in the silver ETFs and funds were a little more in keeping with recent price weakness, even though for the most part they are well up on the year as shown below.

What surprised me was the loss of about 320 tonnes of silver from SLV from Nov 1 until last Friday.

I downloaded the inventory history of SLV and verified Nick's numbers. And in doing so I realized that just looking at tonnes is not adequate, because the huge size of SLV exaggerates the nominal changes.  A 300 tonnes move in SLV inventory seems to be more 'normal' than one might expect.

I have included a third chart that shows the fluctuations in the SLV inventory. I think it is in keeping with the high beta in the price of silver. You have to wonder though, if there really is that much physical silver moving around the markets, or if there might not be some other factors in play that 'smooth' that high silver volatility in the inventory levels out.

YTD 856 Tonnes of Gold Bullion Leave the Comex and 10 Major Western ETFs and Funds

About 856 tonnes of gold bullion have left the Comex and the ten major western ETFs and funds that I have been tracking in calendar year 2013.

For comparison I include the same chart with the levels shown on 1 Novemember 2013.

I wonder where all this gold bullion is going?   We can see that twelve tonnes were transferred to the Comex, most likely to meet December delivery requirements. 

As for the rest, who can say where it has gone, and when and under conditions it might be coming back.

I wonder how much of that gold was leased out from Western central banks?

Data is from Nick Laird at Sharelynx.com

Gold Daily and Silver Weekly Charts - FOMC Meeting This Week - No Yellow Dogs Allowed

As a reminder, there will be an FOMC meeting this week, with the announcement on Wednesday the 18th at 2 PM.

Gold and silver showed some strength today, but until they break their downtrends this just the wiseguys doing the Wall Street shuffle.

Janet Tavakoli has an interesting report out today, How Hidden Bank Risks Drive Investors to Productive Assets, U.S. Treasuries, and Gold.

When I first became interested in gold, traders on the chat boards used to call it 'the yellow dog', or yaller dawg if one was of the Southern persuasion. That was because after the long and brutal bear market, gold was wallowing in the mid 200's and was getting little interest and absolutely no respect.

When this dog turns higher again, and I believe that it will, it may show us a run that would put a greyhound to shame.

Have a pleasant evening.

'Truly I tell you, whatever you did for one of the least of these, you did for me.'

SP 500 and NDX Futures - Deck the Hall With Boughs of Folly

The big tickle today was the US Industrial Production number which came in better than expected.

I have included the economic calendar for this week below.

As I said I think the funds have spend the last week or so squaring up portfolios, getting rid of losers and taking some profits, and now the paint and window dressing start going on into the year end.

After the bell Boeing announced a $10 Billion stock buyback program.

Are there no workhouses, are there no prisons?